−Removed: There are risks, many beyond our control, which could cause our results to differ significantly from management’s expectations.
+Added: 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.
−Removed: Any factor described in this report could, by itself or together with one or more other factors, adversely affect our business, results of operations and/or financial condition.
−Removed: 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.
−Removed: In assessing these risks, you should also refer to other information disclosed in our SEC filings, including the financial statements and notes thereto.
−Removed: The risks discussed below also include forward-looking statements, and actual results may differ substantially from those discussed or implied in these forward-looking statements.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: See “ CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS ” above in this annual report.
Risks Related to Our Business
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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.
−Removed: The economic conditions in these markets may be different from, and in some instances worse than, the economic conditions in the United States as a whole.
+Added: HomeStreet operates in California, Hawaii, Oregon and Washington, and, if completed, the proposed HomeStreet merger will provide additional geographic diversity.
+Added: 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.
−Removed: 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 loan losses, adverse asset values, a reduction in assets under management or administration, and an increase in our deposit and funding costs.
+Added: 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.
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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.
−Removed: More specifically, the market conditions in the markets in which we have a presence may be different from, and could be worse than, the economic conditions in the United States as a whole.
−Removed: As discussed elsewhere in this Item 1A, inflationary
−Removed: pressures have caused the Federal Reserve to recently increase interest rates and indicate its intention to continue to do so.
+Added: 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.
+Added: 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.
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• a permanent impairment of our assets;
−Removed: • 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 loan losses.
−Removed: The impact of the COVID-19 pandemic is fluid and continues to evolve and there is pervasive uncertainty surrounding the future economic conditions that will emerge in the months and years following the onset of the pandemic.
−Removed: Moreover, as economic conditions relating to the pandemic have improved over time, the Federal Reserve has shifted its focus to limiting inflationary and other potentially adverse effects of the pandemic-related government stimulus, which signals the potential for a continued period of economic uncertainty even if the pandemic subsides.
+Added: • 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.
+Added: 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.
−Removed: government debt and fiscal actions that may be taken to address that debt, the potential resurgence of economic and political tensions with China or the Russian invasion of Ukraine, each of which may have a destabilizing effect on financial markets and economic activity.
+Added: 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.
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Inflationary pressures present a potential threat to our results of operation and financial condition.
−Removed: The United States generally and the regions in which we operate specifically have recently experienced, for the first time in decades, significant inflationary pressures, evidenced by higher gas prices, higher food prices and other consumer items.
+Added: 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.
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Decreased deposit balances could result in our reliance upon higher cost funding sources.
−Removed: See Risks Associated with Monetary Events and Interest Rate and Yield Curve Risks and Capital and Liquidity Risks in this Item 1A of this report.
+Added: 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.
−Removed: 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, such as the global COVID-19 pandemic, all of which are beyond our control.
+Added: 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.
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stocks and bonds;
−Removed: significantly raised recessionary expectations for the U.S.;
+Added: significantly raised recessionary expectations for the
and inverted the yield curve in the U.S.
for much of the last two quarters of 2022.
−Removed: For 2023, the Federal Reserve has not yet indicated when it will stop, or at least pause, raising short term rates, although the rate of increases has slowed.
+Added: During the first half of 2023, the Federal Reserve continued to raise short term rates, leading to continuing yield curve inversion.
+Added: 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.
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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.
−Removed: However, as noted above, in 2022 short term rates rose faster than long term rates to the point that the yield curve inverted for much of the final two quarters of the year.
−Removed: This sort of phenomenon—where short term rates are raised more strongly and rapidly than long-term rates can follow—is relatively common.
+Added: 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.
−Removed: Many external factors may interfere with the effects of these plans or cause them to be changed, sometimes quickly.
+Added: 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.
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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.
−Removed: 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 loan losses, each of which could adversely affect our net income.
+Added: 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.
−Removed: Our estimated allowance for loan losses and fair value adjustments with respect to acquired loans may prove to be insufficient to absorb actual losses in our loan portfolio, which may adversely affect our business, financial condition and results of operations.
+Added: 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.
−Removed: We evaluate the collectability of our loan portfolio and we maintain an allowance for loan losses that represents management’s judgment of probable losses and risks inherent in our loan portfolio that we believe to be adequate based on a variety of factors including but not limited to:
−Removed: the risk characteristics of various classifications of loans, previous loan loss experience, specific loans that have loss potential, delinquency trends, estimated fair market value of the collateral, current economic conditions, the views of our regulators, and geographic and industry loan concentrations.
−Removed: If our evaluation is incorrect and defaults by borrowers lead to loan losses that exceed our allowance for loan losses, our earnings could be significantly and adversely affected.
−Removed: No assurance can be given that the allowance will be adequate to cover loan losses incurred in our portfolio.
−Removed: We may experience losses in our loan portfolio or perceive adverse conditions and trends that may require us to significantly increase our allowance for loan losses in the future, a decision that would reduce earnings.
