Item 7. Management’s Discussion and Analysis
Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF FIRSTSUN
In this section, unless the context suggests otherwise, references to “we,” “us,” and “our” mean the combined business of FirstSun and its wholly-owned subsidiaries, Sunflower Bank, Sunflower Wealth Advisors, LLC, and FEIF Capital Partners, LLC.
The following discussion is an analysis of our consolidated results of operations for the years ended December 31, 2025, 2024 and 2023, and financial condition for the years ended December 31, 2025 and 2024. This discussion and analysis should be read in conjunction with our consolidated financial statements and accompanying footnotes filed with this report in “ Part II, Item 8. Financial Statements .” We have omitted discussion of 2023 results where it would be redundant to the discussion previously included in “ Management’s Discussion and Analysis of Financial Condition and Results of Operations of FirstSun ” section of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 7, 2025. Historical results of operations and the percentage relationships among any amounts included, and any trends that may appear, may not indicate trends in operations or results of operations for any future periods.
Comments regarding our business that are not historical facts are considered forward-looking statements that involve inherent risks and uncertainties. Actual results may differ materially from those contained in these forward-looking statements. For additional information regarding our cautionary disclosures, see the “Cautionary Note Regarding Forward-Looking Statements” beginning on page 3 of this report.
General Overview
FirstSun Capital Bancorp, headquartered in Denver, Colorado, is the financial holding company for Sunflower Bank, National Association, which is headquartered in Dallas, Texas and operates as Sunflower Bank, First National 1870 and Sunflower Bank Mortgage Lending. We conduct a full-service community banking and trust business through our wholly-owned subsidiaries—Sunflower Bank, Sunflower Wealth Advisors, 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 throughout Texas, Kansas, Colorado, New Mexico, Arizona, California and Washington and a mortgage lending platform with capabilities in 44 states. Our product line includes commercial and industrial loans, commercial real estate loans, residential mortgage, public finance and other consumer loans, and a variety of commercial and consumer deposit products, including noninterest-bearing accounts, interest-bearing demand products, savings accounts, money market accounts and certificates of deposit. We also offer wealth management and trust products including personal trust and agency accounts, employee benefit and retirement related trust and agency accounts, investment management and advisory agency accounts, and foundation and endowment trust and agency accounts. We also offer online banking and bill payment services, online cash management, safe deposit box rentals, debit card and ATM card services and the availability of a network of ATMs for our customers.
We operate FirstSun through two operating segments: Banking and Mortgage Operations. We also allocate certain expenses to Corporate, which is not an operating segment. The expenses included in Corporate are not deemed to be allocable to our operating segments. The operating segments have been determined based on the products and services we offer and reflect the manner in which our financial information is evaluated by management. Each of the operating segments is complementary to each other and because of the interrelationship of the segments, the information presented is not indicative of how the segments would perform if they operated as independent entities. For additional information on our segments, see Note 21 - Segment Information included in our consolidated financial statements included elsewhere in this report.
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Pending merger with First Foundation Inc.
On October 27, 2025, we entered into a merger agreement with First Foundation, the holding company of First Foundation Bank, headquartered in Irvine, California, as amended by amendment no. 1 to the merger agreement dated February 6, 2026. Under the merger agreement, First Foundation will merge with and into FirstSun, with FirstSun continuing as the surviving entity. Immediately following the merger, First Foundation Bank will merge with and into Sunflower Bank, with Sunflower Bank continuing as the surviving bank. The consummation of the proposed merger will expand our markets in California and Texas, as well as add new markets in Florida, Nevada and Hawaii.
The merger agreement, as amended, was unanimously approved by the boards of directors of FirstSun and First Foundation, and is subject to customary closing conditions, including receipt of remaining required regulatory approvals. The stockholders of FirstSun and First Foundation approved the merger agreement and transactions contemplated thereby at special stockholders’ meetings held on February 27, 2026. The merger is expected to close early in the second quarter of 2026.
Financial Highlights For 2025
We delivered strong financial results in 2025, compared to 2024, which included:
• Net income of $97.9 million, $3.47 per diluted share (adjusted net income of $100.5 million 1 , $3.56 adjusted per diluted share 1 )
• Net interest margin of 4.10%
• Return on average total assets of 1.18% (adjusted return on average total assets of 1.21% 1 )
• Return on average stockholders’ equity of 8.88% (adjusted return on average stockholders’ equity of 9.11% 1 )
• Loan growth of 4.7%
• Average deposit growth of 6.6%
• 24.3% noninterest income to total revenue (defined as net interest income plus noninterest income)
Net income totaled $97.9 million, or $3.47 per diluted share, in 2025, compared to $75.6 million, or $2.69 per diluted share, in 2024. Adjusted net income, a non-GAAP financial measure, was $100.5 million, or $3.56 per diluted share, in 2025 compared to $87.7 million, or $3.13 per adjusted diluted share, in 2024.
The return on average total assets was 1.18% in 2025, compared to 0.96% in 2024, and the return on average stockholders’ equity was 8.88% in 2025, compared to 7.56% in 2024. Adjusted return on average total assets and adjusted return on average stockholders’ equity, each a non-GAAP financial measure, were 1.21% and 9.11% respectively in 2025 compared to 1.12% and 8.77% respectively in 2024.
The following tables set forth certain financial highlights of FirstSun as of and for the years ended December 31,:
($ in thousands, except per share amounts) 2025 2024 2023
Income Statement:
Net interest income $ 317,391 $ 296,910 $ 293,431
Provision for credit losses 24,600 27,550 18,247
Noninterest income 101,879 89,792 79,092
Noninterest expense 271,774 264,040 222,793
Income before income taxes 122,896 95,112 131,483
Provision for income taxes 24,960 19,484 27,950
Net income 97,936 75,628 103,533
Adjusted net income 1
100,505 87,744 103,533
Balance Sheet:
Total assets $ 8,485,162 $ 8,097,387 $ 7,879,724
Loans held-for-sale 100,539 61,825 54,212
Loans held-for-investment 6,673,180 6,376,357 6,267,096
Total deposits 7,107,356 6,672,260 6,374,103
Total borrowed funds 36,680 210,841 464,781
Total stockholders' equity 1,153,356 1,041,366 877,197
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.
