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Item 1A. Risk Factors

2026-03-06 compared with 2025-03-07 · 327 added, 324 removed, 449 unchanged (59% of the section changed)

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Any of the risks discussed below could also cause our actual results to differ materially from those discussed, anticipated or implied in these forward-looking statements.

See “ CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS ” above in this annual report.

Risks Related to Our Business

Economic and Geographic-Related Risks

Our business may be adversely affected by economic conditions.

Generally, in periods of economic downturns, including periods of rising interest rates and recessions, our realized credit losses increase, our deposit and funding costs increase, demand for our products and services declines, and the credit quality of our loan portfolio declines.

See “ CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS ” above in this report.

Risks Related to Our Pending Merger with First Foundation

Combining FirstSun and First Foundation may be more difficult, costly or time-consuming than expected, and the anticipated benefits and cost savings of the merger and the bank merger may not be realized.

FirstSun and First Foundation have operated and, until the completion of the merger, must continue to operate, independently.

The success of the merger and the bank merger, including anticipated benefits and cost savings, will depend, in part, on our ability to successfully combine and integrate our businesses with First Foundation in a manner that permits growth opportunities and does not materially disrupt the existing customer relations or result in decreased revenues due to loss of customers.

In addition, the success of the merger will depend, in part, on the successful execution of the planned balance sheet repositioning strategy which contemplates the sale or disposition of certain assets of First Foundation and pay down or run off certain liabilities of First Foundation as part of the balance sheet repositioning (the “balance sheet repositioning”).

Execution of the balance sheet repositioning will inherently be subject to market conditions.

There is a risk that such conditions will be less favorable than anticipated when the parties entered into the merger agreement and that the balance sheet repositioning may not have the expected effects on our net interest margin, liquidity, or portfolio positioning for potential changes in interest rates.

If we are unable to successfully achieve these objectives, the anticipated benefits of the merger and the bank merger may not be realized fully or at all or may take longer to realize than expected.

In addition, the actual cost savings of the merger and the bank merger could be less than anticipated, and integration may result in additional and unforeseen expenses.

An inability to realize the full extent of the anticipated benefits of the merger, as well as any delays encountered in the integration process and the implementation of the balance sheet repositioning, could have an adverse effect upon the revenues, levels of expenses and operating results of the combined company, which may adversely affect the value of our common stock after the completion of the merger.

It is possible that the integration process could result in the loss of key employees, the disruption of either company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the combined company’s ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits and cost savings of the merger and the bank merger.

If we experience difficulties with the integration process, the anticipated benefits of the merger and the bank merger may not be realized fully or at all, or may take longer to realize than expected.

As with any merger of financial institutions, there also may be business disruptions that cause us and/or First Foundation to lose customers or cause customers to remove their accounts from us and/or First Foundation and move their business to competing financial institutions.

Integration efforts between the two companies will also divert management attention and resources.

These integration matters could have an adverse effect on each of us and First Foundation during this transition period and for an undetermined period after completion of the merger on the combined company.

Furthermore, the board of directors and executive leadership of the combined companies following the merger will consist of former directors and executive officers from each of FirstSun and First Foundation, as described in the merger agreement.

Combining the boards of directors and management teams of each company into a single board and a single management team could require the reconciliation of differing priorities and philosophies.

All regulatory approvals may not be received, may take longer than expected, or may impose conditions that are not presently anticipated or that could have an adverse effect on the combined company following the merger.

Before the merger and the bank merger may be completed, various approvals, consents and non-objections must be obtained.

While we have received approval for the bank merger from the Office of the Comptroller of the Currency, the merger and the bank merger remains subject to approval from the Federal Reserve Board and various other antitrust, insurance and other authorities in the United States.

Other approvals, waivers or consents from regulators may also be

In determining whether to grant these approvals, the regulators consider a variety of factors, including the regulatory standing of each party.

These approvals could be delayed or not obtained at all, including due to:

an adverse development in either party’s regulatory standing or in any other factors considered by regulators when granting such approvals;

governmental, political or community group inquiries, investigations or opposition;

or changes in legislation or the political environment generally.

