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Item 7. Management’s Discussion and Analysis

2025-03-07 compared with 2024-03-07 · 233 added, 219 removed, 581 unchanged (44% of the section changed)

9 unchanged sentences

General Overview

FirstSun Capital Bancorp, headquartered in Denver, Colorado, is the financial holding company for Sunflower Bank, National Association, which is headquartered in Dallas, Texas and operates as Sunflower Bank, First National 1870 and Guardian Mortgage.

We conduct a full-service community banking and trust business through our wholly-owned subsidiaries—Sunflower Bank, Logia Portfolio Management, LLC, and FEIF Capital Partners, LLC.

We offer a full range of relationship-focused services to meet our clients’ personal, business and wealth management financial objectives, with a branch network in Texas, Kansas, Colorado, New Mexico, and Arizona and mortgage capabilities in 43 states.

We offer a full range of relationship-focused services to meet our clients’ personal, business and wealth management financial objectives throughout Texas, Kansas, Colorado, New Mexico, Arizona, California and Washington and a mortgage lending platform with capabilities in 43 states.

Our product line includes commercial and industrial loans, commercial real estate loans, residential mortgage, public finance and other consumer loans, and a variety of commercial and consumer deposit products, including noninterest-bearing accounts, interest-bearing demand products, savings accounts, money market accounts and certificates of deposit.

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For additional information on our segments, see Note 21 - Segment Information included in our consolidated financial statements included elsewhere in this report.

Merger with Pioneer Bancshares, Inc.

On April 1, 2022, we completed our merger with Pioneer Bancshares, Inc.

(“Pioneer”), pursuant to which Pioneer was merged with and into FirstSun, with FirstSun continuing as the surviving entity, and Pioneer’s wholly-owned subsidiary, Pioneer Bank, SSB, a Texas state savings bank, was merged with and into Sunflower Bank, with Sunflower Bank continuing as the surviving bank.

With the acquisition, we acquired 19 branches in Texas.

The results for Pioneer are reflected in our results of operations and financial condition since April 1, 2022.

Further information is presented in Note 2 - Merger with Pioneer Bancshares, Inc .

included in our consolidated financial statements included elsewhere in this report.

Pending Merger with HomeStreet, Inc.

and Common Equity Raise

On January 16, 2024, FirstSun and Seattle-based HomeStreet, Inc.

(“HomeStreet”), the holding company of HomeStreet Bank (“HomeStreet Bank”) entered into a definitive merger agreement (the “merger agreement”).

Under the merger agreement, HomeStreet will merge with and into FirstSun, with FirstSun continuing as the surviving entity.

Immediately following the merger, HomeStreet Bank will merge with and into Sunflower Bank, with Sunflower Bank continuing as the surviving bank.

Subject to the terms and conditions of the merger agreement, at the effective time of the merger, each outstanding share of HomeStreet common stock will be converted into the right to receive 0.4345 of a share of FirstSun common stock.

The combined entity is expected to have total assets of approximately $17 billion and 129 branch locations.

The combined entity’s expanded footprint includes, FirstSun’s current presence in the Southwest and Midwest together with HomeStreet’s presence in Southern California, Hawaii and the Pacific Northwest.

The parties to the merger expect to complete the merger in the middle of 2024, subject to satisfaction of closing conditions, including receipt of customary required regulatory approvals and the approval of the merger agreement by the HomeStreet shareholders.

Concurrently with entry into the HomeStreet merger agreement, FirstSun entered into investment agreements with investors to raise capital to support the merger.

In aggregate, $175 million of common stock will be issued to those investors:

(a) $80 million of which was issued immediately following the merger announcement, and (b) the remaining $95 million of which will be issued substantially concurrently with, and subject to, the closing of the merger.

The proceeds of this equity raise are expected to support the combined entity and result in capital ratios that exceed regulatory requirements.

For additional information on the proposed merger and equity raise, see Note 27 - Subsequent Events included in our consolidated financial statements included elsewhere in this report.

Financial Highlights For 2024

We delivered strong financial results in 2024, which included:

• Net income of $103.5 million, $4.08 per diluted share

• Net income of $75.6 million, $2.69 per diluted share (adjusted, $87.7 million, $3.13 per diluted share, see the “Non-GAAP Financial Measures and Reconciliations” below)

• Net interest margin of 4.06%

• Return on average total assets of 1.38%

• Return on average stockholders’ equity of 12.50%

• Loan growth of 6.0%

• Return on average total assets of 0.96% (adjusted, 1.12%, see the “Non-GAAP Financial Measures and Reconciliations” below)

• Return on average stockholders’ equity of 7.56% (adjusted, 8.77%, see the “Non-GAAP Financial Measures and Reconciliations” below)

• Average deposit growth of 5.8%

• Loan growth of 1.7%

• 23.2% fee revenue to total revenue 1

Net income totaled $75.6 million, or $2.69 per diluted share, in 2024, compared to $103.5 million, or $4.08 per diluted share, in 2023.

Net income in 2022 included merger costs, net of tax, of $17.0 million, or $0.72 per diluted share.

There were no merger costs recorded in 2023.

Adjusted net income, a non-GAAP financial measure, was $87.7 million, or $3.13 per diluted share, in 2024.

The return on average total assets was 0.96% in 2024, compared to 1.38% in 2023, and the return on average stockholders’ equity was 7.56% in 2024, compared to 12.50% in 2023.

The unfavorable impact in 2022 of merger costs, net of tax, to return on average total assets was 0.25% and to return on average stockholders’ equity was 2.46%.

1 Total revenue is net interest income plus noninterest income.

Financial Highlights

The following table sets forth certain financial highlights of FirstSun as of and for the year ended December 31,:

($ in thousands, except share and per share amounts)

2023 2022 2021

Adjusted return on average total assets and adjusted return on average stockholders’ equity, each a non-GAAP financial measure, were 1.12% and 8.77% respectively in 2024.