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($ in thousands, except per share amounts) 2025 2024 2023
Per Common Share Data:
Period end common shares outstanding 27,887,337 27,709,679 24,960,639
Weighted average common shares outstanding, basic 27,786,887 27,433,865 24,938,359
Basic earnings per share $ 3.52 $ 2.76 $ 4.15
Weighted average common shares outstanding, diluted 28,249,796 28,067,273 25,387,196
Diluted earnings per share $ 3.47 $ 2.69 $ 4.08
Adjusted diluted earnings per share 1
3.56 3.13 4.08
Cash dividends $ — $ — $ —
Dividend payout ratio — % — % — %
Book value per share $ 41.36 $ 37.58 $ 35.14
Tangible book value per share 1
37.83 33.94 30.96
Performance Ratios:
Return on average total assets 1.18 % 0.96 % 1.38 %
Adjusted return on average total assets 1
1.21 % 1.12 % 1.38 %
Return on average stockholders' equity 8.88 % 7.56 % 12.50 %
Adjusted return on average stockholders’ equity 1
9.11 % 8.77 % 12.50 %
Return on average tangible stockholders' equity 1
9.95 % 8.74 % 14.88 %
Adjusted return on average tangible stockholders' equity 1
10.21 % 10.09 % 14.88 %
Net interest margin 4.10 % 4.06 % 4.23 %
Net interest margin (FTE basis) 1
4.16 % 4.12 % 4.29 %
Efficiency ratio 64.82 % 68.28 % 59.81 %
Adjusted efficiency ratio 1
64.17 % 64.13 % 59.81 %
Noninterest income to total revenue 2
24.3 % 23.2 % 21.2 %
Balance Sheet Ratios:
Loan to deposit ratio 93.9 % 95.6 % 98.3 %
Net charge-offs (recoveries) to average loans outstanding 0.43 % 0.32 % 0.13 %
Allowance for credit losses to loans 1.27 % 1.38 % 1.28 %
Nonperforming loans to total loans 0.91 % 1.08 % 1.01 %
Capital Ratios:
Total risk-based capital to risk-weighted assets 15.73 % 15.42 % 13.25 %
Tier 1 risk-based capital to risk-weighted assets 14.12 % 13.18 % 11.10 %
Common Equity Tier 1 (CET 1) to risk-weighted assets 14.12 % 13.18 % 11.10 %
Tier 1 leverage capital to average assets 12.75 % 12.11 % 10.52 %
Average stockholders' equity to average total assets 13.33 % 12.72 % 11.05 %
Tangible stockholders' equity to tangible assets 1
12.58 % 11.76 % 9.94 %
Tangible stockholders' equity to tangible assets reflecting net unrealized losses on HTM securities, net of tax 1
12.54 % 11.71 % 9.90 %
Nonfinancial Data:
Full-time equivalent employees 1,177 1,127 1,110
Banking branches 71 69 69
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 net interest income plus noninterest income.
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Non-GAAP Financial Measures and Reconciliations
The non-GAAP financial measures presented below are used by our management and our board of directors on a regular basis in addition to our GAAP results to facilitate the assessment of our financial performance and the efficiency of our operations. Management believes these non-GAAP financial measures provide a greater understanding of our ongoing operations, enhance an investor’s understanding of our financial results by providing a meaningful basis for period-to-period comparisons, assisting in operating results analysis, and predicting future performance. This information supplements our GAAP reported results, and should not be viewed in isolation from, or as a substitute for, our GAAP results. Accordingly, this financial information should be read in conjunction with our consolidated financial statements and notes thereto for the year ended December 31, 2025, included elsewhere in this report. Non-GAAP financial measures exclude certain items that are included in the financial results presented in accordance with GAAP. Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP. These non-GAAP measures are not necessarily comparable to similar measures that may be represented by other companies.
The following table presents GAAP to non-GAAP reconciliations as of and for the years ended December 31,:
($ in thousands, except share and per share amounts) 2025 2024 2023
Tangible stockholders’ equity to tangible assets:
Total stockholders' equity (GAAP) $ 1,153,356 $ 1,041,366 $ 877,197
Less: Goodwill and other intangible assets
Goodwill (93,483) (93,483) (93,483)
Other intangible assets (4,983) (7,434) (10,984)
Tangible stockholders' equity (non-GAAP) $ 1,054,890 $ 940,449 $ 772,730
Total assets (GAAP) $ 8,485,162 $ 8,097,387 $ 7,879,724
Less: Goodwill and other intangible assets
Goodwill (93,483) (93,483) (93,483)
Other intangible assets (4,983) (7,434) (10,984)
Tangible assets (non-GAAP) $ 8,386,696 $ 7,996,470 $ 7,775,257
Total stockholders' equity to total assets (GAAP) 13.59 % 12.86 % 11.13 %
Less: Impact of goodwill and other intangible assets (1.01) % (1.10) % (1.19) %
Tangible stockholders' equity to tangible assets (non-GAAP) 12.58 % 11.76 % 9.94 %
Tangible stockholders’ equity to tangible assets, reflecting net unrealized losses on HTM securities, net of tax:
Tangible stockholders' equity (non-GAAP) $ 1,054,890 $ 940,449 $ 772,730
Less: Net unrealized losses on HTM securities, net of tax (3,320) (4,292) (3,629)
Tangible stockholders’ equity less net unrealized losses on HTM securities, net of tax (non-GAAP) $ 1,051,570 $ 936,157 $ 769,101
Tangible assets (non-GAAP) $ 8,386,696 $ 7,996,470 $ 7,775,257
Less: Net unrealized losses on HTM securities, net of tax (3,320) (4,292) (3,629)
Tangible assets less net unrealized losses on HTM securities, net of tax (non-GAAP) $ 8,383,376 $ 7,992,178 $ 7,771,628
Tangible stockholders’ equity to tangible assets (non-GAAP) 12.58 % 11.76 % 9.94 %
Less: Net unrealized losses on HTM securities, net of tax (0.04) % (0.05) % (0.04) %
Tangible stockholders’ equity to tangible assets reflecting net unrealized losses on HTM securities, net of tax (non-GAAP) 12.54 % 11.71 % 9.90 %
Tangible book value per share:
Total stockholders' equity (GAAP) $ 1,153,356 $ 1,041,366 $ 877,197
Tangible stockholders' equity (non-GAAP) $ 1,054,890 $ 940,449 $ 772,730
Total shares outstanding 27,887,337 27,709,679 24,960,639
Book value per share (GAAP) $ 41.36 $ 37.58 $ 35.14
Tangible book value per share (non-GAAP) $ 37.83 $ 33.94 $ 30.96
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($ in thousands, except share and per share amounts) 2025 2024 2023
Adjusted net income:
Net income (GAAP) $ 97,936 $ 75,628 $ 103,533
Add: Adjustments
Merger related expenses, net of tax 2,569 9,949 —
Write-off of Guardian Mortgage tradename, net of tax — 625 —
Disposal of ATMs, net of tax — 1,542 —
Total adjustments, net of tax 2,569 12,116 —
Adjusted net income (non-GAAP) $ 100,505 $ 87,744 $ 103,533
Adjusted diluted earnings per share:
Diluted earnings per share (GAAP) $ 3.47 $ 2.69 $ 4.08
Add: Impact of adjustments
Merger related expenses, net of tax 0.09 0.36 —
Write-off of Guardian Mortgage tradename, net of tax — 0.02 —
Disposal of ATMs, net of tax — 0.06 —
Adjusted diluted earnings per share (non-GAAP) $ 3.56 $ 3.13 $ 4.08
Adjusted return on average total assets:
Return on average total assets (ROAA) (GAAP) 1.18 % 0.96 % 1.38 %