These regulators also could impose conditions on the completion of the merger or the bank merger or require changes to the terms of the merger or the bank merger.

Such conditions or changes could have the effect of delaying or preventing completion of the merger or the bank merger or imposing additional costs on or limiting the revenues of the combined company following the merger and the bank merger, any of which might have an adverse effect on the combined company following the merger.

Additionally, the completion of the merger is conditioned on the absence of certain orders, injunctions or decrees by any court or regulatory agency of competent jurisdiction that would prohibit or make illegal the completion of any of the transactions contemplated by the merger agreement.

In addition, despite the parties’ commitments to use their reasonable best efforts to comply with conditions imposed by regulators, under the terms of the merger agreement, neither we nor First Foundation will be required, and neither party will be permitted without the prior written consent of the other party, to take actions or agree to conditions that would reasonably be expected to have a material adverse effect on the combined company, after giving effect to the merger.

The success of the merger and the bank merger and integration of FirstSun and First Foundation will depend on a number of uncertain factors.

The success of the merger and the bank merger will depend on a number of factors, including, without limitation:

• our ability to integrate the branches acquired from First Foundation in the merger into our current operations;

• our ability to implement the balance sheet repositioning strategy;

• our ability to limit the outflow of deposits held by First Foundation customers to successfully retain and manage interest-earning assets (i.e., loans) acquired in the merger;

• our ability to control the incremental non-interest expense acquired in the merger in a manner that enables us to maintain a favorable overall efficiency ratio;

• our ability to retain and attract the appropriate personnel to staff and manage the combined business;

• our ability to retain the customer relationships acquired in the merger;

• our ability to earn acceptable levels of interest and non-interest income, including fee income.

Integrating our business with the business of First Foundation will be an operation of substantial size and expense, and may be affected by general market and economic conditions or government actions affecting the financial industry generally.

Integration efforts will also likely divert our management’s attention and resources.

No assurance can be given that we will be able to integrate First Foundation successfully, and the integration process could result in the loss of key employees, the disruption of ongoing business or inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with clients, customers, depositors and employees, or to achieve the anticipated benefits of the merger and the bank merger.

We may also encounter unexpected difficulties or costs during the integration that could adversely affect our earnings and financial condition, perhaps materially.

Additionally, no assurance can be given that the operation of the combined business will not adversely affect our existing profitability, that we will be able to achieve results in the future similar to those achieved by our existing banking business or that we will be able to manage any growth resulting from the merger and the bank merger effectively.

The merger agreement may be terminated in accordance with its terms and the merger and other transactions contemplated by the merger agreement may not be completed.

If the merger is not completed, we will have incurred substantial expenses without realizing the expected benefits of the merger.

The merger agreement is subject to a number of conditions which must be fulfilled in order to complete the merger.

These conditions to the closing may not be fulfilled in a timely manner or at all, and, accordingly, the merger may not be completed.

In addition, the parties can mutually decide to terminate the merger agreement at any time, including after stockholder approval, or we or First Foundation may elect to terminate the merger agreement in certain other circumstances.

We and First Foundation have incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement.

If the merger is not completed, we and First Foundation would have to recognize these expenses without realizing the expected benefits of the merger.

If the merger is not completed for any reason, there may be various adverse consequences and we may experience negative reactions from the financial markets and from our customers and employees.

Additionally, if the merger agreement is terminated, the market price of our common stock could decline to the extent that the current market prices reflect a market assumption that the merger will be completed.

We also could be subject to litigation related to any failure to complete the merger or to proceedings commenced against us to perform our obligations under the merger agreement.

If the merger agreement is terminated under certain circumstances, either FirstSun or First Foundation may be required to pay a termination fee of $45,089,000 or $31,390,000, respectively, to the other party.

Stockholder litigation could prevent or delay the completion of the merger or otherwise negatively impact our business and operations.

Our stockholders and/or stockholders of First Foundation may file lawsuits against us, First Foundation and/or the directors and officers of either company in connection with the merger and/or the other transactions contemplated by the merger agreement.