The following table sets forth certain financial highlights of FirstSun as of and for the years ended December 31,:

($ in thousands, except per share amounts) 2024 2023 2022

Income Statement:

Net interest income $ 296,910 $ 293,431 $ 241,632

Taxable equivalent adjustment 5,086 5,059 5,755

Net interest income - fully tax equivalent ("FTE") basis (non-GAAP) (3) $ 298,517 $ 246,691 $ 160,988

Provision for credit losses 27,550 18,247 18,050

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Noninterest expense 264,040 222,793 239,126

Income before income taxes 95,112 131,483 74,022

Provision for income taxes 19,484 27,950 14,840

Net income 75,628 103,533 59,182

Adjusted net income 2

87,744 103,533 76,213

Balance Sheet:

Total assets $ 8,097,387 $ 7,879,724 $ 7,430,322

Total loans held-for-sale 61,825 54,212 57,323

Total loans held-for-investment 6,376,357 6,267,096 5,911,832

Total deposits 6,672,260 6,374,103 5,765,062

Total borrowed funds 210,841 464,781 724,120

Total stockholders' equity 1,041,366 877,197 774,536

Per Common Share Data:

Weighted average diluted common shares 25,387,196 23,838,471 18,770,785

Net income (basic) $ 4.15 $ 2.55 $ 2.36

Net income (diluted) $ 4.08 $ 2.48 $ 2.30

Period end common shares outstanding 27,709,679 24,960,639 24,920,984

Weighted average common shares outstanding, basic 27,433,865 24,938,359 23,245,598

Basic earnings per share $ 2.76 $ 4.15 $ 2.55

Weighted average common shares outstanding, diluted 28,067,273 25,387,196 23,838,471

Diluted earnings per share $ 2.69 $ 4.08 $ 2.48

Adjusted diluted earnings per share 2

3.13 4.08 3.20

Cash dividends $ — $ — $ —

Dividend payout ratio — % — % — %

Book value $ 35.14 $ 31.08 $ 28.56

Tangible book value (non-GAAP) (3) $ 30.96 $ 26.69 $ 26.31

Book value per share $ 37.58 $ 35.14 $ 31.08

Tangible book value per share 2

33.94 30.96 26.69

1 Total revenue is net interest income plus noninterest income.

2 See section entitled “ Non-GAAP Financial Measures and Reconciliations ” for information regarding these non-GAAP financial measures and a reconciliation to the most comparable GAAP equivalent.

($ in thousands, except per share amounts) 2024 2023 2022

Performance Ratios:

Return on average total assets 0.96 % 1.38 % 0.88 %

Adjusted return on average total assets 2

1.12 % 1.38 % 1.13 %

Return on average stockholders' equity 7.56 % 12.50 % 8.55 %

Return on average tangible common stockholders' equity (non-GAAP) (3) 14.88 % 10.45 % 9.35 %

Adjusted return on average stockholders’ equity 2

8.77 % 12.50 % 11.01 %

Return on average tangible stockholders' equity 2

8.74 % 14.88 % 10.45 %

Adjusted return on average tangible stockholders' equity 2

10.09 % 14.88 % 13.30 %

Net interest margin 4.06 % 4.23 % 3.87 %

Net interest margin (on FTE basis) (3) 4.29 % 3.95 % 3.11 %

Net interest margin (FTE basis) 2

4.12 % 4.29 % 3.95 %

Efficiency ratio 68.28 % 59.81 % 72.20 %

Adjusted efficiency ratio 2

64.13 % 59.81 % 66.54 %

Noninterest income to total revenue 1

23.2 % 21.2 % 27.0 %

Balance Sheet Ratios:

Loan to deposit ratio 95.6 % 98.3 % 102.5 %

Net charge-offs (recoveries) to average loans outstanding 0.32 % 0.13 % (0.01) %

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Nonperforming loans to total loans 3

Balance Sheet:

Total loans, excluding loans held-for-sale $ 6,267,096 $ 5,911,832 $ 4,037,123

Total assets $ 7,879,724 $ 7,430,322 $ 5,666,814

Total deposits $ 6,374,103 $ 5,765,062 $ 4,854,948

Total borrowed funds $ 464,781 $ 724,120 $ 109,458

Total stockholders' equity $ 877,197 $ 774,536 $ 524,038

1.08 % 1.01 % 0.49 %

Capital Ratios:

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Average stockholders' equity to average total assets 12.72 % 11.05 % 10.28 %

Tangible common stockholders' equity to tangible assets (non-GAAP) (3) 9.94 % 9.09 % 8.58 %

Tangible common stockholders’ equity to tangible assets reflecting net unrealized losses on HTM securities, net of tax (non-GAAP) (3) 9.90 % 9.03 % 8.59 %

Tangible stockholders' equity to tangible assets 2

11.76 % 9.94 % 9.09 %

Tangible stockholders' equity to tangible assets reflecting net unrealized losses on HTM securities, net of tax 2

11.71 % 9.90 % 9.03 %

Nonfinancial Data:

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Banking branches 69 69 72

(1) The efficiency ratio is one measure of profitability in the banking industry.

This ratio measures the cost of generating one dollar of revenue.

That is, the ratio is designed to reflect the percentage of one dollar which must be expended to generate that dollar of revenue.

We calculate this ratio by dividing noninterest expense by the sum of net interest income and noninterest income.

1 Total revenue is net interest income plus noninterest income.

2 See section entitled “ Non-GAAP Financial Measures and Reconciliations ” for information regarding these non-GAAP financial measures and a reconciliation to the most comparable GAAP equivalent.

3 Nonperforming loans include nonaccrual loans and accrual loans greater than 90 days past due.

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The loans previously classified as accrual TDRs are no longer considered nonperforming.

We have adjusted prior periods to reflect this change in accounting.

(3) See section entitled “ Non-GAAP Financial Measures and Reconciliations ” for information regarding these non-GAAP financial measures and a reconciliation to the most comparable GAAP equivalent.

We have adjusted December 31, 2022 to reflect this change in accounting.

Non-GAAP Financial Measures and Reconciliations

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These non-GAAP measures are not necessarily comparable to similar measures that may be represented by other companies.

The following table presents GAAP to non-GAAP reconciliations as of and for the year ended December 31,:

The following table presents GAAP to non-GAAP reconciliations as of and for the years ended December 31,:

($ in thousands, except share and per share amounts) 2024 2023 2022

2023 2022 2021

Tangible common stockholders’ equity and tangible book value per common share:

Total common stockholders' equity (GAAP) $ 877,197 $ 774,536 $ 524,038

Tangible stockholders’ equity to tangible assets:

Total stockholders' equity (GAAP) $ 1,041,366 $ 877,197 $ 774,536

Goodwill and other intangible assets

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Other intangible assets (7,434) (10,984) (15,806)

Tangible common stockholders' equity (non-GAAP) $ 772,730 $ 665,247 $ 482,738

Total common shares outstanding 24,960,639 24,920,984 18,346,288

Tangible book value per common share (non-GAAP) $ 30.96 $ 26.69 $ 26.31

Tangible net income:

Net Income (GAAP) $ 103,533 $ 59,182 $ 43,164

Intangible amortization, net of tax 3,809 3,330 1,119

Tangible net income (non-GAAP) $ 107,342 $ 62,512 $ 44,283

Return on average tangible common stockholders’ equity:

Tangible net income (non-GAAP) (see above) $ 107,342 $ 62,512 $ 44,283

Total average common stockholders' equity (GAAP) $ 828,102 $ 692,524 $ 515,773

Average goodwill and other intangible assets

Average goodwill (93,483) (78,582) (33,050)

Average other intangible assets (13,178) (15,811) (8,964)

Total average tangible common stockholders' equity (non-GAAP) $ 721,441 $ 598,131 $ 473,759