−Removed: The application of the acquisition method of accounting in our prior acquisition of Pioneer or any future acquisitions, will impact our allowance for loan losses.
−Removed: Under the acquisition method of accounting, all acquired loans were recorded in our consolidated financial statements at their estimated fair value at the time of acquisition and any related allowance for loan loss was eliminated because credit quality, among other factors, was considered in the determination of fair value.
−Removed: To the extent that our estimates of fair value are too high, we will incur losses associated with the acquired loans.
−Removed: In addition, our regulators, as an integral part of their periodic examination, review our methodology for calculating, and the adequacy of, our allowance and provision for loan losses.
−Removed: Although we believe that the methodology used by us to determine the amount of both the allowance for loan losses and provision is effective, the regulators or our auditor may conclude that changes are necessary based on information available to them at the time of their review, which could impact our overall credit portfolio.
−Removed: Such changes could result in, among other things, modifications to our methodology for determining our allowance or provision for loan losses or models, reclassification or downgrades of our loans, increases in our allowance for loan losses or other credit costs, imposition of new or more stringent concentration limits, restrictions in our lending activities and/or recognition of further losses.
−Removed: Further, if actual charge-offs in future periods exceed the amounts allocated to the allowance for loan losses, we may need additional provisions for loan losses to restore the adequacy of our allowance for loan losses.
−Removed: New accounting standards such as ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) (CECL) could require us to increase our allowance for loan losses and may have a material adverse effect on our reported financial condition and results of operations.
−Removed: The measure of our allowance for loan losses will be impacted by the adoption and interpretation of accounting standards.
−Removed: The Financial Accounting Standards Board, or FASB, has issued a new credit impairment model, the Current Expected Credit Loss, or CECL model, which will become applicable to us in 2023.
−Removed: Under the CECL model, we will be required to present certain financial assets carried at amortized cost, such as loans held for investment and held-to-maturity debt securities, at the net amount expected to be collected.
−Removed: The measurement of expected credit losses is to be based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.
−Removed: This measurement will take place at the time the financial asset is first added to the balance sheet and periodically thereafter.
−Removed: This differs significantly from the “incurred loss” model currently required under GAAP, which delays recognition until it is probable a loss has been incurred.
−Removed: Accordingly, we expect that the adoption of the CECL model will materially affect how we determine our allowance for loan losses and could require us to significantly increase our allowance.
−Removed: Moreover, the CECL model may create more volatility in the level of our allowance for loan losses.
−Removed: If we are required to materially increase our level of allowance for loan losses for any reason, such increase could adversely affect our business, financial condition and results of operations.
−Removed: We are exposed to higher credit risk by commercial real estate (inclusive of construction lending) and commercial and industrial lending.
−Removed: Commercial real estate, commercial business and construction lending usually involves higher credit risks than that of single-family residential lending.
−Removed: At December 31, 2022, the following loan types accounted for the stated percentages of our total loan portfolio:
−Removed: commercial real estate 29.3% (consists of owner occupied, non-owner occupied and non-residential
−Removed: construction), and commercial and industrial 49.4% (includes public finance).
−Removed: These types of loans involve larger loan balances to a single borrower or groups of related borrowers.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: 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.
+Added: Relevant available information includes historical credit loss experience, current conditions and reasonable and supportable forecasts.
+Added: 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.
+Added: Continuing deterioration in economic conditions, including the possibility of a recession, affecting borrowers;
+Added: rising interest rates;
+Added: new information regarding existing loans, credit commitments;
+Added: the lingering effects of the COVID-19 pandemic or other global pandemics;
+Added: disasters and risks related to climate change;
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: We are exposed to higher credit risk by commercial and industrial and commercial real estate lending.
+Added: Commercial and industrial lending and commercial real estate lending usually involves higher credit risks than that of single-family residential lending.
+Added: At December 31, 2023, approximately 69.6% of our loan portfolio consisted of commercial and industrial and commercial real estate loans.
+Added: 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.
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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.
+Added: 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.
+Added: 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.
+Added: 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.
1 unchanged sentence
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.
−Removed: Commercial real estate, commercial business, and construction loans are more susceptible to a risk of loss during a downturn in the business cycle.
+Added: 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.
−Removed: As of December 31, 2022, our commercial real estate loans (consists of owner occupied, non-owner occupied and non-residential construction) were equal to 210.1% of our total risk-based capital.
+Added: 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.
1 unchanged sentence
A significant portion of our loans are secured by real estate.
−Removed: As of December 31, 2022, approximately 49.0% of such loans had real estate as primary collateral (owner occupied, non-owner occupied and non-residential construction).
+Added: 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.
1 unchanged sentence
Deterioration in the real estate market could cause us to adjust our opinion of the level of credit quality in our loan portfolio.
−Removed: Such a determination may lead to an additional increase in our provisions for loan losses, which could also adversely affect our business, financial condition, and results of operations.
+Added: 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.
Nonperforming assets take significant time and resources to resolve and adversely affect our results of operations and financial condition.
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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.