Add: Impact of adjustments
Merger related expenses, net of tax 0.03 % 0.13 % — %
Write-off of Guardian Mortgage tradename, net of tax — % 0.01 % — %
Disposal of ATMs, net of tax — % 0.02 % — %
Adjusted ROAA (non-GAAP) 1.21 % 1.12 % 1.38 %
Adjusted return on average stockholders’ equity:
Return on average stockholders' equity (ROACE) (GAAP) 8.88 % 7.56 % 12.50 %
Add: Impact of adjustments
Merger related expenses, net of tax 0.23 % 1.00 % — %
Write-off of Guardian Mortgage tradename, net of tax — % 0.06 % — %
Disposal of ATMs, net of tax — % 0.15 % — %
Adjusted ROACE (non-GAAP) 9.11 % 8.77 % 12.50 %
Return on average tangible stockholders’ equity
Return on average stockholders’ equity (ROACE) (GAAP) 8.88 % 7.56 % 12.50 %
Add: Impact from goodwill and other intangible assets
Goodwill 0.88 % 0.87 % 1.85 %
Other intangible assets 0.19 % 0.31 % 0.53 %
Return on average tangible stockholders’ equity (ROATCE) (non-GAAP) 9.95 % 8.74 % 14.88 %
Adjusted return on average tangible stockholders’ equity:
Return on average tangible stockholders' equity (ROATCE) (non-GAAP) 9.95 % 8.74 % 14.88 %
Add: Impact of adjustments
Merger related expenses, net of tax 0.26 % 1.11 % — %
Write-off of Guardian Mortgage tradename, net of tax — % 0.07 % — %
Disposal of ATMs, net of tax — % 0.17 % — %
Adjusted ROATCE (non-GAAP) 10.21 % 10.09 % 14.88 %
Adjusted total noninterest expense:
Total noninterest expense (GAAP) $ 271,774 $ 264,040 $ 222,793
Less: Adjustments
Merger related expenses (2,743) (13,178) —
Write-off of Guardian Mortgage trade name — (828) —
Disposal of ATMs — (2,042) —
Total adjustments (2,743) (16,048) —
Adjusted total noninterest expense (non-GAAP) $ 269,031 $ 247,992 $ 222,793
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($ in thousands, except share and per share amounts) 2025 2024 2023
Adjusted efficiency ratio:
Efficiency ratio (GAAP) 64.82 % 68.28 % 59.81 %
Less: Impact of adjustments
Merger related expenses (0.65) % (3.41) % — %
Write-off of Guardian Mortgage tradename — % (0.21) % — %
Disposal of ATMs — % (0.53) % — %
Adjusted efficiency ratio (non-GAAP) 64.17 % 64.13 % 59.81 %
Fully tax equivalent (“FTE”) net interest income and net interest margin:
Net interest income (GAAP) $ 317,391 $ 296,910 $ 293,431
Gross income effect of tax exempt income 4,777 4,767 5,086
FTE net interest income (non-GAAP) $ 322,168 $ 301,677 $ 298,517
Average earning assets $ 7,740,525 $ 7,320,696 $ 6,935,567
Net interest margin 4.10 % 4.06 % 4.23 %
Net interest margin on FTE basis (non-GAAP) 4.16 % 4.12 % 4.29 %
Segments
Our operations are conducted through two operating segments: Banking and Mortgage Operations. We also allocate certain expenses to Corporate, which is not an operating segment. The operating segments have been determined based on the products and services we offer and reflect the manner in which our financial information is currently evaluated by management. Each of the operating segments is complementary to each other and because of the interrelationship of the segments, the information presented is not indicative of how the segments would perform if they operated as independent entities. For additional information on our segments, see Note 21 - Segment Information included in our audited consolidated financial statements included elsewhere in this report.
Comparison of fiscal years 2025 and 2024
Banking
Income before income taxes increased $18.3 million to $116.6 million in 2025, from $98.3 million in 2024. The period over period increase was primarily driven by an increase in net interest income, an increase in noninterest income, and a decrease in provision for credit losses, partially offset by an increase in noninterest expense. Net interest income increased $13.8 million to $297.0 million in 2025 compared to $283.2 million in 2024. The increase in net interest income was a result of lower interest expense primarily due to a decrease in balances and rates for certificates of deposit amidst the declining interest rate environment, partially offset by an increase in promotional rate money market deposit balances. Noninterest income increased $3.9 million to $52.3 million in 2025 compared to $48.4 million in 2024 primarily due to an increase in treasury management service fees and loan syndication and swap fees. Provision for credit losses decreased $1.7 million to $26.7 million in 2025 compared to $28.4 million in 2024. Noninterest expense increased $1.1 million to $206.0 million in 2025, compared to $204.9 million in 2024. The increase in noninterest expense was primarily the result of an increase in salary and employee benefits of $10.1 million primarily due to an increase in headcount of C&I bankers and support personnel, higher levels of variable compensation, and an increase in medical insurance costs. Merger related expenses decreased $8.1 million to $0.5 million in 2025 compared to $8.6 million in 2024. Identifiable assets for our Banking segment increased by $0.4 billion to $7.2 billion at December 31, 2025 from $6.8 billion at December 31, 2024.
Mortgage Operations
Income before income taxes increased $8.0 million to $17.6 million in 2025, from $9.7 million in 2024. The period over period increase was primarily driven by an increase in net interest income, an increase in mortgage banking service revenues, and a decrease in provision for (benefit from) credit losses, partially offset by an increase in noninterest expense. Net interest income increased $6.3 million to $24.9 million in 2025 compared to $18.6 million in 2024. The increase in net interest income was a result of a higher average balance and higher average yield on residential real estate loans and the impact of internal funds transfer pricing. Mortgage banking service revenues increased $8.2 million to $49.6 million in 2025 compared to $41.4 million in 2024, primarily due to an increase in gain on sales driven by higher origination volume and an increase in mortgage servicing revenue driven by higher servicing portfolio balances. Total mortgage loan originations for sale were $1.4 billion in 2025, an increase of $0.3 billion from $1.1 billion in 2024. The unpaid principal balance of mortgage loans serviced for others were $6.3 billion in 2025, an increase of $0.5 billion from $5.8 billion in 2024. Provision for (benefit from) credit losses decreased $1.3 million to $(2.1) million in 2025 compared to $(0.9) million in 2024. The increase in noninterest expense was primarily the result of an increase in salary and employee benefits of $6.2
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million to $37.8 million in 2025, from $31.6 million in 2024 primarily due to higher levels of variable compensation associated with an increase in mortgage loan originations. Identifiable assets for our Mortgage Operations segment increased by $0.1 billion to $1.2 billion at December 31, 2025 from $1.1 billion at December 31, 2024.