Return on average tangible common stockholders’ equity (non-GAAP) 14.88 % 10.45 % 9.35 %

Net interest margin - FTE basis:

Net interest income (GAAP) $ 293,431 $ 241,632 $ 155,233

Taxable equivalent adjustment 5,086 5,059 5,755

Net interest income - FTE basis (non-GAAP) $ 298,517 $ 246,691 $ 160,988

Average earning assets $ 6,935,567 $ 6,244,221 $ 5,180,650

Net interest margin - FTE basis (non-GAAP) 4.29 % 3.95 % 3.11 %

Tangible common stockholders’ equity to tangible assets:

Tangible stockholders' equity (non-GAAP) $ 940,449 $ 772,730 $ 665,247

Total assets (GAAP) $ 8,097,387 $ 7,879,724 $ 7,430,322

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Other intangible assets (7,434) (10,984) (15,806)

Total tangible assets (non-GAAP) $ 7,775,257 $ 7,321,033 $ 5,625,514

Tangible common stockholders’ equity (non-GAAP) (see above) $ 772,730 $ 665,247 $ 482,738

Tangible common stockholders’ equity to tangible assets (non-GAAP) 9.94 % 9.09 % 8.58 %

($ in thousands, except share and per share amounts)

2023 2022 2021

Tangible common stockholders’ equity to tangible assets, reflecting net unrealized losses on HTM securities, net of tax:

Total tangible common stockholders' equity (non-GAAP) (see above) $ 772,730 $ 665,247 $ 482,738

Tangible assets (non-GAAP) $ 7,996,470 $ 7,775,257 $ 7,321,033

Total stockholders' equity to total assets (GAAP) 12.86 % 11.13 % 10.42 %

Impact of goodwill and other intangible assets (1.10) % (1.19) % (1.33) %

Tangible stockholders' equity to tangible assets (non-GAAP) 11.76 % 9.94 % 9.09 %

Tangible stockholders’ equity to tangible assets, reflecting net unrealized losses on HTM securities, net of tax:

Tangible stockholders' equity (non-GAAP) $ 940,449 $ 772,730 $ 665,247

Net unrealized losses on HTM securities, net of tax (4,292) (3,629) (4,295)

Total tangible common stockholders’ equity less net unrealized losses on HTM securities, net of tax (non-GAAP) $ 769,101 $ 660,952 $ 483,185

Total tangible assets (non-GAAP) (see above) $ 7,775,257 $ 7,321,033 $ 5,625,514

Tangible stockholders’ equity less net unrealized losses on HTM securities, net of tax (non-GAAP) $ 936,157 $ 769,101 $ 660,952

Tangible assets (non-GAAP) $ 7,996,470 $ 7,775,257 $ 7,321,033

Net unrealized losses on HTM securities, net of tax (4,292) (3,629) (4,295)

Total tangible assets less net unrealized losses on HTM securities, net of tax (non-GAAP) $ 7,771,628 $ 7,316,738 $ 5,625,961

Tangible common stockholders’ equity to tangible assets (non-GAAP) 9.94 % 9.09 % 8.58 %

Tangible common stockholders’ equity to tangible assets reflecting net unrealized losses on HTM securities, net of tax (non-GAAP) 9.90 % 9.03 % 8.59 %

Net income excluding merger costs:

Tangible assets less net unrealized losses on HTM securities, net of tax (non-GAAP) $ 7,992,178 $ 7,771,628 $ 7,316,738

Tangible stockholders’ equity to tangible assets (non-GAAP) 11.76 % 9.94 % 9.09 %

Net unrealized losses on HTM securities, net of tax (0.05) % (0.04) % (0.06) %

Tangible stockholders’ equity to tangible assets reflecting net unrealized losses on HTM securities, net of tax (non-GAAP) 11.71 % 9.90 % 9.03 %

Tangible book value per share:

Total stockholders' equity (GAAP) $ 1,041,366 $ 877,197 $ 774,536

Tangible stockholders' equity (non-GAAP) $ 940,449 $ 772,730 $ 665,247

Total shares outstanding 27,709,679 24,960,639 24,920,984

Book value per share (GAAP) $ 37.58 $ 35.14 $ 31.08

Tangible book value per share (non-GAAP) $ 33.94 $ 30.96 $ 26.69

($ in thousands, except share and per share amounts) 2024 2023 2022

Adjusted net income:

Net income (GAAP) $ 75,628 $ 103,533 $ 59,182

Merger related expenses — 18,751 3,085

Income tax effect on merger related expenses — (4,083) (509)

Provision for loan loss on Pioneer loans marked at a premium — 2,884 —

Income tax effect on provision for loan loss on Pioneer loans marked at a premium — (521) —

Total merger costs — 17,031 2,576

Net income excluding merger costs (non-GAAP) $ 103,533 $ 76,213 $ 45,740

Return on average total assets excluding merger costs:

Non-recurring adjustments

Terminated merger / Merger related expenses, net of tax 9,949 — 14,668

Provision for loan loss on acquired loans marked at a premium, net of tax — — 2,363

Write-off of Guardian Mortgage trade name, net of tax 625 — —

Disposal of ATMs, net of tax 1,542 — —

Total adjustments, net of tax 12,116 — 17,031

Adjusted net income (non-GAAP) $ 87,744 $ 103,533 $ 76,213

Adjusted diluted earnings per share:

Diluted earnings per share (GAAP) $ 2.69 $ 4.08 $ 2.48

Impact of non-recurring adjustments

Terminated merger / Merger related expenses, net of tax 0.36 — 0.62

Provision for loan loss on acquired loans marked at a premium, net of tax — — 0.10

Write-off of Guardian Mortgage trade name, net of tax 0.02 — —

Disposal of ATMs, net of tax 0.06 — —

Adjusted diluted earnings per share (non-GAAP) $ 3.13 $ 4.08 $ 3.20

Adjusted return on average total assets:

Return on average total assets (ROAA) (GAAP) 0.96 % 1.38 % 0.88 %

Impact of merger costs, net of tax — % 0.25 % 0.05 %

ROAA excluding merger costs (non-GAAP) 1.38 % 1.13 % 0.84 %

Return on average stockholders’ equity excluding merger costs:

Return on average stockholders' equity (ROAE) (GAAP) 12.50 % 8.55 % 8.37 %

Impact of merger costs, net of tax — % 2.46 % 0.50 %

ROAE excluding merger costs (non-GAAP) 12.50 % 11.01 % 8.87 %

Efficiency ratio excluding merger related expenses:

Impact of non-recurring adjustments

Terminated merger / Merger related expenses, net of tax 0.13 % — % 0.21 %

Provision for loan loss on acquired loans marked at a premium, net of tax — % — % 0.04 %