Although we are not aware of any pending lawsuits relating to the merger or any of the transactions contemplated by the merger agreement as of the date of this report, lawsuits arising out of the merger or any of the transactions contemplated by the merger agreement could be filed in the future.

One of the conditions to the closing is that 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 be in effect.

If any plaintiff were successful in obtaining an injunction prohibiting us or First Foundation defendants from completing the merger or other transactions contemplated by the merger agreement, then such injunction may delay or prevent the effectiveness of the merger or such other transactions and could result in significant costs to us and/or First Foundation, including any cost associated with the indemnification of directors and officers of each company.

If a lawsuit is filed, we and First Foundation may incur costs in connection with the defense or settlement of any stockholder lawsuits filed in connection with the merger or any of the transactions contemplated by the merger agreement.

Such litigation could have an adverse effect on the financial condition and results of operations of FirstSun and First Foundation and could prevent or delay the completion of the merger or the transactions contemplated by the merger agreement.

Issuance of shares of our common stock in connection with the merger may adversely affect the market price of our common stock.

In connection with the completion of the merger, we expect to issue approximately 18.7 million shares of our common stock to First Foundation stockholders and approximately 240,400 shares of our common stock to holders of First Foundation equity awards.

The issuance of these new shares will significantly increase the number of outstanding shares of our common stock, which will result in dilution to our existing stockholders.

The increased supply of our common stock in the market, as well as any sales of these shares, could result in fluctuations in the market price of our common stock, including a possible decrease in the stock price.

The market price may also be affected by investor perceptions regarding the merger, the combined company’s future prospects, and other factors.

Risks Related to Our Business, Industry, Markets and Market Interest Rates

Our business and results of operations may be adversely affected by the financial markets, fiscal, monetary, and regulatory policies, developments impacting the financial services industry specifically and economic conditions generally.

General economic, political, social and health conditions in the U.S.

and abroad affect markets in the U.S.

and our business.

In particular, markets in the U.S.

may be affected by the level and volatility of interest rates, availability and market conditions of financing, unexpected changes in gross domestic product, economic growth or its sustainability, inflation, supply chain disruptions, consumer spending, employment levels, labor shortages, wage stagnation, federal government shutdowns, developments related to the U.S.

federal debt ceiling, energy prices, home prices, commercial property values, bankruptcies, a default by a significant market participant or class of counterparties, fluctuations or other significant changes in both debt and equity capital markets and currencies, liquidity of the global financial markets, the growth of global trade and commerce, trade policies, tariffs, a U.S.

withdrawal from or significant renegotiation of trade agreements, trade wars, the availability and cost of capital and credit, disruption of communication, transportation or energy infrastructure and investor sentiment and confidence.

Markets may also be adversely affected by the current or anticipated impact of climate change, extreme weather events or natural disasters, the emergence or continuation of widespread health emergencies or pandemics, cyberattacks or campaigns, military conflict, acts of war or terrorism, international hostilities or other geopolitical events, including any escalation of or increased U.S.

involvement in ongoing conflicts, such as those occurring with respect to Russia, Ukraine, Venezuela, Iran and the Middle East.

Market fluctuations may impact net interest margin and affect our business liquidity.

Also, any sudden or prolonged market downturn in the U.S., as a result of

the above factors or otherwise, could result in a decline in net interest income and noninterest income and adversely affect our results of operations and financial condition, including capital and liquidity levels.

Events in the financial services industry, such as the high-profile bank failures in 2023 and additional bank failures in 2024 and 2025, may also cause concern and uncertainty about the financial services industry generally, which may result in sudden deposit outflows, increased borrowing and funding costs, and increased competition for liquidity, any of which could have a material adverse impact on our business, financial condition, and results of operations.

Our financial performance generally, and in particular, the ability of borrowers to pay interest on and repay the principal of outstanding loans and the value of collateral securing those loans, as well as demand for loans and other products and services we offer and whose success we rely on to drive our growth, is highly dependent upon the business environment in the primary markets where we operate and in the United States as a whole.