Critical Accounting Estimates
In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Our accounting and reporting estimates are in accordance with U.S. generally accepted accounting principles, or “GAAP,” and conform to general practices within the banking industry. Changes in underlying factors, estimates, assumptions or judgments could result in material changes in our consolidated financial position and/or results of operations.
Certain policies inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. We have identified the determination of the allowance for credit losses (“ACL”) and fair value measurement of MSRs to be the accounting areas that require the most subjective or complex judgments and, as such, could be most subject to revision as new or additional information becomes available or circumstances change, including overall changes in the economic climate and/or market interest rates. Therefore, we consider these policies to be critical accounting estimates and discuss them directly with the Audit Committee of our Board of Directors.
The following is a description of our critical accounting estimates and an explanation of the methods and assumptions underlying their application.
Allowance for Credit Losses - Management maintains an ACL for loans based upon management’s estimate of the lifetime expected credit losses in the loan portfolio, as of the balance sheet date, excluding loans held for sale. Additionally, management maintains an ACL for held-to-maturity or available-for-sale debt securities, and other off-balance sheet credit exposures (e.g., unfunded loan commitments). For loans and unfunded loan commitments, the estimate of lifetime credit losses includes the use of quantitative models that incorporate forward-looking macroeconomic scenarios that are applied over the contractual lives of the portfolios, adjusted, as appropriate, for prepayments and permitted extension options using historical experience. For purposes of the ACL for lending commitments, such allowance is determined using the same methodology as the ACL for loans, while also taking into consideration the probability of drawdowns or funding, and whether such commitments are cancellable by us. The ACL for held-to-maturity and available-for-sale debt securities is measured using a risk-adjusted discounted cash flow approach that also considers relevant current and forward-looking economic variables and the ACL is limited to the difference between the fair value of the security and its amortized cost. Judgment is specifically applied in the determination of economic assumptions, length of the initial loss forecast period, the reversion of losses beyond the initial forecast period, usage of macroeconomic scenarios, probabilities of default, losses given default, amortization and prepayment rates, and qualitative factors, which may not be adequately captured in the loss model, as further discussed below.
The macroeconomic scenarios utilized by management include variables that have historically been key drivers of increases and decreases in credit losses. These variables include, but are not limited to, unemployment rates, housing and commercial real estate prices, gross domestic product levels, corporate bond spreads and changes in equity market prices. Management derives the economic forecasts it uses in its ACL model from Moody’s Analytics. The latter has a large team of economists, database managers and operational engineers with a history of producing monthly economic forecasts for over 25 years.
Management has currently set an initial forecast period (“reasonable and supportable period”) of four years and a reversion period of one year, utilizing a straight-line approach and reverting back to the historical macroeconomic mean. After the reversion period, a historical loss forecast period covering the remaining contractual life, adjusted for prepayments, is used based on changes in key historical economic variables during representative historical expansionary and recessionary periods. Changes in economic forecasts impact the probability of default (“PD”), loss-given default (“LGD”), and exposure at default (“EAD”) for each instrument, and therefore influence the amount of future cash flows for each instrument that management does not expect to collect.
Further, management periodically considers the need for qualitative adjustments to the ACL. Qualitative adjustments may be related to and include, but not limited to, factors such as the following: (i) management’s assessment of economic forecasts used in the model and how those forecasts align with management’s overall evaluation of current and expected economic conditions; (ii) organization specific risks such as credit concentrations, collateral specific risks, nature, and size of the portfolio and external factors that may ultimately impact credit quality, and (iii) other limitations associated with factors such as changes in underwriting and loan resolution strategies, among others. The qualitative factors applied on
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December 31, 2025, 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 judgment.
The ACL can also be impacted by factors outside of management’s control, which include unanticipated changes in asset quality of the portfolio, such as deterioration in borrower delinquencies, or credit scores in our residential real estate and consumer portfolio. Further, the current fair value of collateral is utilized to assess the expected credit losses when a financial asset is considered to be collateral dependent.
Our process for determining ACL is further discussed in “ Note 1- Basis of Presentation, Description of Business and Summary of Significant Accounting Policies ” included in Item 8 of this Form 10-K.
Fair Value Measurement of MSRs - Our residential mortgage servicing rights are measured at fair value on a recurring basis. We estimate the fair value of our MSRs using a process that utilizes a discounted cash flow model and analysis of current market data to arrive at the estimate. The cash flow assumptions used in the model are based on numerous factors, with the key assumptions being mortgage prepayment speeds, discount rates and cost to service that management believes are consistent with the assumptions that other similar market participants use in valuing MSRs. The change of any of these key assumptions due to market conditions or other factors could materially affect the fair value of our MSRs. We also utilize a third-party consulting firm to assist us with the valuation. Because of the nature of the valuation inputs, we classify the valuation of our MSRs as Level 3 in the fair value hierarchy. See Note 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.
Results of Operations
Comparison of fiscal years 2025 and 2024
The following table sets forth our results of operations as of and for the year ended December 31,:
($ in thousands, except per share amounts) 2025 2024 2023
Net interest income $ 317,391 $ 296,910 $ 293,431
Provision for credit losses 24,600 27,550 18,247
Noninterest income 101,879 89,792 79,092
Noninterest expense 271,774 264,040 222,793
Income before income taxes 122,896 95,112 131,483
Provision for income taxes 24,960 19,484 27,950
Net income 97,936 75,628 103,533
Diluted earnings per share $ 3.47 $ 2.69 $ 4.08
Return on average total assets 1.18 % 0.96 % 1.38 %
Return on average stockholders' equity 8.88 % 7.56 % 12.50 %
Net interest margin 4.10 % 4.06 % 4.23 %
Net interest margin (FTE basis) 1
4.16 % 4.12 % 4.29 %
Efficiency ratio 64.82 % 68.28 % 59.81 %
Noninterest income to total revenue 2
24.3 % 23.2 % 21.2 %
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 net interest income plus noninterest income.
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General
Our results of operations depend significantly on net interest income, which is the difference between interest income on interest-earning assets, consisting primarily of interest income on loans and investment securities and interest expense on interest-bearing liabilities, consisting primarily of deposits and borrowings. Our results of operations are also dependent on our generation of noninterest income, consisting primarily of mortgage banking services, deposit account service fees, trust and investment advisory fees and credit and debit card fees. Other factors contributing to our results of operations include our provisions for credit losses, income taxes, and noninterest expenses, such as salaries and employee benefits, occupancy and equipment, amortization of intangible assets and other operating costs.
Net Interest Income
Net interest income, representing interest income less interest expense, is a significant contributor to our revenues and earnings. We generate interest income from interest and dividends on interest-earning assets, which are principally comprised of loans and investment securities. We incur interest expense from interest owed or paid on interest-bearing liabilities, including interest-bearing deposits, FHLB advances and other borrowings. Net interest income and margin are shaped by the characteristics of the underlying products, including volume, term and structure of each product. We measure and monitor yields on our loans and other interest-earning assets, the costs of our deposits and other funding sources, our net interest spread and our net interest margin. Net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities. Net interest margin is calculated as net interest income divided by average interest-earning assets.