Write-off of Guardian Mortgage trade name 0.01 % — % — %

Disposal of ATMs 0.02 % — % — %

Adjusted ROAA (non-GAAP) 1.12 % 1.38 % 1.13 %

Adjusted return on average stockholders’ equity:

Return on average stockholders' equity (ROACE) (GAAP) 7.56 % 12.50 % 8.55 %

Impact of non-recurring adjustments

Terminated merger / Merger related expenses, net of tax 1.00 % — % 2.12 %

Provision for loan loss on acquired loans marked at a premium, net of tax — % — % 0.34 %

Write-off of Guardian Mortgage trade name 0.06 % — % — %

Disposal of ATMs 0.15 % — % — %

Adjusted ROACE (non-GAAP) 8.77 % 12.50 % 11.01 %

Return on average tangible stockholders’ equity

Return on average stockholders’ equity (ROACE) 7.56 % 12.50 % 8.55 %

Impact from goodwill and other intangible assets

Goodwill 0.87 % 1.85 % 1.34 %

Other intangible assets 0.31 % 0.53 % 0.56 %

Return on average tangible stockholders’ equity (ROATCE) 8.74 % 14.88 % 10.45 %

Adjusted return on average tangible stockholders’ equity:

Return on average tangible stockholders' equity (ROATCE) 8.74 % 14.88 % 10.45 %

Impact of non-recurring adjustments

Terminated merger / Merger related expenses, net of tax 1.11 % — % 2.45 %

Provision for loan loss on acquired loans marked at a premium, net of tax — % — % 0.40 %

Write-off of Guardian Mortgage trade name 0.07 % — % — %

Disposal of ATMs 0.17 % — % — %

Adjusted ROATCE (non-GAAP) 10.09 % 14.88 % 13.30 %

Adjusted total noninterest expense:

Total noninterest expense (GAAP) $ 264,040 $ 222,793 $ 239,126

Non-recurring adjustments

Terminated merger / Merger related expenses (13,178) — (18,751)

Write-off of Guardian Mortgage trade name (828) — —

Disposal of ATMs (2,042) — —

Total adjustments, net of tax (16,048) — (18,751)

Adjusted total noninterest expense (non-GAAP) $ 247,992 $ 222,793 $ 220,375

($ in thousands, except share and per share amounts) 2024 2023 2022

Adjusted efficiency ratio:

Efficiency ratio (GAAP) 68.28 % 59.81 % 72.20 %

Impact of merger related expenses — % (5.66) % (1.11) %

Efficiency ratio excluding merger related expenses (non-GAAP) 59.81 % 66.54 % 79.27 %

Diluted earnings per share excluding merger costs:

Diluted earnings per share (GAAP) $ 4.08 $ 2.48 $ 2.30

Impact of merger costs, net of tax — 0.72 0.14

Diluted earnings per share excluding merger costs (non-GAAP) $ 4.08 $ 3.20 $ 2.44

Impact of non-recurring adjustments

Terminated merger related expenses / Merger related expenses (3.41) % — % (5.66) %

Write-off of Guardian Mortgage trade name (0.21) % — % — %

Disposal of ATMs (0.53) % — % — %

Adjusted efficiency ratio (non-GAAP) 64.13 % 59.81 % 66.54 %

Fully tax equivalent (“FTE”) net interest income and net interest margin:

Net interest income (GAAP) $ 296,910 $ 293,431 $ 241,632

Gross income effect of tax exempt income 4,767 5,086 5,059

FTE net interest income (non-GAAP) $ 301,677 $ 298,517 $ 246,691

Average earning assets $ 7,320,696 $ 6,935,567 $ 6,244,221

Net interest margin 4.06 % 4.23 % 3.87 %

Net interest margin on FTE basis (non-GAAP) 4.12 % 4.29 % 3.95 %

Our operations are conducted through two operating segments:

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Comparison of fiscal years 2024 and 2023

Income before income taxes increased $58.6 million to $147.2 million in 2023, from $88.5 million in 2022.

The period over period increase was primarily driven by an increase in net interest income and to a lesser extent noninterest income and a reduction in noninterest expense, partially offset by an increase in provision for credit losses.

Net interest income increased $50.7 million to $292.6 million in 2023 compared to $241.8 million in 2022.

The increase in net interest income was primarily due to organic growth in our loan portfolios and an increase in net interest margin.

Noninterest expense

decreased $3.1 million to $175.7 million in 2023, compared to $178.8 million in 2022.

The decrease in noninterest expense was primarily the result of the absence of merger costs in 2023 compared to $18.8 million ($0.62 diluted earnings per share) in merger-related expenses incurred in 2022 related to the Pioneer merger, partially offset by an increase in salary and employee benefits of $11.7 million and an increase of $3.1 million in occupancy expenses in 2023.

Income before income taxes decreased $48.9 million to $98.3 million in 2024, from $147.2 million in 2023.

The period over period decrease was primarily driven by a decrease in net interest income, increase in noninterest expenses, and increase in provision for credit losses, partially offset by an increase in noninterest income.

Net interest income decreased $9.3 million to $283.2 million in 2024 compared to $292.6 million in 2023.

The decrease in net interest income was a result of higher interest expense primarily due to continued intense competition for deposits amidst the elevated interest rate environment and an increase in certificates of deposit balances.

Noninterest expense increased $29.3 million to $204.9 million in 2024, compared to $175.7 million in 2023.

The increase in noninterest expense was primarily the result of an increase in salary and employee benefits of $15.5 million and an increase of $8.6 million in terminated merger related expenses in 2024.

Provision for credit losses increased $12.6 million to $28.4 million in 2024 compared to $15.8 million in 2023.

The increase in the provision for credit losses was attributed to both organic loan growth and our implementation of a new allowance for credit loss methodology in 2023.

For additional information on our new allowance for credit loss methodology see “Critical Accounting Estimates” below.

Identifiable assets for our Banking segment grew by $0.3 billion to $6.9 billion at December 31, 2023 from $6.6 billion at December 31, 2022.

The growth in identifiable assets was primarily driven by organic growth in our loan portfolios.

The increase in the provision for credit losses was primarily due to a $13.6 million provision for credit loss on a specific customer in our commercial and industrial (C&I) loan portfolio in 2024.

Identifiable assets for our Banking segment decreased by $0.1 billion to $6.8 billion at December 31, 2024 from $6.9 billion at December 31, 2023.

Mortgage Operations

Loss before income taxes increased to $6.5 million in 2023, compared to a loss of $4.6 million in 2022, primarily due to a $16.3 million decrease in mortgage banking services revenue, net, partially offset by a $13.1 million decrease in salary and employee benefits expenses from the decline in mortgage loan originations and reductions in staffing levels.

MSR capitalization and changes in fair value, net of derivative activity, decreased $10.8 million for the year ended December 31, 2023, compared to 2022.