−Removed: If we experience increases in nonperforming loans and
−Removed: 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.
+Added: 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
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The majority of our banking assets are subject to changes in interest rates.
−Removed: For example, as of December 31, 2022, 46.5% of our loan portfolio, including loan level derivative instruments, consisted of floating and adjustable interest rate loans.
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.
3 unchanged sentences
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.
−Removed: In response to the COVID-19 pandemic, the Federal Open Market Committee cut short-term interest rates to a record low range of 0% to 0.25%.
−Removed: Over the course of 2022 these record low rates were reversed, with the Federal Reserve continuing to signal its concerns with respect to inflation.
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.
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Changes in interest rates also can affect the value of loans, securities and other assets.
−Removed: 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 loan losses, and a reduction of income recognized, among others, which could have a material adverse effect on our results of operations and cash flows.
−Removed: Further, when we place a loan on non-accrual status, we reverse any accrued but unpaid interest receivable, which decreases interest income.
+Added: 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.
+Added: 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.
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We have traditionally obtained funds through local deposits and thus we have a base of lower cost transaction deposits.
−Removed: 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, whereas brokered deposits typically are higher cost time deposits.
−Removed: Further, economic conditions and rising 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.
+Added: 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.
+Added: Further, economic conditions and rising
+Added: 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.
−Removed: 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
−Removed: our loan portfolio.
−Removed: Further, as a result of the March 2023 bank closures and in an effort to strengthen public confidence in the banking system and protect depositors, regulators have announced that any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law, which could increase the cost of our FDIC insurance assessments and affect our profitability.
+Added: 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.
+Added: 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.
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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.
−Removed: Changes in market values of investment securities classified as available for sale are impacted by higher 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.
+Added: 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.
−Removed: In March 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.
−Removed: We may elect to use the Bank Term Funding Program on an as needed basis.
−Removed: We actively monitor and manage the balances of our maturing and re-pricing assets and liabilities to reduce the adverse impact of changes in interest rates, but there can be no assurance that we will be able to avoid material adverse effects on our net interest margin in all market conditions.
−Removed: Discontinuance of, and transition away from, LIBOR (and any other reference rates) may adversely affect our reputation, business, financial condition and results of operations.
−Removed: ICE Benchmark Administration, the administrator of LIBOR, ceased publication of one-week and two-month USD LIBOR on a representative basis on December 31, 2021.
−Removed: The remaining USD LIBOR settings (i.e., overnight, one month, three month, six month and 12 month) will cease or become non-representative immediately after June 30, 2023.
−Removed: We no longer originate loans that reference LIBOR.
−Removed: New floating rate loans reference alternative reference rates, such as SOFR or Prime.
−Removed: LIBOR and other benchmarks which rely upon LIBOR (or LIBOR transactions) for their calculation, however, remain the reference rate in a substantial number of our outstanding debt securities, derivatives, corporate and commercial loans, consumer loans, residential mortgages loans, credit cards, structured products, and other assets and liabilities.
−Removed: Discontinuance of, and transition away from, such reference rates present various uncertainties and operational, legal, reputational, compliance, financial and other risks and challenges.
−Removed: For example, LIBOR-based products and contracts, may contain language requiring us to undertake certain actions to determine a successor rate to the existing benchmark or to exercise discretion in selection of such rate.
−Removed: We may face a risk of litigation, disputes or other actions from clients, counterparties, customers, investors or others based on various claims, for example that we incorrectly interpreted or enforced such contract provisions or failed to appropriately communicate or effectuate such transition.
−Removed: Other LIBOR-based products and contracts may have no fallback provisions, and we are assessing and planning to utilize relevant contractual and statutory solutions, including the Adjustable Interest Rate (LIBOR) Act, enacted in March 2022 and the implementing rules by the Federal Reserve (collectively, the “LIBOR Act”), to transition such products and contracts.
−Removed: It is possible that the characteristics of alternative reference rates may not be sufficiently similar to, or produce the economic equivalent of, the benchmark rates that they are intended to replace.
−Removed: For example, SOFR is a riskless rate.
−Removed: Historically, in periods of economic or financial industry stress, riskless rates that are analogous to SOFR have been relatively stable.
−Removed: In contrast, LIBOR, which is designed to reflect the credit risk of banks, has widened relative to riskless rates, reflecting increased uncertainty regarding the creditworthiness of banks.
−Removed: SOFR, because it is riskless, tends to be a lower rate than LIBOR.
−Removed: To address these differences between LIBOR and SOFR, industry-recommended LIBOR fallback provisions and the LIBOR ACT include a concept of an adjustment spread that is applied when a LIBOR-based contract falls back to SOFR and that is calculated based on a five-year median look-back of the historical spot difference between the applicable LIBOR tenor and the applicable SOFR tenor.
−Removed: However, because any such adjustment spread is and will be based on a historical median, such adjustment spreads have not, and are likely in the future to not, reflect the spot
−Removed: difference between LIBOR and SOFR at certain points in time and there may be a value transfer between the contracting parties over the life of the instrument because the all-in rate applied to a contract, even taking into account the spread adjustment, might have behaved differently over the life of the instrument in the absence of LIBOR cessation.