Interest earned on our loan portfolio is the largest component of our interest income. Our loan portfolios are presented at the principal amount outstanding net of deferred origination fees and unamortized discounts and premiums. Interest income is recognized based on the principal balance outstanding and the stated rate of the loan. Loan origination fees and certain direct origination costs are capitalized and recognized as an adjustment of the yield on the related loan. Non-PCD loans acquired are initially recorded at fair value and the resulting discount or premium is recognized as an adjustment of the yield on the related loans.
Our net interest income can be significantly influenced by a variety of factors, including overall loan demand, economic conditions, credit risk, the amount of non-earning assets including nonperforming loans and OREO, the amounts of and 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 $317.4 million in 2025, an increase of $20.5 million, or 6.9%, compared to 2024. Interest income on loans increased by $3.5 million in 2025, compared to 2024. Interest income on investment securities decreased by $1.0 million in 2025, compared to 2024. Interest income on cash and other assets increased $5.7 million in 2025, compared to 2024. Interest expense from total interest-bearing liabilities decreased by $12.3 million in 2025, compared to 2024.
Our net interest margin increased four basis points to 4.10% in 2025, compared to 2024. The increase in 2025, compared to the prior year, was driven by a decrease of 36 basis points in the cost of interest-bearing liabilities, partially offset by a decrease of 24 basis points in yield on earning assets.
Total average loans, including loans held-for-sale, grew to $6.6 billion in 2025, an increase of $0.2 billion, or 3.5%, compared to 2024, due to organic growth in our loan portfolios. Yield on loans decreased 17 basis points in 2025, compared to 2024, primarily due to the declining interest rate environment and its impact on variable rate loans in our loan portfolio. Average interest-bearing cash and other assets, grew to $0.6 billion in 2025, an increase of $0.2 billion. Yield on interest-bearing cash and other assets decreased 88 basis points in 2025, compared to 2024, primarily due to the declining interest rate environment.
Average interest-bearing liabilities grew to $5.4 billion in 2025, an increase of $0.2 billion, or 4.3%, compared to 2024, primarily to support the growth in our loan portfolio. Average interest-bearing deposits increased $0.4 billion, or 7.2%, in 2025, compared to 2024. Total cost of deposits decreased by 30 basis points to 2.73% in 2025, compared to 2024, primarily due to a decrease in balances and rates for certificates of deposit amidst the declining interest rate environment, partially offset by an increase in promotional rate money market deposit balances. Average FHLB borrowings decreased $117.0 million in 2025, compared to 2024. The cost of FHLB borrowings decreased by 87 basis points to 4.61% in 2025, compared to 2024.
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The following table sets forth information related to our average balance sheet, average yields on assets, and average costs of liabilities for the periods presented. We derived these yields by dividing income or expense by the average balance of the corresponding assets or liabilities. We derived average balances from the daily balances throughout the periods indicated.
As of and for the year ended December 31,:
2025 2024 2023
(In thousands) Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate
Interest Earning Assets
Loans 1
$ 6,634,643 $ 425,459 6.41 % $ 6,410,520 $ 421,959 6.58 % $ 6,178,414 $ 385,637 6.24 %
Investment securities 506,294 17,462 3.45 % 529,209 18,468 3.49 % 554,433 17,032 3.07 %
Interest-bearing cash and other assets 599,588 24,848 4.14 % 380,967 19,113 5.02 % 202,720 11,015 5.43 %
Total earning assets 7,740,525 467,769 6.04 % 7,320,696 459,540 6.28 % 6,935,567 413,684 5.96 %
Other assets 536,383 543,650 556,083
Total assets $ 8,276,908 $ 7,864,346 $ 7,491,650
Interest-bearing liabilities
Demand and NOW deposits $ 785,777 $ 25,001 3.18 % $ 633,123 $ 23,013 3.63 % $ 385,424 $ 11,574 3.00 %
Savings deposits 393,771 2,253 0.57 % 412,941 2,834 0.69 % 453,654 2,676 0.59 %
Money market deposits 2,709,997 64,945 2.40 % 2,161,618 45,643 2.11 % 2,122,410 28,301 1.33 %
Certificates of deposit 1,432,539 53,139 3.71 % 1,756,755 79,161 4.51 % 1,512,638 58,804 3.89 %
Total deposits 5,322,084 145,338 2.73 % 4,964,437 150,651 3.03 % 4,474,126 101,355 2.27 %
Repurchase agreements 8,956 150 1.67 % 15,557 188 1.21 % 28,316 225 0.80 %
Total deposits and repurchase agreements 5,331,040 145,488 2.73 % 4,979,994 150,839 3.03 % 4,502,442 101,580 2.26 %
FHLB borrowings 7,847 361 4.61 % 124,833 6,836 5.48 % 269,613 13,621 5.05 %
Other long-term borrowings 66,094 4,529 6.85 % 75,586 4,955 6.55 % 78,654 5,052 6.42 %
Total interest-bearing liabilities 5,404,981 150,378 2.78 % 5,180,413 162,630 3.14 % 4,850,709 120,253 2.48 %
Noninterest-bearing deposits 1,615,511 1,542,808 1,678,240
Other liabilities 153,460 140,529 134,599
Stockholders’ equity 1,102,956 1,000,596 828,102
Total liabilities and stockholders’ equity $ 8,276,908 $ 7,864,346 $ 7,491,650
Net interest income $ 317,391 $ 296,910 $ 293,431
Net interest spread 3.26 % 3.14 % 3.48 %
Net interest margin 4.10 % 4.06 % 4.23 %
Net interest margin (on a FTE basis) 2
4.16 % 4.12 % 4.29 %
1 Includes loans held-for-investment, including nonaccrual loans, and loans held-for-sale.
2 See section entitled “ Non-GAAP Financial Measures and Reconciliations ” for information regarding these non-GAAP financial measures and a reconciliation to the most comparable GAAP equivalent.
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Rate-Volume Analysis
The table below presents the effect of volume and rate changes on interest income and expense. Changes in volume are changes in the average balance multiplied by the previous period’s average rate. Changes in rate are changes in the average rate multiplied by the average balance from the current period. The net changes attributable to the combined impact of both rate and volume have been allocated proportionately to the changes due to volume and the changes due to rate.