The decrease in revenue related to our MSRs was primarily the result of market interest rate movement and the impact to fair values and overall origination activity, which led to a year over year decline in the net fair value for MSRs and the related derivative activity of $5.8 million, as the total fair value change for 2023 for MSRs, net of derivative activity, was a loss of $1.1 million.

The year over year decline in capitalized servicing value for MSRs was $5.0 million.

Overall gains on sale of mortgage loans declined by $4.6 million as a result of the decline in origination activity, continued margin compression, and a decline in the rate lock pipeline volume and valuation due to rising interest rates.

Total loan originations for sale were $0.8 billion in 2023, a decline of $0.3 billion from $1.1 billion in 2022.

The decline in gains from mortgage loan sales was partially offset by a $0.6 million increase in servicing fee income related to our mortgage servicing rights (“MSRs”), resulting from an increase of $0.2 billion in 2023 of the unpaid principal balance of loans serviced to $5.4 billion, from $5.2 billion in 2022.

Income before income taxes increased to $9.7 million in 2024, compared to a loss of $6.5 million in 2023, primarily due to a $12.7 million increase in net interest income and a $8.4 million increase in mortgage banking services revenue, net, partially offset by a $6.3 million increase in salary and employee benefits.

Net interest income increased primarily due to a higher average balance and higher average yield on residential real estate loans and the impact of internal funds transfer pricing.

Mortgage banking services revenue, net increased primarily due to higher net sale gains and fees from mortgage loan originations and to a lesser extent, an increase in mortgage servicing income, and MSR capitalization and changes in fair value, net of derivative activity.

Total mortgage loan originations for sale were $1.1 billion in 2024, an increase of $0.3 billion from $0.8 billion in 2023.

The unpaid principal balance of mortgage loans serviced for others were $5.8 billion in 2024, an increase of $0.4 billion from $5.4 billion in 2023.

Salary and employee benefits increased due to higher levels of variable compensation associated with an increase in mortgage loan originations.

Critical Accounting Estimates

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Therefore, we consider these policies to be critical accounting estimates and discuss them directly with the Audit Committee of our board of directors.

During the year ended December 31, 2023, we adopted ASU 2016-13, Financial Instruments-Credit Losses:

Measurement of Credit Losses on Financial Instruments which required a change to our estimate of the allowance for credit losses.

These critical accounting estimates and their application are reviewed at least annually by our audit committee.

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For loans and unfunded loan commitments, the estimate of lifetime credit losses includes the use of quantitative models that incorporate forward-looking macroeconomic scenarios that are applied over the contractual lives of the portfolios, adjusted, as appropriate, for prepayments and permitted extension options using historical experience.

For purposes of the ACL for lending commitments, such allowance is determined using the same

methodology as the ACL for loans, while also taking into consideration the probability of drawdowns or funding, and whether such commitments are cancellable by us.

For purposes of the ACL for lending commitments, such allowance is determined using the same methodology as the ACL for loans, while also taking into consideration the probability of drawdowns or funding, and whether such commitments are cancellable by us.

The ACL for held-to-maturity and available-for-sale debt securities is measured using a risk-adjusted discounted cash flow approach that also considers relevant current and forward-looking economic variables and the ACL is limited to the difference between the fair value of the security and its amortized cost.

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(ii) organization specific risks such as credit concentrations, collateral specific risks, nature, and size of the portfolio and external factors that may ultimately impact credit quality, and (iii) other limitations associated with factors such as changes in underwriting and loan resolution strategies, among others.

The qualitative factors applied on January 1, 2023, and December 31, 2023, and the importance and levels of the qualitative factors applied, may change in future periods depending on the level of changes to items such as the uncertainty of economic conditions and management’s assessment of the level of credit risk within the loan portfolio as a result of such changes, compared to the amount of ACL calculated by the model.

The qualitative factors applied on

December 31, 2024, and the importance and levels of the qualitative factors applied, may change in future periods depending on the level of changes to items such as the uncertainty of economic conditions and management’s assessment of the level of credit risk within the loan portfolio as a result of such changes, compared to the amount of ACL calculated by the model.

The evaluation of qualitative factors is inherently imprecise and requires significant management judgement.

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Our process for determining ACL is further discussed in “ Note 1- Basis of Presentation, Description of Business and Summary of Significant Accounting Policies ” included in Item 8 of this Form 10-K.

Additionally, as an “emerging growth company” under Section 107 of the JOBS Act, we did not to adopt ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) (CECL) until January 1, 2023.

Additionally, as an “emerging growth company” under Section 107 of the JOBS Act, we adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) (CECL) on January 1, 2023.

As such, our allowance for credit losses for years prior to 2023 may not be comparable to other public financial institutions that adopted CECL in an earlier year.

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See Note 4 - Mortgage Servicing Rights included in our audited consolidated financial statements included elsewhere in this report for our assumptions used in valuing the MSRs.

For information concerning the hypothetical sensitivity of the key assumptions under adverse changes on our MSRs, see

the table under “Noninterest Income” elsewhere in the Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report.

For information concerning the hypothetical sensitivity of the key assumptions under adverse changes on our MSRs, see the table under “Noninterest Income” elsewhere in the Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report.

Results of Operations

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Net interest margin (FTE basis) 1

4.12 % 4.29 % 3.95 %

Efficiency ratio 68.28 % 59.81 % 72.20 %

Noninterest income to total revenue 2

23.2 % 21.2 % 27.0 %

1 See section entitled “ Non-GAAP Financial Measures and Reconciliations ” for information regarding these non-GAAP financial measures and a reconciliation to the most comparable GAAP equivalent.

(2) Total revenue is presented net of interest expense.

2 Total revenue is net interest income plus noninterest income.

Our results of operations depend significantly on net interest income, which is the difference between interest income on interest-earning assets, consisting primarily of interest income on loans and investment securities and interest expense on interest-bearing liabilities, consisting primarily of deposits and borrowings.

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Non-PCD loans acquired are initially recorded at fair value and the resulting discount or premium are recognized as an adjustment of the yield on the related loans.

rates at which assets and liabilities reprice, variances in prepayment of loans and securities, exercise of call options on borrowings or securities, a general rise or decline in interest rates, changes in the slope of the yield-curve, and balance sheet growth or contraction.

Our net interest income was $293.4 million for the year ended December 31, 2023, an increase of $51.8 million, or 21.4%, from 2022.

Interest income on loans increased by $137.6 million for the year ended December 31, 2023, from 2022.

Interest income on investment securities increased by $3.8 million for the year ended December 31, 2023, from 2022.

Interest expense from total interest-bearing liabilities increased by $95.1 million for the year ended December 31, 2023, from 2022.

Total average loans, including loans held-for-sale grew to $6.2 billion at December 31, 2023, an increase of $1.0 billion, compared to December 31, 2022, primarily due to organic growth in our loan portfolios.