−Removed: Impacts from a change in reference rate would likely include changes to the yield on, and value of, loans or securities held by us, amounts paid on securities we have issued, amounts received and paid on derivative instruments we have entered into.
−Removed: Any theoretical benefit to us could result in counterparty dissatisfaction, which, in turn could lead to litigation, potentially as class actions, or other adverse consequences, including dissatisfied customers or impaired relationships with financial institution counterparties resulting in loss of business.
−Removed: In sum, the transition away from LIBOR to an alternative reference rate is complex and the failure to adequately manage the transition could have a range of material adverse effects, including the potential to:
−Removed: • adversely affect the interest rates paid or received on, and the revenue and expenses associated with, our floating rate obligations, loans, deposits, derivatives and other financial instruments tied to LIBOR rates (including our trust preferred securities), or other securities or financial arrangements given LIBOR’s role in determining market interest rates globally;
−Removed: • adversely affect the value of our floating rate obligations, loans, deposits, derivatives and other financial instruments tied to LIBOR rates, or other securities or financial arrangements given LIBOR’s role in determining market interest rates globally;
−Removed: • prompt inquiries or other actions from regulators in respect of our preparation and readiness for the replacement of LIBOR with an alternative reference rate;
−Removed: • result in disputes, litigation or other actions with counterparties regarding the interpretation and enforceability of certain fallback language in LIBOR-based securities;
−Removed: • require the transition to or development of appropriate systems and analytics to effectively transition our risk management processes from LIBOR-based products to those based on the applicable alternative pricing benchmark.
A flat or inverted yield curve may reduce our net interest margin and adversely affect our loan and investment portfolios.
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Historically, the yield curve is usually upward sloping (higher rates for longer terms).
−Removed: However, the yield curve can be relatively flat or inverted (downward sloping), which has happened several times in the past few years, and in fact was common in the second half of 2022 and early 2023.
−Removed: A flat or inverted yield curve, which tends to decrease net interest margin, which would adversely impact our lending businesses and investment portfolio.
−Removed: The Federal Reserve, consistent with long-term goals, has been raising rates in response to inflation.
+Added: However, the yield curve can be relatively flat or inverted (downward sloping), which has happened several times in the past few years.
+Added: A flat or inverted yield curve, which tends to decrease net interest margin, would adversely impact our lending businesses and investment portfolio.
+Added: 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.
−Removed: In 2023 there is significant risk, especially if inversion remains common and a recession begins, that our net interest margin could compress.
+Added: 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.
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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.
−Removed: Mortgage activity decreased significantly in 2022.
−Removed: Our mortgage activity decreased as well as we may not be able to return our mortgage business to the rates of growth achieved in recent years or even grow our mortgage business at all.
+Added: Mortgage activity decreased significantly in 2023 and 2022.
+Added: 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.
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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.
−Removed: 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
−Removed: our mortgage operations.
+Added: 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.
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Lower rates tend to foster higher activity.
−Removed: experienced extremely low interest rates for several years, ending in early 2022.
−Removed: Rising rates in 2022 substantially curtailed our income from these businesses.
−Removed: For example, by late 2022 consumer mortgage refinancings fell to extremely low levels.
−Removed: Rates are likely to continue to rise in 2023, and further reductions in income from our mortgage-related businesses are possible.
+Added: Rising rates have substantially reduced our income from our mortgage division.
+Added: 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.
−Removed: This revenue will likely decline in future periods as interest rates rise or if the other risks highlighted in this paragraph are realized, which will adversely affect our profitability.
+Added: 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.
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federal government, and any changes in leadership at these entities, could adversely affect our business and prospects.
−Removed: Any discontinuation of, or significant reduction in, the operation of Fannie Mae or Freddie Mac or any significant adverse change in their capital structure,
−Removed: 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.
−Removed: 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 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.
+Added: 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.
+Added: 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
+Added: 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.
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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.
−Removed: 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 fairly, in all material respects, the financial condition, results of operations and cash flows of the customer.
+Added: 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
+Added: 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.
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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.
−Removed: 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.
+Added: 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.
−Removed: 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.
+Added: 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;
−Removed: natural disasters such as earthquakes, tornadoes, and hurricanes;
+Added: natural disasters such as
+Added: earthquakes, tornadoes, and hurricanes;
disease pandemics (such as the COVID-19 pandemic);
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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.
+Added: 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.
+Added: We publicly disclosed this breach and provided appropriate notifications to potentially impacted customers.
+Added: 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.
+Added: 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.
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We have implemented a risk management framework to mitigate our risk and loss exposure.
−Removed: 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, reputational risk and operational risk related to our employees, systems and vendors, among others.
+Added: 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.
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Damage to our reputation could undermine the confidence of our current and potential clients in our ability to provide financial services.