For the year ended December 31,
For the year ended December 31,
2025 Versus 2024 Increase (Decrease) Due to:
2024 Versus 2023 Increase (Decrease) Due to:
(In thousands) Rate Volume Total Rate Volume Total
Interest Earning Assets
Loans 1
$ (11,034) $ 14,534 $ 3,500 $ 21,512 $ 14,810 $ 36,322
Investment securities (214) (792) (1,006) 2,158 (722) 1,436
Interest-bearing cash (3,769) 9,504 5,735 (773) 8,871 8,098
Total earning assets (15,017) 23,246 8,229 22,897 22,959 45,856
Interest-Bearing Liabilities
Demand and NOW deposits (3,105) 5,093 1,988 2,822 8,617 11,439
Savings deposits (454) (127) (581) 350 (192) 158
Money market deposits 6,703 12,599 19,302 16,810 532 17,342
Certificates of deposit (12,732) (13,290) (26,022) 10,107 10,250 20,357
Total deposits (9,588) 4,275 (5,313) 30,089 19,207 49,296
Repurchase agreements 58 (96) (38) (280) 243 (37)
Total deposits and repurchase agreements (9,530) 4,179 (5,351) 29,809 19,450 49,259
FHLB borrowings (939) (5,536) (6,475) 1,257 (8,042) (6,785)
Other long-term borrowings 217 (643) (426) 109 (206) (97)
Total interest-bearing liabilities (10,252) (2,000) (12,252) 31,175 11,202 42,377
Net interest income $ (4,765) $ 25,246 $ 20,481 $ (8,278) $ 11,757 $ 3,479
1 Includes loans held-for-investment, including nonaccrual loans, and loans held-for-sale.
Provision for Credit Losses
We established an allowance for credit losses through a provision for credit losses charged as an expense in our consolidated statements of income. The provision for credit losses is the amount of expense that, based on our judgment, is required to maintain the allowance for credit losses at an adequate level to absorb expected losses in the loan portfolio at the balance sheet date and that, in management’s judgment, is appropriate under GAAP. Our determination of the amount of the allowance for credit losses and corresponding provision for credit losses considers ongoing evaluations of the credit quality and level of credit risk inherent in our loan portfolio, levels of nonperforming loans and charge-offs, statistical trends and economic and other relevant factors. The allowance for credit losses is increased by the provision for credit losses and is decreased by charge-offs, net of recoveries on prior loan charge-offs.
The provision for credit losses totaled $24.6 million in 2025, primarily due to a combination of deterioration of two customer relationships in our commercial and industrial (C&I) portfolio, impacts from net portfolio downgrades, and impacts from growth in loan portfolio balances.
Net charge-offs in 2025 were $28.3 million, or a ratio of net charge-offs to average loans of 0.43%, compared to net charge-offs of $20.4 million, or a ratio of net charge-offs to average loans of 0.32%, in 2024. Net charge-offs in 2025 were elevated primarily due to write-downs of two customer relationships in our C&I loan portfolio.
The allowance for credit losses as a percentage of total loans was 1.27% at December 31, 2025, compared to 1.38% at December 31, 2024. The ratio of nonperforming assets to total assets was 0.85% at December 31, 2025, compared to 0.92% at December 31, 2024.
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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Noninterest Income
The following table presents noninterest income for the year ended December 31,:
(In thousands) 2025 2024 2023
Deposit account service fees $ 8,321 $ 9,495 $ 9,940
Treasury management service fees 17,473 14,829 11,724
Credit and debit card fees 10,729 11,153 11,681
Trust and investment advisory fees 5,945 5,787 5,693
Mortgage banking services, net 47,072 39,014 31,384
Other noninterest income 12,339 9,514 8,670
Total noninterest income $ 101,879 $ 89,792 $ 79,092
Noninterest income totaled $101.9 million in 2025, an increase of $12.1 million from 2024, primarily due to increases in mortgage banking services, treasury management service fees, and other noninterest income.
Deposit account service fees include overdraft and non-sufficient funds charges, and other maintenance fees on deposit accounts. Deposit account service fees decreased $1.2 million for the year ended December 31, 2025 compared to 2024, primarily due to a decrease in overdraft and non-sufficient funds charges.
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 $2.6 million, primarily due to growth in services provided to our business customers.
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 decreased $0.4 million for the year ended December 31, 2025 compared to 2024, 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 increased $0.2 million for the year ended December 31, 2025 compared to 2024, primarily due to higher average assets under management.
The components of mortgage banking services, were as follows for the year ended December 31,:
(In thousands) 2025 2024 2023
Net sale gains and fees from mortgage loan originations, including loans held-for-sale changes in fair value and hedging $ 23,907 $ 18,855 $ 14,275
Mortgage servicing income 18,667 16,973 15,674
Net MSR capitalization and changes in fair value, net of derivative activity 4,498 3,186 1,435
Mortgage banking services, net $ 47,072 $ 39,014 $ 31,384
Mortgage banking services increased $8.1 million in 2025, compared to 2024. We experienced an increase of $5.1 million in 2025, compared to 2024, 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 primarily due to an increase in gain on sales driven by higher origination volume. We retain servicing rights on the majority of mortgage loans that we sell, which drove the increase in servicing income of $1.7 million to $18.7 million in 2025, from $17.0 million in 2024. Net MSR capitalization and changes in fair value, net of derivative activity, increased $1.3 million in 2025, compared to 2024. Revenue was higher in 2025, compared to 2024 due to an increase in net MSR capitalization of $2.3 million partially offset by a decrease in MSR fair value, net of derivative activity of $1 million. We recognize fair value adjustments to our MSR asset, which includes changes in assumptions to the valuation model and pay-offs and pay-downs of the MSR portfolio. See the impact of changes to our key MSR valuation assumptions in the table below.
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The following table shows the hypothetical effect on the fair value of our MSRs when applying certain unfavorable variations of key assumptions to these assets as of December 31, 2025.
(In thousands) 10% 20%
Discount rate $ (3,173) $ (6,209)
Total prepayment speeds (3,032) (5,903)
Cost of servicing each loan (858) (1,728)
These hypothetical sensitivities should be evaluated with care. The effect on fair value of an adverse change in assumptions generally cannot be determined because the relationship of the change in assumptions to the fair value may not be linear. Additionally, the impact of a variation in a particular assumption on the fair value is calculated while holding other assumptions constant. In reality, changes in one factor may lead to changes in other factors, which could impact the above hypothetical effects.
We also maintain a hedging strategy to manage a portion of the risk associated with changes in the fair value of our MSR portfolio. Changes in fair value of the derivative instruments used to economically hedge the MSRs are also included as a component of mortgage banking services.
Other noninterest income increased $2.8 million for the year ended December 31, 2025 compared to 2024, primarily due to an increase in loan syndication fees and swap fee income.
Noninterest Expense
The following table presents noninterest expense for the year ended December 31,:
(In thousands) 2025 2024 2023
Salary and employee benefits $ 171,824 $ 154,985 $ 133,231
Occupancy, equipment and software 38,244 36,282 33,426
Amortization and impairment of intangible assets 2,412 3,549 4,822
Merger related expenses 2,743 13,178 —
Other ( Note 16 - Other noninterest expenses )
56,551 56,046 51,314
Total noninterest expenses $ 271,774 $ 264,040 $ 222,793
Noninterest expenses totaled $271.8 million in 2025, an increase of $7.7 million from 2024, primarily due to an increase in salary and employee benefits due to the higher headcount of C&I bankers and support personnel, higher levels of variable compensation, including compensation associated with an increase in mortgage loan originations, and higher medical insurance costs, partially offset by a decrease in merger related expenses of $10.4 million in 2025 compared to 2024.