Unlike larger financial institutions that are more geographically diversified, we are a regional bank that provides banking and financial services to customers primarily in Texas, Kansas, Colorado, New Mexico, Arizona, California and Washington.

First Foundation operates in California, Florida, Texas, Nevada and Hawaii and, if completed, the proposed merger will provide additional geographic diversity.

However, the economic conditions in our current, and potential future, markets may be different from, and in some instances worse than, the economic conditions in the United States as a whole.

Some elements of the business environment that affect our financial performance include short-term and long-term interest rates, the prevailing yield curve, inflation, monetary supply, fluctuations in the debt and equity capital markets, and the strength of the domestic economy and the local economies in the markets in which we operate.

Unfavorable market

conditions can result in a deterioration of the credit quality of borrowers, an increase in the number of loan delinquencies, defaults and charge-offs, foreclosures, additional provisions for credit losses, adverse asset values, a reduction in assets under management or administration, and an increase in our deposit and funding costs.

A component of our loan portfolio is secured by real estate.

A decline in real estate values can negatively impact our ability to recover our investment should the borrower become delinquent.

Loans secured by stock or other collateral may be adversely impacted by a downturn in the economy and other factors that could reduce the recoverability of our investment.

Unsecured loans are dependent on the solvency of the borrower, which can deteriorate, leaving us with a risk of loss.

Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity or investor or business confidence, limitations on the availability of or increases in the cost of credit and capital, increases in inflation or interest rates, high unemployment, natural disasters, epidemics and pandemics (such as COVID-19), state or local government insolvency, or a combination of these or other factors.

More specifically, the market conditions in the markets in which we have a presence may be different from, and could be worse than, the economic conditions in the United States as a whole.

Inflationary pressures caused the Federal Reserve to increase interest rates in 2022 and 2023, although the Federal Reserve began reducing interest rates in 2024.

Increases in interest rates in the past have led to recessions of various lengths and intensities and might lead to such a recession in the near future.

Such a recession or any other adverse changes in business and economic conditions generally or specifically in the markets in which we operate could affect our business, including causing one or more of the following negative developments:

• an increase in our deposit and funding costs;

• a decrease in the demand for loans, mortgage banking products and services and other products and services we offer;

• a decrease in our deposit account balances as customers move funds to seek to obtain maximum federal deposit insurance coverage or to seek higher interest rates;

• a decrease in the value of the collateral securing our residential or commercial real estate loans;

• a permanent impairment of our assets;

• an increase in the number of customers or other counterparties who default on their loans or other obligations to us, which could result in a higher level of NPAs, net charge-offs and provision for credit losses.

The Federal Reserve has shifted its focus to limiting inflationary and other potentially adverse economic effects or market conditions, which signals the potential for a continued period of economic uncertainty.

In addition, there are continuing concerns related to, among other things, the level of U.S.

government debt and fiscal actions that may be taken to address that debt, the potential impacts of artificial intelligence, potential pandemic risks, the potential resurgence of economic and political tensions with China, the Middle East or the Russian invasion of Ukraine, the growth of global trade and commerce, trade policies, tariffs, a U.S.

withdrawal from or significant renegotiation of trade agreements, and trade wars, any of which may have a destabilizing effect on financial markets and economic activity.

Economic pressure on consumers and overall economic uncertainty may result in changes in consumer and business spending, borrowing and saving habits.

These economic conditions and/or other negative developments in the domestic or international credit markets may significantly affect the markets in which we do business, the value of our loans and investments, and our ongoing operations, costs and profitability.

Declines in real estate values and sales volumes and high unemployment or underemployment may also result in higher than expected loan delinquencies, increases in our levels of nonperforming and classified assets and a decline in demand for our products and services.

These negative events may cause us to incur losses and may adversely affect our capital, liquidity and financial condition.

An economic downturn or prolonged recession can result in a deterioration of our credit quality, an increase in the number of loan delinquencies, defaults and charge-offs, foreclosures, additional provisions for loan losses, adverse asset values, an increase in deposit and funding costs, and a reduction in deposits and assets under management or administration.

Unlike many larger institutions, we are not able to spread the risks of unfavorable local economic conditions across a large number of diversified economies.