−Removed: Such damage could also impair the confidence of our counterparties and business partners, and ultimately affect our ability to effect transactions.
−Removed: 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
−Removed: 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.
+Added: Such damage could also impair the
+Added: confidence of our counterparties and business partners, and ultimately affect our ability to effect transactions.
+Added: 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.
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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.
−Removed: We believe 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.
+Added: 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.
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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.
−Removed: In 2022 and 2021, there has been a dramatic increase in workers leaving their positions throughout our industry and other industries that is being referred to as the “great resignation,” and the market to build, retain and replace talent has become even more highly competitive.
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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
−Removed: We are subject to environmental risks.
+Added: 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.
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In addition, we are subject to the growing risk of climate change.
−Removed: Among the risks associated with climate change are more frequent severe weather events.
−Removed: Severe weather events such as droughts, heat waves, hurricanes, tropical storms, tornados, winter storms, freezes, flooding and other large-scale weather catastrophes in our markets subject us to significant risks and more frequent severe weather events magnify those risks.
−Removed: Large-scale weather catastrophes or other significant climate change effects that either damage or destroy residential or multifamily real estate underlying mortgage loans or real estate collateral, or negatively affects the value of real estate collateral or the ability of borrowers to continue to make payments on loans, could decrease the value of our real estate collateral or increase our delinquency rates in the affected areas and thus diminish the value of our loan portfolio.
−Removed: Such events could also cause downturns in economic and market conditions generally, which could have an adverse effect on our business and financial results.
−Removed: The potential losses and costs associated with climate change related risks are difficult to predict and could have a material adverse effect on our business, financial condition and results of operation.
+Added: See Climate Risks in this Item 1A of this report.
Industry-Related Risks
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We could experience a loss due to competition with other financial institutions.
−Removed: 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.
+Added: 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.
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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.
−Removed: The loss of these revenue streams and the lower
−Removed: cost of deposits as a source of funds could have a material adverse effect on our financial condition and results of operations.
+Added: 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.
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Many of these transactions expose us to credit risk in the event of a default by a counterparty or client.
−Removed: In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due to us.
+Added: In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized or is liquidated at prices not sufficient
+Added: 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.
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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.
−Removed: We analyze our securities on a quarterly basis to determine if an other-than-temporary impairment has occurred.
−Removed: The process for
−Removed: determining whether impairment is other-than-temporary 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.
−Removed: In March 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.
−Removed: We may use the Bank Term Funding Program on an as needed basis.
−Removed: Because of changing economic and market conditions affecting issuers, we may be required to recognize other-than-temporary impairment in future periods, which could have a material adverse effect on our business, financial condition or results of operations.
+Added: We analyze our securities on a quarterly basis to determine if an expected credit loss has occurred.
+Added: 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.
+Added: 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.
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In addition to ordinary assessments described above, the FDIC has the ability to impose special assessments in certain instances.
+Added: 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.
−Removed: For example, in response to March 2023 bank closures and in an effort to strengthen public confidence in the banking system and protect depositors, regulators have announced that any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law, which could increase the cost of our FDIC insurance assessments and affect our profitability.
−Removed: If our financial condition deteriorates or if the bank regulators otherwise have supervisory concerns about us, then our assessments could rise.
+Added: 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.
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In addition, if we decide to raise additional equity capital, our current stockholders’ interests could be diluted.
+Added: 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.
+Added: 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.
+Added: The Warrants will carry a term of three years.
+Added: In the event the proposed HomeStreet merger is not consummated, no Warrants will be issued.
+Added: 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”).
+Added: 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.
+Added: We may need to incur additional debt or equity
+Added: 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.
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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.
−Removed: Such secondary sources include FHLB advances, brokered deposits, secured and unsecured federal funds lines of credit from
−Removed: correspondent banks, Federal Reserve borrowings and/or accessing the equity or debt capital markets.
+Added: 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.
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Additionally, when necessary, the secondary sources of borrowed funds described above will be used to augment our primary funding sources.
−Removed: In March 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.
−Removed: We may use the Bank Term Funding Program on an as needed basis.
+Added: 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.
+Added: 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.
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In addition, our future growth will largely depend on our ability to maintain and grow a strong core deposit base.
−Removed: 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 may not be able to grow our assets as quickly.
+Added: 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
+Added: may not be able to grow our assets as quickly.
We compete with banks and other financial services companies for deposits.
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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.
−Removed: The extremely low interest rate environment of the past several years ended in 2022.
−Removed: Contrary to the expectations outlined in the paragraph above, deposit levels prior to 2022 climbed, possibly buoyed by the severe volatility experienced by the
−Removed: stock markets in 2018-2020 coupled with Federal pandemic assistance, particularly direct cash payments to most citizens, in 2020 and 2021.
−Removed: Significant market volatility resumed in 2022, and we have generally raised deposit interest rates to attract and maintain clients.
−Removed: We are unsure whether or not deposit levels will continue to rise appreciably in 2023 as the Federal Reserve continues to tighten monetary policy to curb inflation.