The efficiency ratio for 2025 was 64.82% compared to 68.28% in 2024. The adjusted efficiency ratio, a non-GAAP financial measure, in 2025 was 64.17% compared to 64.13% in 2024.
Income Taxes
We had income tax expense in 2025 of $25.0 million, compared to $19.5 million in 2024. The increase in income tax expense was primarily due to our increased income during 2025. Our effective tax rate was 20.3% in 2025, compared to 20.5% in 2024. For additional information on our income taxes, see Note 15 - Income Taxes included in our audited consolidated financial statements included elsewhere in this report.
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Financial Condition
Balance Sheet
Our total assets were $8.5 billion at December 31, 2025, compared to $8.1 billion at December 31, 2024. Our total loans held-for-investment, net of deferred fees, costs, premiums and discounts were $6.7 billion at December 31, 2025, an increase of $0.3 billion from 2024, which was due to organic growth.
Investment Securities
Our securities portfolio is used to make various term investments, maintain a source of liquidity and serve as collateral for certain types of deposits and borrowings. We manage our investment portfolio according to written investment policies approved by our board of directors. Investment in our securities portfolio may change over time based on our funding needs and interest rate risk management objectives. Our liquidity levels take into account anticipated future cash flows and other available sources of funds, and are maintained at levels that we believe are appropriate to provide the necessary flexibility to meet our anticipated funding requirements.
Our investment securities portfolio consists of securities classified as available-for-sale and held-to-maturity. There were no trading securities in our investment portfolio as of December 31, 2025 and 2024. All available-for sale securities are carried at fair value and may be used for liquidity purposes should management consider it to be in our best interest.
Our securities available-for-sale decreased by $0.1 million to $469.0 million at December 31, 2025, compared to December 31, 2024. The decrease was primarily due to amortization of the portfolio. Securities held-to-maturity decreased $1.4 million to $33.8 million at December 31, 2025, compared to December 31, 2024, due primarily to amortization of the portfolio.
The following table is a summary of our investment portfolio as of December 31,:
2025 2024
(In thousands) Carrying Amount % of Portfolio Carrying Amount % of Portfolio
Available-for-sale:
U.S. treasury $ 33,270 7.1 % $ 31,730 6.8 %
U.S. agency 412 0.1 % 656 0.2 %
Obligations of states and political subdivisions 28,073 6.0 % 25,699 5.5 %
Mortgage backed - residential 96,176 20.5 % 96,279 20.5 %
Collateralized mortgage obligations 150,797 32.1 % 164,347 35.0 %
Mortgage backed - commercial 143,993 30.7 % 134,827 28.7 %
Other debt 16,249 3.5 % 15,538 3.3 %
Total available-for-sale $ 468,970 100 % $ 469,076 100 %
Held-to-maturity:
Obligations of states and political subdivisions $ 25,890 76.5 % $ 25,713 73.0 %
Mortgage backed - residential 5,467 16.2 % 6,373 18.0 %
Collateralized mortgage obligations 2,482 7.3 % 3,156 9.0 %
Total held-to-maturity $ 33,839 100 % $ 35,242 100 %
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The following tables show the weighted average yield to average life of each category of investment securities as of December 31, 2025:
(In thousands) One year or less One to five years Five to ten years After ten years
Carrying Amount Average Yield Carrying Amount Average Yield Carrying Amount Average Yield Carrying Amount Average Yield
Available-for-sale:
U.S. treasury $ — — % $ 33,270 1.28 % $ — — % $ — — %
U.S. agency 20 4.84 % — — % 392 5.28 % — — %
Obligations of states and political subdivisions — — % — — % 25,083 3.23 % 2,990 2.01 %
Mortgage backed - residential 749 2.50 % 26,239 2.64 % 30,743 2.34 % 38,445 3.27 %
Collateralized mortgage obligations 37 3.00 % 38,016 3.97 % 104,613 2.86 % 8,131 1.74 %
Mortgage backed - commercial 944 2.56 % 73,851 3.46 % 69,198 2.83 % — — %
Other debt — — % 9,811 3.13 % 4,566 2.61 % 1,872 3.75 %
Total available-for-sale $ 1,750 2.57 % $ 181,187 3.03 % $ 234,595 2.82 % $ 51,438 2.97 %
Held-to-maturity:
Obligations of states and political subdivisions $ 982 2.07 % $ — — % $ — — % $ 24,908 3.52 %
Mortgage backed - residential 74 3.69 % 3,637 2.43 % 542 3.33 % 1,214 3.23 %
Collateralized mortgage obligations 34 2.50 % 1,446 2.84 % 1,002 3.10 % — — %
Total held-to-maturity $ 1,090 2.19 % $ 5,083 2.55 % $ 1,544 3.18 % $ 26,122 3.51 %
We had no securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.
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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 fees, costs, premiums and discounts, as of December 31, 2025 and 2024 were $6.7 billion and $6.4 billion, respectively.
The following table sets forth the composition of our loan portfolio, as of December 31,:
2025 2024
(In thousands) Amount % of
total loans Amount % of
total loans
Commercial and industrial $ 2,937,867 44.0 % $ 2,627,591 41.2 %
Commercial real estate:
Non-owner occupied 742,002 11.1 % 752,628 11.8 %
Owner occupied 700,774 10.5 % 700,867 11.0 %
Construction and land 268,652 4.0 % 362,677 5.7 %
Multifamily 210,368 3.2 % 94,355 1.5 %
Total commercial real estate 1,921,796 28.8 % 1,910,527 30.0 %
Residential real estate 1,221,086 18.3 % 1,180,610 18.5 %
Public finance 501,582 7.5 % 554,784 8.7 %
Consumer 32,651 0.5 % 41,144 0.6 %
Other 58,198 0.9 % 61,701 1.0 %
Total loans $ 6,673,180 100.0 % $ 6,376,357 100.0 %
Commercial and industrial loans include loans to commercial customers for use in normal business operations to finance working capital needs, equipment and inventory purchases, and other expansion projects. These loans are made primarily in our market areas and are underwritten on the basis of the borrower’s ability to service the debt from revenue, and are generally extended under our normal credit standards, controls and monitoring systems.
Commercial real estate (“CRE”) loans include owner occupied and non-owner occupied commercial real estate mortgage loans to operating commercial and agricultural businesses, and include both loans for long-term financing of land and buildings and loans made for the initial development or construction of a commercial real estate project. Non-owner occupied CRE loans were 62.5% of the Company’s risk-based capital, or 11.1% of total loans as of December 31, 2025. Non-owner occupied CRE loans associated with office space were $48.9 million, or 0.7% of total loans as of December 31, 2025. Owner occupied CRE loans associated with office space were $215.5 million, or 3.2% of total loans as of December 31, 2025.