Yield on loans held-for-investment increased 149 basis points for the year ended December 31, 2023, from 2022, primarily due to the rising interest rate environment and its impact on variable rate loans in the loan portfolio and higher yields on new originations.

Average interest-bearing liabilities increased $0.7 billion, or 17.5%, for the year ended December 31, 2023, from 2022 primarily to support the growth in our loan portfolio.

Average interest-bearing deposits increased $0.7 billion, or 18.5%, for the year ended December 31, 2023, from 2022, with organic growth as the primary driver.

Total cost of deposits increased by 192 basis points to 2.27% in 2023 compared to 2022, primarily due to increased pricing on our deposit products as a result of the rising interest rate environment.

Average FHLB borrowings increased $54.4 million in 2023, compared to 2022.

The cost of FHLB borrowings increased by 216 basis points to 5.05% in 2023, compared to 2022, also due to the rising interest rate environment.

Our net interest margin was 4.23% for the year ended December 31, 2023, compared to 3.87% for the same period in 2022, an increase of 36 basis points.

We experienced a 169 basis point increase in yield from earning assets and our total cost of funds increased by 187 basis points for the year ended December 31, 2023, compared to the same period in 2022.

While we have experienced a significant increase in our cost of funds in this rising interest rate environment, we do not expect our cost of funds to continue to rise in 2024 at the level of increase experienced in 2023.

Our net interest income can be significantly influenced by a variety of factors, including overall loan demand, economic conditions, credit risk, the amount of non-earning assets including nonperforming loans and OREO, the amounts of and rates at which assets and liabilities reprice, variances in prepayment of loans and securities, exercise of call options on borrowings or securities, a general rise or decline in interest rates, changes in the slope of the yield-curve, and balance sheet growth or contraction.

Our net interest income was $296.9 million in 2024, an increase of $3.5 million, or 1.2%, compared to 2023.

Interest income on loans increased by $36.3 million in 2024, compared to 2023.

Interest income on investment securities increased by $1.4 million in 2024, compared to 2023.

Interest expense from total interest-bearing liabilities increased by $42.4 million in 2024, compared to 2023.

Our net interest margin decreased 17 basis points to 4.06% in 2024, compared to 2023.

Results in 2024, compared to the prior year, were driven by an increase of 66 basis points in the cost of interest-bearing liabilities, partially offset by an increase of 32 basis points in yield on earning assets.

Total average loans, including loans held-for-sale, grew to $6.4 billion in 2024, an increase of $0.2 billion, or 3.8%, compared to 2023, primarily due to organic growth in our loan portfolios.

Yield on loans increased 34 basis points in 2024, compared to 2023, primarily due to higher yields on new originations as compared to amortizing and maturing balances.

Average interest-bearing liabilities grew to $5.2 billion in 2024, an increase of $0.3 billion, or 6.8%, compared to 2023, primarily to support the growth in our loan portfolio.

Average interest-bearing deposits increased $0.5 billion, or 11.0%, in 2024, compared to 2023.

Total cost of deposits increased by 76 basis points to 3.03% in 2024, compared to 2023, primarily due to continued intense competition for deposits amidst the elevated interest rate environment and an increase in certificates of deposit balances.

Average FHLB borrowings decreased $144.8 million in 2024, compared to 2023.

The cost of FHLB borrowings increased by 43 basis points to 5.48% in 2024, compared to 2023.

The following tables set forth information related to our average balance sheet, average yields on assets, and average costs of liabilities for the periods presented.

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Interest Earning Assets

Loans (1) $ 6,178,414 $ 385,637 6.24 % $ 5,216,212 $ 247,988 4.75 % $ 3,906,458 $ 159,303 4.08 %

$ 6,410,520 $ 421,959 6.58 % $ 6,178,414 $ 385,637 6.24 % $ 5,216,212 $ 247,988 4.75 %

Investment securities 529,209 18,468 3.49 % 554,433 17,032 3.07 % 605,119 13,185 2.18 %

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Net interest margin (on a FTE basis) 2

4.12 % 4.29 % 3.95 %

1 Includes loans held-for-investment, including nonaccrual loans, and loans held-for-sale.

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Interest Earning Assets

Loans (1) $ 86,596 $ 51,053 $ 137,649 $ 34,316 $ 54,369 $ 88,685

$ 21,512 $ 14,810 $ 36,322 $ 86,596 $ 51,053 $ 137,649

Investment securities 2,158 (722) 1,436 4,835 (988) 3,847

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Net interest income $ (8,278) $ 11,757 $ 3,479 $ 21,986 $ 29,813 $ 51,799

1 Includes loans held-for-investment, including nonaccrual loans, and loans held-for-sale.

Provision for Credit Losses

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The allowance for credit losses is increased by the provision for credit losses and is decreased by charge-offs, net of recoveries on prior loan charge-offs.

We had a provision for credit losses of $18.2 million for the year ended December 31, 2023, compared to a provision for credit losses of $18.1 million for 2022.

During 2022, our provision for credit losses was negatively impacted by $2.9 million for certain non-impaired loans acquired in the Pioneer Merger at a premium valuation.

Upon elimination of the $2.9 million merger related provision for 2022, the adjusted increase in the provision for credit losses is $3.1 million for 2023.

This adjusted increase is primarily due to loan growth and the charge-offs of two specific customer relationships in our loan portfolio.

The provision for credit losses totaled $27.6 million in 2024, an increase of $9.3 million compared to 2023, primarily due to a $13.6 million provision for credit loss on a specific customer in our commercial and industrial (C&I) loan portfolio in 2024.

Net charge-offs in 2024 were $20.4 million, or a ratio of net charge-offs to average loans of 0.32%, compared to net charge-offs of $7.8 million, or a ratio of net charge-offs to average loans of 0.13%, in 2023.

The increase in net charge-offs in 2024 is primarily due to a $16.7 million net charge-off on a specific customer in our C&I loan portfolio.

The allowance for credit losses as a percentage of total loans was 1.38% at December 31, 2024, compared to 1.28% at December 31, 2023.

The ratio of nonperforming assets to total assets was 0.92% at December 31, 2024, compared to 0.85% at December 31, 2023.

For a further discussion of the allowance for credit losses, refer to the “Allowance for Credit Losses” section of this financial review.

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Service charges on deposit accounts $ 9,495 $ 9,940 $ 9,857

Treasury management service fees 14,829 11,724 8,827

Credit and debit card fees 11,153 11,681 11,038

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Total noninterest income $ 89,792 $ 79,092 $ 89,566

Our noninterest income decreased $10.5 million to $79.1 million for the year ended December 31, 2023 from $89.6 million in 2022, primarily due to a decrease in income from mortgage banking services, net.

Service charges on deposit accounts includes overdraft and non-sufficient funds charges, treasury management services provided to our business customers, and other maintenance fees on deposit accounts.