−Removed: In addition, recent economic events have highlighted the current market volatility related to deposits, and regulators are taking action to strengthen public confidence in the banking system and protect depositors.
−Removed: We are unable to predict how current economic conditions might affect our deposits and whether these regulatory actions will be successful.
−Removed: Deposit levels may be affected, fairly quickly, by changes in monetary policy.
−Removed: The Federal Reserve currently is pursuing an aggressive tightening policy.
−Removed: The Federal Reserve has indicated it intends to continue tightening based on economic events during the year, including inflationary pressures, employment data, and overall economic activity.
−Removed: Additional information concerning monetary policy changes appears under the caption Risks Associated with Monetary Events in this Item 1A of this report.
Risks Related to Strategic Plans
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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.
−Removed: Our merger and acquisition activities, including our recent merger with Pioneer, could involve a number of additional risks, including the risks of:
+Added: Our merger and acquisition activities, including our proposed merger with HomeStreet, could involve a number of additional risks, including the risks of:
+Added: • 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;
−Removed: • the possibility that the expected benefits of a transaction may not materialize in the timeframe expected or at all, or may be costlier to achieve;
−Removed: • incurring the time and expense associated with identifying and evaluating potential merger or acquisition targets;
+Added: • 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;
+Added: • 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;
−Removed: • our estimates and judgments used to evaluate credit, operations, management and market risks with respect to the acquired or merged company may not be accurate;
+Added: • the inability to obtain alternative capital in the event it becomes necessary to complete the proposed merger;
+Added: • 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;
+Added: • 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;
−Removed: • difficulty or unanticipated expense associated with converting the operating systems of the acquired or merged company into ours;
+Added: • 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;
−Removed: • delay in completing a merger or acquisition due to litigation, closing conditions or the regulatory approval process;
+Added: • 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;
−Removed: • the possible loss of our key employees and customers or of the acquired or merged company.
−Removed: 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, and our ability to successfully implement our strategic plan.
+Added: • the possible loss of our key employees and customers or those of the acquired or merged company.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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).
+Added: 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.
+Added: Future mergers and acquisitions may be delayed, impeded, or prohibited due to regulatory issues.
+Added: Our mergers and acquisitions, including our proposed merger with HomeStreet, are subject to approval by a variety of federal and state regulatory agencies.
+Added: The process for obtaining these required regulatory approvals has become substantially more difficult in recent years.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: We face risks and uncertainties related to our proposed merger with HomeStreet.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: FirstSun and HomeStreet have operated and, until the completion of the merger, will continue to operate independently.
+Added: There can be no assurances that the businesses of FirstSun and HomeStreet can be integrated successfully.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: These provisions, which include a $10.0 million termination fee payable under certain circumstances, might discourage a potential competing
+Added: 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.
+Added: Failure to complete our proposed merger with HomeStreet could negatively impact our business, financial results and stock price.
+Added: 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.
+Added: If HomeStreet shareholders exercise dissenters’ rights and the proposed HomeStreet merger is completed, FirstSun may incur significant additional costs.
+Added: HomeStreet shareholders are entitled to exercise dissenters’ rights in connection with the proposed HomeStreet merger.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: We expect to incur substantial expenses related to the proposed HomeStreet merger.
+Added: 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.
+Added: 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.
+Added: Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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:
+Added: • we may be required, under certain circumstances, to pay HomeStreet a termination fee of $10.0 million under the merger agreement;
+Added: • 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;
+Added: • 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;
+Added: • 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.
+Added: In addition, if the merger is not completed, we may experience negative reactions from the financial markets and from our customers and employees.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: Additional growth will subject FirstSun to additional regulation, increased supervision and increased costs.
+Added: The Dodd-Frank Act imposes additional regulatory requirements on institutions with $10 billion or more in assets.
+Added: We had $7.88 billion in assets as of December 31, 2023.
+Added: 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:
+Added: • Supervision, examination and enforcement by the CFPB with respect to consumer financial protection laws;
+Added: • A different methodology for calculating FDIC insurance assessments and potentially higher assessment rates for institutions with $10 billion or more in assets;
+Added: • 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;
+Added: 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);
+Added: • Heightened compliance standards under the Volcker Rule;
+Added: • Enhanced supervision as a larger financial institution;
+Added: • 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.
+Added: 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.
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These risks include, without limitation, the following:
−Removed: • our inability to attract and retain clients in our banking market areas, particularly as we further integrate our recent acquisition of Pioneer;
+Added: • 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;
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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.
−Removed: Risks Related to Public Health Issues, Including COVID-19
+Added: 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.
−Removed: The ongoing COVID-19 pandemic has 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.
−Removed: This has recently been accompanied by a surge in flu and other respiratory illnesses of varying seriousness and magnitude.
+Added: 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.
+Added: 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.
−Removed: These restrictions and other consequences of public health issues have resulted in significant adverse effects
−Removed: 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.