An economic downturn could, therefore, result in losses that materially and adversely affect our business.

Inflationary pressures present a potential threat to our results of operation and financial condition.

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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.

In 2024 and early 2025, continued regional economic uncertainty, exacerbated by persistent inflation, supply chain disruptions and subdued consumer spending has further increased the risks in our primary markets.

Accordingly, inflation can result in material adverse effects upon our customers, their businesses and, as a result, our financial position and results of operation.

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Our trust and wealth management business may be negatively impacted by changes in economic and market conditions and clients may seek legal remedies for investment performance.

Our trust and 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.

Our trust and wealth management business may be negatively impacted by changes in general economic and market conditions because the performance of these businesses is directly affected by conditions in the financial and securities markets.

The financial markets and businesses operating in the securities industry are highly volatile (meaning that performance results can vary greatly within short periods of time) and are directly affected by, among other factors, domestic and foreign economic conditions and general trends in business and finance, and by the threat, as well as the occurrence of global conflicts or events, all of which are beyond our control.

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If any of these events occur, the financial performance of our trust and wealth management business could be materially and adversely affected.

Risks Associated with Monetary Events

Monetary policies and regulations of the Federal Reserve could adversely affect our business, financial condition and results of operations.

In addition to being affected by general economic conditions, our earnings and growth are affected by the policies of the Federal Reserve.

An important function of the Federal Reserve is to regulate the money supply and credit conditions.

Among the instruments used by the Federal Reserve to implement these objectives are open market purchases and sales of U.S.

government securities, adjustments to the discount rate and changes in banks’ reserve requirements against bank deposits.

These instruments are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits.

Their use also affects interest rates charged on loans or paid on deposits.

The monetary policies and regulations of the Federal Reserve have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future.

The effects of such policies upon our business, financial condition and results of operations cannot be predicted.

Lending Risks

We are subject to interest rate risk, which could adversely affect our financial condition and profitability.

The majority of our banking assets are subject to changes in interest rates.

Like most financial institutions, our earnings significantly depend on our net interest income, the principal component of our earnings, which is the difference between interest earned by us from our interest-earning assets, such as loans and investment securities, and interest paid by us on our interest-bearing liabilities, such as deposits and borrowings.

We expect that we will periodically experience “gaps” in the interest rate sensitivities of our assets and liabilities, meaning that either our interest-bearing liabilities will be more sensitive to changes in market interest rates than our interest-earning assets, or vice versa.

In either event, if market interest

rates should move contrary to our position, this “gap” will negatively impact our earnings.

Many factors beyond our control impact interest rates, including economic conditions, governmental monetary policies, inflation, recession, changes in unemployment, the money supply, and disorder and instability in domestic and foreign financial markets.

Changes in monetary policies of the various government agencies could influence not only the interest we receive on loans and securities and the interest we pay on deposits and borrowings, but such changes could also affect our ability to originate loans and obtain deposits, the fair value of our financial assets and liabilities, and the average duration of our assets and liabilities.

An increase in interest rates may not increase our net interest income to the same extent we currently anticipate based on our modeling estimates and the assumptions underlying such modeling.

Our failure to benefit from an increased interest rate environment to the extent we currently estimate, to the same extent as our competitors or at all could have a material adverse effect on our business, financial condition and results of operations.

In a declining interest rate environment, there may be an increase in prepayments on loans as borrowers refinance their loans at lower rates.

Interest rate increases often result in larger payment requirements for our floating interest rate borrowers, which increases the potential for default.

At the same time, the marketability of the property securing a loan may be adversely affected by any reduced demand resulting from higher interest rates.

An increase (or decrease) in interest rates may also require us to increase (or decrease) the interest rates that we pay on our deposits.

Changes in interest rates also can affect the value of loans, securities and other assets.

An increase in interest rates that adversely affects the ability of borrowers to pay the principal or interest on loans may lead to increases in nonperforming assets, charge-offs and delinquencies, further increases to the allowance for credit losses, and a reduction of income recognized, among others, which could have a material adverse effect on our results of operations and cash flows.