For the year ended December 31, 2023, service charges on deposit accounts increased $3.1 million, primarily due to growth in treasury management services provided to our business customers, as compared to 2022.

Noninterest income totaled $89.8 million in 2024, an increase of $10.7 million from 2023, primarily due to increases in treasury management service fees and income from mortgage banking services, net.

Service charges on deposit accounts includes overdraft and non-sufficient funds charges, and other maintenance fees on deposit accounts.

Service charges on deposit accounts decreased $0.4 million for the year ended December 31, 2024 compared to 2023, primarily due to a decrease in insufficient funds and overdraft fees.

Treasury management service fees include financial information management, accounts receivable management, accounts payable services, fraud mitigation services, and cash flow management.

Treasury management service fees increased $3.1 million, primarily due to an overall increase in our business customer base as well as an increase in products and services provided to our existing customer base.

Credit and debit card fees represent interchange income from credit and debit card activity and referral fees earned from processing fees on card transactions by our business customers.

Credit and debit card fees increased $0.5 million for the year ended December 31, 2023 compared to 2022, primarily due to increased card transaction volumes.

Credit and debit card fees decreased $0.5 million for the year ended December 31, 2024 compared to 2023, primarily due to a decrease in card transaction volumes.

Trust and investment advisory fees represent fees we receive in connection with our investment advisory and custodial management services of investment accounts.

Trust and investment advisory fees decreased $1.1 million for the year ended December 31, 2023 compared to 2022 primarily due to lower average assets under management.

Trust and investment advisory fees increased $0.1 million for the year ended December 31, 2024 compared to 2023, primarily due to higher average assets under management.

The components of income from mortgage banking services, net, were as follows for the year ended December 31,:

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Income from mortgage banking services, net $ 39,014 $ 31,384 $ 46,285

For the year ended December 31, 2023, income from mortgage banking services decreased $14.9 million, compared to 2022.

We experienced a decline in revenue related to net sale gains and fees from mortgage loan originations, including fair value changes in the held-for-sale portfolio and hedging activity, which decreased $4.6 million for the year ended December 31, 2023, compared to 2022.

Total loan originations for sale were $0.8 billion for the year ended December 31, 2023, a decline of $0.3 billion from $1.1 billion in 2022.

We retain servicing rights on the majority of mortgage loans that we sell, which drove the increase in servicing income of $0.6 million to $15.7 million for the year ended December 31, 2023, from $15.1 million for 2022.

MSR capitalization and changes in fair value, net of derivative activity, decreased $10.8 million for the year ended December 31, 2023, compared to 2022.

The year over year decline in capitalized servicing value for MSRs was $5.0 million.

Income from mortgage banking services increased $7.6 million in 2024, compared to 2023.

We experienced an increase of $4.6 million in 2024, compared to 2023, in revenue related to net sale gains and fees from mortgage loan originations, including fair value changes in the held-for-sale portfolio and hedging activity.

Total loan originations for sale were $1.1 billion in 2024, an increase of $0.3 billion from $0.8 billion in 2023.

We retain servicing rights on the majority of mortgage loans that we sell, which drove the increase in servicing income of $1.3 million to $17.0 million in 2024, from $15.7 million in 2023.

MSR capitalization and changes in fair value, net of derivative activity, increased $1.8 million in 2024, compared to 2023.

Revenue was higher in 2024, compared to 2023 due to an increase in MSR capitalization of $3.0 million partially offset by a decrease in MSR fair value, net of derivative activity of $1.2 million.

We recognize fair value adjustments to our MSR asset, which includes changes in assumptions to the valuation model and pay-offs and pay-downs of the MSR portfolio.

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Changes in fair value of the derivative instruments used to economically hedge the MSRs are also included as a component of income from mortgage banking services.

Due to a number of factors, including the overall elevated level of interest rates, low inventory in the housing market, lower refinance volumes and lower margin on loans sales, we expect revenue from mortgage banking activities to remain at a lesser level as compared to levels we experienced during the lower market rate environment experienced during 2021 and 2020.

Other noninterest income increased $1.9 million for the year ended December 31, 2023 compared to 2022, primarily due to an increase in the fair value of investments related to our deferred compensation plan.

Other noninterest income increased $0.8 million for the year ended December 31, 2024 compared to 2023, primarily due to an increase in the cash surrender value of BOLI.

Noninterest Expense

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Amortization of intangible assets 3,549 4,822 4,215

Terminated merger related expenses 13,178 — —

Merger related expenses — — 18,751

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Total noninterest expenses $ 264,040 $ 222,793 $ 239,126

Our noninterest expenses decreased $16.3 million to $222.8 million for the year ended December 31, 2023, from $239.1 million for 2022.

The decrease is primarily due to the decrease of $18.8 million in merger related expenses.

We incurred no merger related expenses for the year ended December 31, 2023.

Our merger with Pioneer was completed on April 1, 2022.

The decrease of $1.1 million in our salary and employee benefits expense for the year ended December 31, 2023, compared to 2022, was driven by a decrease in commissions paid to our mortgage loan officers related to decreased mortgage origination activity during 2023, partially offset by annual compensation increases occurring in 2023.

Occupancy and equipment increased $2.1 million for the year ended December 31, 2023, compared to 2022.

This increase was primarily due to having a full year of expenses related to the facilities acquired in the Pioneer merger in 2023 compared to only nine months in 2022.

We had income tax expense for the year ended December 31, 2023 of $28.0 million, compared to $14.8 million in 2022.

The increase in income tax expense was primarily due to our increased income during 2023.

Our effective tax rate was 21.3% for the year ended December 31, 2023, compared to 20.0% in 2022.

For additional information on our income taxes, see Note 17 - Income Tax es included in our audited consolidated financial statements included elsewhere in this report.

Noninterest expenses totaled $264.0 million in 2024, an increase of $41.2 million from 2023, primarily due to an increase in salaries and benefits of $21.8 million as a result of increased head count of C&I bankers and higher levels of variable compensation associated with an increase in mortgage loan originations.

Noninterest expense in 2024 included terminated merger related expenses of $13.2 million.

Additional non-recurring expenses include $2.0 million of costs to dispose of a majority of our ATMs and amend our associated service contract as we move to participating in a national ATM network, and a $0.8 million write-off of the Guardian Mortgage trade name as we are in the process of rebranding our residential mortgage business as Sunflower Bank Mortgage Lending.

Adjusted noninterest expense, a non-GAAP financial measure, totaled $248.0 million in 2024, an increase of $25.2 million from 2023.

The efficiency ratio for 2024 was 68.28% compared to 59.81% in 2023.

The adjusted efficiency ratio, a non-GAAP financial measure, in 2024 was 64.13% compared to 59.81% in 2023.

We had income tax expense in 2024 of $19.5 million, compared to $28.0 million in 2023.

The decrease in income tax expense was primarily due to our decreased income during 2024.