−Removed: Although we are taking precautions to protect the safety and well-being of our employees and customers, the unpredictability of the pandemic and public health issues could result in any of the following:
−Removed: • employees contracting these diseases, including COVID-19 or its variants;
−Removed: • reductions in operating effectiveness as employees work from home;
−Removed: • a work stoppage, forced quarantine, or other interruption of our business, including sustained closures of our business locations;
−Removed: • unavailability of key personnel necessary to conduct our business activities;
−Removed: • effects on key employees, including operational management personnel and those charged with preparing, monitoring, and evaluating our financial reporting and internal controls;
−Removed: • increased cybersecurity risks as a result of employees working remotely;
−Removed: • declines in demand for loans and other banking services and products;
−Removed: • reduced consumer spending due to job losses, inflation and other effects directly or indirectly attributable to the pandemic;
−Removed: • continued volatility in United States financial markets;
−Removed: • continued volatile performance of our investment securities portfolio;
−Removed: • decline in the credit quality of our loan portfolio resulting from the effects of the COVID-19 pandemic in our markets, leading to a need to increase the allowance for loan or credit losses, as applicable;
−Removed: • declines in value of collateral for loans, including real estate collateral;
−Removed: • declines in the net worth and liquidity of borrowers and loan guarantors, impairing their ability to honor commitments to us, which may affect, among other things, the levels of non-performing assets, charge-offs, and provision expense;
−Removed: • declines in demand resulting from businesses deemed to be “non-essential” by governments in the markets that we serve, and from both “non-essential” and “essential” businesses suffering adverse effects from reduced levels of economic activity.
−Removed: We have also experienced and may experience other negative impacts to our business as a result of the pandemic that could exacerbate other risks discussed in this “Risk Factors” section.
−Removed: The ongoing fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on economic and market conditions, and, as a result, presents material uncertainty and risk with respect to us.
+Added: 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.
+Added: 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
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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.
+Added: 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.
+Added: Many aspects of the banking business involve a substantial risk of legal liability.
+Added: 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.
+Added: 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.
−Removed: capital standards are discussed under the captions Capital and Related Requirements in Item 1 of this report and the caption “ Capital ” in Item 7 of this report.
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.
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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.
−Removed: Over the course of 2013, the CFPB issued several rules on mortgage lending, notably a rule requiring all home mortgage lenders to determine a borrower’s ability to repay the loan.
−Removed: Loans with certain terms and conditions and that otherwise meet the definition of a “qualified mortgage” may be protected from liability to a borrower for failing to make the necessary determinations.
+Added: 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.
+Added: Loans with certain terms and conditions and that otherwise meet the definition of a “qualified mortgage”
+Added: 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.
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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.
−Removed: Certain claims may seek injunctive relief, which could disrupt the ordinary conduct of our business and operations or increase our cost of doing business.
+Added: 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.
Our insurance or indemnities may not cover all claims that may be asserted against us.
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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.
−Removed: We service some 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.
+Added: 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.
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In addition, we have sold loans to third parties.
−Removed: In connection with these sales, we or certain of our subsidiaries 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.
+Added: 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:
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Any of these developments could have a material adverse effect on our financial condition, results of operations or liquidity.
−Removed: Data privacy is becoming a major political concern.
−Removed: The laws governing it are new, and are likely to evolve and expand.
−Removed: Many non-regulated, non-banking companies have gathered large amounts of personal details about millions of people, and have the ability to analyze that data and act on that analysis very quickly.
+Added: Data privacy is a major political concern.
+Added: The laws governing it are new, and they are likely to evolve and expand.
+Added: 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.
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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.
−Removed: The estimate that is consistently one of our most critical is the level of the allowance for loan or credit losses.
+Added: 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.
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As actual events unfold, estimates are adjusted accordingly.
−Removed: 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 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.
+Added: 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
+Added: 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.
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In addition, the determination of our provision for income taxes and other liabilities requires significant judgment by management.
−Removed: Although we believe that our estimates are reasonable, 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.
+Added: 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.
−Removed: Moreover, as we continue to grow, our controls and procedures may become more complex and require additional resources to ensure they remain effective amid dynamic regulatory and other guidance.
+Added: 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.
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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.
−Removed: Our common stock is currently quoted on the OTCQX® Best Market operated by the OTC Markets.
+Added: 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.
−Removed: The number of active buyers and sellers of the shares of our common stock at any particular time may be limited.
+Added: 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.
−Removed: In addition, our public float, which is the total number of our outstanding shares less the shares held by Sunflower Bank and our directors and executive officers, is quite limited.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: Accordingly, investing in FirstSun stock could potentially be illiquid and a long-term investment.
+Added: 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.
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.
−Removed: Certain Relationships and Related Transactions, and Director Independence ,” under the heading “Stockholders’ Agreement”), own, in the aggregate, approximately 58.6%.
+Added: 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.
−Removed: In addition, under our Stockholders’ Agreement, as amended, certain of FirstSun’s Significant Stockholders, are entitled to designate nine of the ten directors, in each case, so long as certain stock ownership thresholds are maintained.