Further, when we place a loan on nonaccrual status, we reverse any accrued but unpaid interest receivable, which decreases interest income.

At the same time, we continue to have a cost to fund the loan, which is reflected as interest expense, without any interest income to offset the associated funding expense.

Thus, an increase in the amount of nonperforming assets could have a material adverse impact on our net interest income.

Changes in market values of investment securities classified as available for sale are also 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.

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.

Our cost of funds may increase as a result of general economic conditions, FDIC insurance assessments, interest rates and competitive pressures.

We have traditionally obtained funds through local deposits and thus we have a base of lower cost transaction deposits.

Generally, we believe local deposits are a cheaper and more stable source of funds than other borrowings because interest rates paid for local deposits are typically lower than interest rates charged for borrowings from the Federal Reserve or from other institutional lenders.

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.

Additionally, our costs of funds and our profitability and liquidity are likely to be adversely affected if, and to the extent, we have to rely upon higher cost borrowings from the Federal Reserve or other institutional lenders, such as the Federal Home Loan Bank, or upon brokers to fund liquidity needs, and changes in our deposit mix, pricing, and growth could adversely affect our profitability and the ability to expand our loan portfolio.

Further, as a result of bank closures or other factors, regulators could increase the cost of our FDIC insurance assessments and affect our profitability.

We are exposed to the possibility that more prepayments may be made by customers to pay down loan balances, which could reduce our interest income and profitability.

Prepayment rates stem from consumer behavior, conditions in the housing and financial markets, general U.S.

economic conditions, and the relative interest rates on fixed-rate and adjustable-rate loans.

Therefore, changes in prepayment rates are difficult to predict.

Recognition of deferred loan origination costs and premiums paid in originating these loans are normally recognized over the contractual life of each loan.

As prepayments occur, the rate at which net deferred loan origination costs and premiums are expensed will accelerate.

The effect of the acceleration of deferred costs and premium amortization may be mitigated by prepayment penalties paid by the borrower when the loan is paid in part or in full within a certain period of time, which varies between loans.

If prepayment occurs after the period of time when the loan is subject to a prepayment penalty, the effect of the acceleration of premium and deferred cost amortization is no longer mitigated.

We recognize premiums paid on mortgage-backed securities as an adjustment from interest income over the expected life of the security based on the rate of repayment of the securities.

Acceleration of prepayments on the loans underlying a mortgage-backed security shortens the life of the security, increases the rate at which premiums are expensed and further reduces interest income.

We may not be able to reinvest loan and security prepayments at rates comparable to the prepaid instrument particularly in a period of declining interest rates.

We could experience a loss due to competition with other financial institutions.

We face substantial competition in all areas of our operations from a variety of different competitors, both within and beyond our principal markets, many of which are larger and may have more financial resources than us.

Such competitors primarily include national, super-regional, and internet banks within the various markets in which we operate.

We also face competition from many other types of financial institutions, including, without limitation, savings and loans, credit unions, finance companies, brokerage firms, insurance companies, and other financial intermediaries.

The financial services industry could become even more competitive as a result of legislative and regulatory changes and continued consolidation.

In addition, as customer preferences and expectations continue to evolve, technology has lowered barriers to entry and made it possible for nonbanks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems.

Many of our competitors have fewer regulatory constraints and may have lower cost structures.

Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than we can.

Further, as a result of the GENIUS Act, passed in 2025, which establishes a regulatory framework for “payment stablecoins” in the U.S., increased competition may emerge from issuers of stablecoins and providers of related technology.

Our ability to compete successfully depends on a number of factors, including, among other things:

• our ability to develop, maintain, and build upon long‑term customer relationships based on top quality service, high ethical standards, and safe and sound assets;

• our ability to expand our market position;

• the scope, relevance, and pricing of the products and services we offer to meet our customers’ needs and demands;

• the rate at which we introduce new products and services relative to our competitors;

• customer satisfaction with our level of service;

• industry and general economic trends.