Our effective tax rate was 20.5% in 2024, compared to 21.3% in 2023.

For additional information on our income taxes, see Note 15 - Income Taxes included in our audited consolidated financial statements included elsewhere in this report.

Financial Condition

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Our securities available-for-sale decreased by $47.7 million to $469.1 million at December 31, 2024, compared to December 31, 2023.

The decrease was primarily due to amortization of the portfolio and a decrease in fair value due to the rising interest rate environment.

The decrease was primarily due to amortization of the portfolio.

Securities held-to-maturity decreased $1.7 million to $35.2 million at December 31, 2024, compared to December 31, 2023, due to amortization of the portfolio.

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Government and its agencies, in an amount greater than 10% of stockholders’ equity.

Our loan portfolio represents a broad range of borrowers primarily in our markets in Texas, Kansas, Colorado, New Mexico and Arizona, primarily comprised of commercial and industrial, commercial real estate, residential real estate, public finance and consumer financing loans.

Our loan portfolio represents a broad range of borrowers primarily in our markets in Texas, Kansas, Colorado, New Mexico, Arizona and California primarily comprised of commercial and industrial, commercial real estate, residential real estate, public finance and consumer financing loans.

We have a diversified portfolio across a variety of industries, and the portfolio is generally centered in the states in which we have branch offices.

Our lending focus continues to be on operating companies, including commercial and industrial loans and lines-of-credit, as well as owner occupied commercial real estate loans.

Total loans, net of deferred origination fees, premiums and discounts, as of December 31, 2023 and 2022 were $6.3 billion and $5.9 billion, respectively.

Total loans, net of deferred fees, costs, premiums and discounts, as of December 31, 2024 and 2023 were $6.4 billion and $6.3 billion, respectively.

The following table sets forth the composition of our loan portfolio, as of December 31,:

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Renewal of these loans is subject to review and credit approval, as well as modification of terms upon maturity.

Actual repayments of loans may differ from the maturities reflected below because

borrowers have the right to prepay obligations with or without prepayment penalties.

Actual repayments of loans may differ from the maturities reflected below because borrowers have the right to prepay obligations with or without prepayment penalties.

The following tables summarize the loan maturity distribution by type and related interest rate characteristics as of December 31, 2024:

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Provision for credit losses 1

28,200 17,035 18,050

Balance, end of period $ 88,221 $ 80,398 $ 65,917

Allowance for credit losses to total loans 1.38 % 1.28 % 1.12 %

Ratio of net charge-offs (recoveries) to average loans outstanding 0.13 % (0.01) % 0.09 %

Ratio of net charge-offs to average loans outstanding 0.32 % 0.13 % (0.01) %

1 For the years ended December 31, 2024, 2023 and 2022 we recorded a provision for credit losses on unfunded commitments of $(650), $1,212 and $525, respectively.

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Residential real estate 20,220 22,413

Public finance 7,226 —

Consumer 64 10

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Allowance for credit losses to nonaccrual loans 130.66 % 215.39 %

(1) Loans greater than 90 days past due, still accruing at December 31, 2023 relates primarily to one borrower relationship where interest was paid current in February 2024.

Contractual principal payments related to this borrower relationship were deferred until March 15, 2024.

(2) On January 1, 2023, we adopted ASU 2022-02, whereby we no longer recognize or account for TDRs.

The loans previously classified as accrual TDRs are no longer considered nonperforming.

We have adjusted prior periods to reflect this change in accounting.

(3) Nonperforming loans include nonaccrual loans and accrual loans greater than 90 days past due.

Deposits represent our primary source of funds.

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The following table presents our deposits by customer type as of December 31,:

($ in thousands) December 31,

2023 December 31, 2022

($ in thousands) 2024 2023

Noninterest bearing deposit accounts $ 410,303 $ 360,168

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Wholesale deposits 1

$ 444,740 $ 280,745

Total deposits $ 6,672,260 $ 6,374,103

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Deposits in the ICS / CDARS program totaled $0.7 billion, or 11.1% of all deposits as of December 31, 2024, and $0.6 billion, or 9.2% of all deposits as of December 31, 2023.

Maturities of certificates of deposit that are in excess of the FDIC insurance limit of $250,000, by remaining time to maturity are summarized as follows as of December 31,:

(In thousands) 2023 2022

Three months or less $ 87,640 $ 22,451

Over three months through twelve months 396,834 310,694

Over twelve months through three years 36,673 75,804

Over three years 592 961

Total $ 521,739 $ 409,910

The following table sets forth the portion of the Bank's time deposits, by account, that are in excess of the FDIC insurance limit, by remaining time until maturity, as of December 31,:

The following table sets forth the portion of the Bank's certificates of deposit, by account, that are in excess of the FDIC insurance limit, by remaining time until maturity, as of December 31, 2024:

(In thousands)

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FirstSun has routine funding requirements consisting primarily of operating expenses, debt service, and funds used for acquisitions.

FirstSun can obtain funding to meet its obligations from dividends collected from its subsidiaries, primarily the Bank, and through the issuance of varying forms of debt.

FirstSun can obtain funding to meet its obligations from dividends collected from its subsidiaries, primarily the Bank, and through the issuance of FirstSun common stock and varying forms of debt.

At December 31, 2024, FirstSun had available cash and cash equivalents of $109.0 million and debt outstanding of $78.9 million.

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At December 31, 2024, the Bank could pay dividends to FirstSun of approximately $226.6 million without prior regulatory approval.

During the year ended December 31, 2023, the Bank paid dividends totaling $26.0 million to FirstSun.

During the year ended December 31, 2024, the Bank did not pay a dividend to FirstSun.

During the year ended December 31, 2024, Logia paid dividends totaling $0.7 million to FirstSun.

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At December 31, 2024, our liquid assets, which consist of cash and amounts due from banks and interest-bearing deposits in other financial institutions, amounted to $607.6 million, or 7.5% of total assets, compared to $473.0 million, or 6.0% of total assets, at December 31, 2023.

The increase in our liquid assets was primarily due to an increase in cash held at the Federal Reserve.

At December 31, 2024, approximately 91% of the investment securities portfolio was pledged as collateral to secure public deposits and repurchase agreements.

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Stockholders’ equity at December 31, 2024 was $1,041.4 million, compared to $877.2 million at 2023, an increase of $164.2 million, or 18.7%.

The increase in stockholders’ equity relates primarily to net income for the year ended December 31, 2023.

The increase in stockholders’ equity relates primarily to net income for the year ended December 31, 2024 and issuance of FirstSun common stock in January 2024.

We did not pay a dividend to our common shareholders during the years ended December 31, 2024 or 2023.

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Short-term debt:

FHLB LOC 12 389,468 389,468 — — —

FHLB term advances 11 135,000 135,000 — — —

Long-term debt:

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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.

What changed 10-K

Item 7. Management’s Discussion and Analysis