+Added: 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.
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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.
−Removed: The concentration of ownership may also delay, defer or even
−Removed: 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.
+Added: 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.
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These provisions include:
−Removed: • 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 designated by certain Significant Stockholders under the Stockholders’ Agreement, so long as certain stock ownership thresholds are maintained;
+Added: • 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;
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• enabling our board of directors to amend our bylaws without stockholder approval.
−Removed: We do not intend to pay dividends in the near-term and our future ability to pay dividends is subject to restrictions.
−Removed: We currently conduct substantially all of our operations through our subsidiaries, and a significant part of our income is attributable to dividends from Sunflower Bank and we principally rely on the profitability of Sunflower Bank to conduct operations and satisfy obligations.
−Removed: Our principal source of funds to pay dividends on our common stock and service any of our obligations are dividends received directly from our subsidiaries, including Sunflower Bank.
−Removed: As is the case with all financial institutions, the profitability of Sunflower Bank is subject to the fluctuating cost and availability of money, changes in interest rates, and in economic conditions in general.
−Removed: In addition, various federal statutes and regulations limit the amount of dividends that Sunflower Bank may pay to us, with or without regulatory approval.
−Removed: FirstSun stockholders are entitled to receive only such cash dividends as our board of directors may declare out of funds legally available for such payments.
−Removed: Any declaration and payment of dividends on FirstSun common stock will depend upon our earnings and financial condition, liquidity and capital requirements, the general economic and regulatory climate, our ability to service any equity or debt obligations senior to the FirstSun common stock, and other factors deemed relevant by the board of directors.
−Removed: Furthermore, consistent with our business plans, growth initiatives, capital availability, projected liquidity needs, and other factors, we have made, and will continue to make, capital management decisions and policies that could adversely impact the amount of dividends, if any, paid to our common stockholders.
−Removed: Our board of directors currently intends to retain all of our earnings to promote growth and build capital.
−Removed: Accordingly, we do not expect to pay dividends in the near-term.
−Removed: In addition, we are subject to certain restrictions on the payment of cash dividends as a result of banking laws, regulations and policies.
+Added: We do not intend to pay dividends for the foreseeable future.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: The Bank is also subject to various legal, regulatory and other restrictions on its ability to make distributions and payments to the Company.
+Added: In addition, in the future, we may enter into borrowing or other contractual arrangements that restrict our ability to pay dividends.
+Added: As a consequence of these various limitations and restrictions, we may not be able to pay dividends on our common stock.
+Added: Business - Supervision and Regulation - Dividend Payments” for additional information.
An investment in FirstSun common stock is not an insured deposit and is subject to risk of loss.
11 unchanged sentences
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.
−Removed: Substantial future sales of our common stock, or the perception that these sales may occur, could cause the price of our common stock to decline, or could result in dilution.
−Removed: Sales of substantial amounts of FirstSun common stock in future offerings, or the perception that these sales could occur, could cause the market price of FirstSun common stock to decline.
−Removed: These sales could also 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.
−Removed: Certain investors, including our Significant Stockholders, are party to a Registration Rights Agreement under which we may be required to register their approximately 18.8 million shares of FirstSun common stock under the Securities Act.
−Removed: Each Significant Stockholder has up to five of these demand registration rights, which are subject to specified limitations.
−Removed: See “ Item 13.
−Removed: Certain Relationships and Related Transactions, and Director Independence ,” under the heading “Registration Rights Agreement.” Accordingly, the market price of FirstSun common stock could be adversely affected by actual or anticipated sales of a significant number of shares of FirstSun common stock in the future.
−Removed: We are authorized to issue up to 50,000,000 shares of our common stock without further stockholder approval.
−Removed: We may issue additional shares of our common stock in the future pursuant to current or future equity compensation plans or in connection with future acquisitions or financings.
−Removed: If we choose to raise capital by selling shares of our common stock for any reason, the issuance would have a dilutive effect on the holders of our common stock and could have a material negative effect on the value of our common stock.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: As of March 6, 2024, FirstSun had 27,430,682 shares of common stock outstanding, and no shares of preferred stock outstanding.
+Added: 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.
+Added: Such amendment to the certificate of incorporation will become effective upon filing with the Secretary of State of the State of Delaware.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: Shareholder litigation could prevent or delay the completion of the merger or otherwise negatively impact the business and operations of FirstSun and HomeStreet.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
−Removed: We operate in markets in which natural disasters, including tornadoes, severe storms, fires, floods, hurricanes and earthquakes have occurred.
+Added: 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.
−Removed: Although our banking offices are geographically dispersed throughout portions of the midwestern 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.
+Added: 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.
9 unchanged sentences
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.
−Removed: As an example, although not currently applicable to us, on December 16, 2021, the OCC requested feedback on draft principles designed to support the identification and management of climate-related financial risks at institutions with more than $100 billion in total consolidated assets.
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.
8 unchanged sentences
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.
−Removed: Unresolved Staff Comments
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.