Failure to perform in any of these areas could significantly weaken our competitive position, making it more difficult to attract new and retain existing clients and our net interest margin, net interest income and trust and wealth management fees could decline, which would adversely affect our results of operations and could cause us to incur losses in the future.

In addition, our ability to successfully attract and retain trust and wealth management clients is dependent on our ability to compete with competitors’ investment products, level of investment performance, client services and marketing and distribution capabilities.

If we are not successful in attracting new and retaining existing clients, our business, financial condition, results of operations and prospects may be materially and adversely affected.

Likewise, rapid adoption of AI by competitors, either in financial services or FinTech, could create significant pressure on pricing, automation, or client satisfaction.

If we fail to keep pace with AI-enabled analytics and customer offerings, our competitive positioning could be detrimentally impacted.

Consumers may decide not to use banks to complete their financial transactions.

Technology and other changes are allowing parties to complete financial transactions through alternative methods that historically have involved banks.

For example, consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts, mutual funds or general-purpose reloadable prepaid cards.

Consumers can also complete transactions such as paying bills and/or transferring funds directly without the assistance of banks.

The process of eliminating banks as intermediaries, known as “disintermediation,” could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits.

The loss of these revenue streams and the lower cost of deposits as a source of funds could have a material adverse effect on our financial condition and results of operations.

Failure to keep pace with technological change could adversely affect our business.

The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services, including those related to AI and migration to the cloud.

The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs.

success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations.

Many of our competitors have substantially greater resources to invest in technological improvements.

We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers.

Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on our business, financial condition and results of operations.

We may be adversely affected by the lack of soundness of other financial institutions.

Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships.

We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks, and other institutional clients.

Many of these transactions expose us to credit risk in the event of a default by a counterparty or client.

In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due to us.

Any such losses could have a material adverse effect on our financial condition and results of operations.

The value of securities in our investment portfolio may decline in the future.

As of December 31, 2025, we had a carrying amount of $502.8 million of investment securities.

The fair value of our investment securities may be adversely affected by market conditions, including changes in interest rates, and the occurrence of any events adversely affecting the issuer of particular securities in our investments portfolio.

We analyze our securities on a quarterly basis to determine if an expected credit loss has occurred.

The process for determining whether a credit loss has occurred usually requires complex, subjective judgments about the future financial performance of the issuer in order to assess the probability of receiving all contractual principal and interest payments on the security.

Because of changing economic and market conditions affecting issuers, we may be required to recognize expected credit losses on our securities in future periods, which could have a material adverse effect on our business, financial condition or results of operations.

Our deposit insurance premiums could be higher in the future, which could have an adverse effect on our future earnings.

The FDIC insures deposits at FDIC-insured depository institutions, such as Sunflower Bank, up to the maximum federal deposit insurance level per account.

Our regular assessments are based on average consolidated total assets minus average tangible equity as well as by risk classification, which includes regulatory capital levels and the level of supervisory concern.

In addition to ordinary assessments described above, the FDIC has the ability to impose special assessments in certain instances.

We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance.

If there are additional bank or financial institution failures, we may be required to pay even higher FDIC premiums.

Also, if our financial condition deteriorates or if the bank regulators otherwise have supervisory concerns about us, then our assessments could rise.

Any future additional assessments, increases or required prepayments in FDIC insurance premiums could reduce our profitability, may limit our ability to pursue certain business opportunities, or otherwise negatively impact our operations.

Risks Related to Our Lending and Mortgage Banking Activities

If we fail to effectively manage credit risk, our business and financial condition will suffer.

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Many of our loans are made to small and medium-sized businesses that are less able to withstand competitive, economic and financial pressures than larger borrowers.

Consequently, we may have significant exposure if any of these borrowers become unable to pay their loan obligations as a result of economic or market conditions, or personal circumstances.

Consequently, we may have

significant exposure if any of these borrowers become unable to pay their loan obligations as a result of economic or market conditions, or personal circumstances.

In addition, we are a middle-market lender, as such, the relative size of individual credits in our commercial portfolio increases the potential impact from singular credit events.

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Credit losses are inherent in the lending business and could have a material adverse effect on our operating results and ability to meet our obligations.

We evaluate the collectability of our loan portfolio and we maintain an allowance for credit losses on such loans that represents management’s best estimate of current expected losses in our loan portfolio considering available information, from internal and external sources, relevant to assessing exposure to credit loss over the contractual term of the loan portfolio.

Relevant available information includes historical credit loss experience, current conditions and reasonable and supportable forecasts.

As a result, the determination of the appropriate level of allowance for credit losses inherently involves a high degree of subjectivity and requires us to make significant estimates related to current and expected future credit risks and trends, all of which may undergo material changes.

Continuing deterioration in economic conditions, including the possibility of a recession, affecting borrowers;

rising interest rates;

new information regarding existing loans, credit commitments;

the lingering effects of the COVID-19 pandemic or other global pandemics;

natural disasters and risks related to climate change;

and identification of additional problem loans, and other factors, both within and outside of our control, may require an increase in the allowance for credit losses on loans.

As a result, the determination of the appropriate level of allowance for credit losses uses models, estimates and assumptions which inherently involve 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.

The ability of our borrowers to repay their obligations will likely be impacted by changes in future economic conditions, which in turn could impact the accuracy of our loss forecasts and allowance estimates.

There is also the possibility that we have failed or will fail to accurately identify the appropriate economic indicators, to accurately estimate the timing of future changes in economic conditions, or to estimate accurately the impacts of future changes in economic conditions to our borrowers, which similarly could impact the accuracy of our loss forecasts and allowance estimates.

If the models, estimates, and assumptions we use to establish reserves or the judgments we make in extending credit to our borrowers prove inaccurate in predicting future events, we may suffer unexpected losses.

The allowance for credit losses is our best estimate of expected credit losses;

however, there is no guarantee that it will be sufficient to address credit losses, particularly if the economic outlook deteriorates significantly and quickly.

In such an event, we may increase our allowance for credit losses, which would reduce our earnings and possibly capital.

Additionally, to the extent that economic conditions worsen, impacting our consumer and commercial borrowers or underlying collateral, and credit losses are worse than expected, as may be caused by inflation, an economic recession or otherwise, we may increase our provision for loan losses, which could have a material adverse effect on our business, financial condition, and results of operations.

In addition, bank regulatory agencies periodically review our allowance for credit losses and may require an increase in credit loss expense or the recognition of further loan charge-offs, based on judgments different than those of management.

Furthermore, if any charge-offs related to loans in future periods exceed our allowance for credit losses on loans, we will need to recognize additional credit loss expense to increase the applicable allowance.

Any increase in the allowance for credit losses on loans will result in a decrease in net income and, possibly, capital, and may have a material adverse effect on our business, financial condition and results of operations.

We are exposed to higher credit risk by commercial and industrial and commercial real estate lending.

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Commercial real estate loans may be affected to a greater extent than residential loans by adverse conditions in real estate markets or the economy because commercial real estate borrowers’ ability to repay their loans depends in some cases on successful development of their properties, as well as the factors affecting residential real estate borrowers.

These loans may involve greater risk because they generally are not fully amortizing over the loan period, but have a balloon payment due at maturity.

may involve greater risk because they generally are not fully amortizing over the loan period, but have a balloon payment due at maturity.

A borrower’s ability to make a balloon payment typically will depend on being able to either refinance the loan or sell the underlying property in a timely manner.

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As of December 31, 2025, our commercial real estate loans were equal to 161.8% of our total risk-based capital.

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.

The banking regulators give commercial real estate lending greater scrutiny, and may require banks with higher levels of commercial real estate loans to implement enhanced underwriting, internal controls, risk management policies and portfolio stress testing, as well as possibly higher levels of allowances for losses and capital levels as a result of commercial real estate lending growth and exposures.

A significant portion of our loan portfolio is secured by real estate, and events that negatively impact the real estate market could hurt our business.

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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 Risks

We are subject to interest rate risk, which could adversely affect our financial condition and profitability.

The majority of our banking assets are subject to changes in interest rates.

In either event, if market interest rates should move contrary to our position, this “gap” will negatively impact our earnings.