Residential real estate loans represent loans to consumers collateralized by a mortgage on a residence and include purchase money, refinancing, secondary mortgages, and home equity loans and lines of credit.
Public finance loans include loans to our charter school and municipal based customers.
Consumer loans include direct consumer installment loans, credit card accounts, overdrafts and other revolving loans.
Other loans consist of loans to nondepository financial institutions, lease financing receivables and loans for agricultural production.
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Maturities and Sensitivity of Loans to Changes in Interest Rates
The information in the following tables is based on the contractual maturities of individual loans, including loans that may be subject to renewal at their contractual maturity. Renewal of these loans is subject to review and credit approval, as well as modification of terms upon maturity. Actual repayments of loans may differ from the maturities reflected below because 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, 2025:
(In thousands) One year
or less After one
through
five years After five
through
15 years After 15
years Total
Commercial and industrial $ 639,033 $ 2,035,847 $ 241,756 $ 21,231 $ 2,937,867
Commercial real estate 408,545 1,206,960 258,555 47,736 1,921,796
Residential real estate 91,430 40,762 49,110 1,039,784 1,221,086
Public finance 17,444 187,206 248,148 48,784 501,582
Consumer 11,875 9,235 11,317 224 32,651
Other 3,890 31,024 18,999 4,285 58,198
Total loans $ 1,172,217 $ 3,511,034 $ 827,885 $ 1,162,044 $ 6,673,180
(In thousands) One year
or less After one
through
five years After five
through
15 years After 15
years Total Total Loans Maturing After 1 Year
Loans maturing with:
Fixed interest rates
Commercial and industrial $ 99,862 $ 202,210 $ 131,389 $ 509 $ 433,970 $ 334,108
Commercial real estate 164,896 508,324 51,596 4,510 729,326 564,430
Residential real estate 65,724 27,272 33,788 294,460 421,244 355,520
Public finance 14,330 187,206 245,143 48,784 495,463 481,133
Consumer 1,449 7,538 11,067 — 20,054 18,605
Other 1,359 19,294 16,100 4,285 41,038 39,679
Total fixed interest rate loans $ 347,620 $ 951,844 $ 489,083 $ 352,548 $ 2,141,095 $ 1,793,475
Floating or adjustable interest rates
Commercial and industrial $ 539,171 $ 1,833,637 $ 110,367 $ 20,722 $ 2,503,897 $ 1,964,726
Commercial real estate 243,649 698,636 206,959 43,226 1,192,470 948,821
Residential real estate 25,706 13,490 15,322 745,324 799,842 774,136
Public finance 3,114 — 3,005 — 6,119 3,005
Consumer 10,426 1,697 250 224 12,597 2,171
Other 2,531 11,730 2,899 — 17,160 14,629
Total floating or adjustable interest rate loans $ 824,597 $ 2,559,190 $ 338,802 $ 809,496 $ 4,532,085 $ 3,707,488
Total loans $ 1,172,217 $ 3,511,034 $ 827,885 $ 1,162,044 $ 6,673,180 $ 5,500,963
Allowance for Credit Losses
We maintain the allowance for credit losses at a level we believe is sufficient to absorb expected losses in our loan portfolio given the conditions at the time and our estimates of future economic conditions. Events that are not within our control, such as changes in economic factors, could change subsequent to the reporting date and could cause increases or decreases to the allowance. The amount of the allowance is affected by loan charge-offs, which decrease the allowance; recoveries on loans previously charged off, which increase the allowance; and the provision for credit losses charged to earnings, which increases the allowance.
In determining the provision for credit losses, management monitors fluctuations in the allowance resulting from actual charge-offs and recoveries and reviews the size and composition of the loan portfolio in light of current and anticipated economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as events change.
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The following table presents, by loan type, the changes in the allowance for credit losses for the years ended December 31,:
(In thousands) 2025 2024 2023
Balance, beginning of year $ 88,221 $ 80,398 $ 65,917
Impact of adopting ASC 326 — — 5,256
Adjusted beginning balance $ 88,221 $ 80,398 $ 71,173
Loan charge-offs:
Commercial and industrial (25,800) (20,743) (9,242)
Commercial real estate — (475) (83)
Residential real estate (74) (38) (13)
Public finance (1,922) — —
Consumer (447) (438) (334)
Other (743) — —
Total loan charge-offs (28,986) (21,694) (9,672)
Recoveries of loans previously charged-off:
Commercial and industrial 441 1,181 1,118
Commercial real estate 11 9 12
Residential real estate 74 8 682
Public finance — — —
Consumer 205 119 50
Other — — —
Total loan recoveries 731 1,317 1,862
Net loan charge-offs (28,255) (20,377) (7,810)
Provision for credit losses 1
25,050 28,200 17,035
Balance, end of year $ 85,016 $ 88,221 $ 80,398
Allowance for credit losses to total loans 1.27 % 1.38 % 1.28 %
Ratio of net charge-offs to average loans outstanding 0.43 % 0.32 % 0.13 %
1 For the years ended December 31, 2025, 2024 and 2023 we recorded a (benefit) provision for credit losses on unfunded commitments of $(450), $(650) and $1,212, respectively. For further information, see Note 3 - Loans .
The following table presents net charge-offs to average loans outstanding by loan category for the years ended December 31,:
(In thousands) 2025 2024 2023
Commercial and industrial 0.89 % 0.66 % 0.29 %
Commercial real estate — % 0.03 % — %
Residential real estate — % — % (0.07) %
Public finance 0.37 % — % — %
Consumer 0.62 % 0.79 % 0.70 %
Other 1.43 % — % — %
Total 0.43 % 0.32 % 0.13 %
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Allocation of Allowance for Credit Losses
The following table presents the allocation of the allowance for credit losses by category and the percentage of the allocation of the allowance for credit losses by category to total loans listed as of December 31,:
2025 2024
(In thousands) Allowance
Amount % of loans in
each category to
total loans Allowance
Amount % of loans in
each category to
total loans
Commercial and industrial $ 42,902 44.0 % $ 38,489 41.2 %
Commercial real estate 24,408 28.8 % 28,323 30.0 %
Residential real estate 13,323 18.3 % 15,450 18.5 %
Public finance 2,942 7.5 % 4,750 8.7 %
Consumer 721 0.5 % 750 0.6 %
Other 720 0.9 % 459 1.0 %
Total $ 85,016 100.0 % $ 88,221 100.0 %
Nonperforming Assets
We have established policies and procedures to guide us in originating, monitoring and maintaining the credit quality of our loan portfolio. These policies and procedures are expected to be followed by our bankers and underwriters and exceptions to these policies require elevated levels of approval and are reported to our board of directors.
Nonperforming assets include all loans categorized as nonaccrual, accrual loans greater than 90 days past due, and other real estate owned and other repossessed assets. The accrual of interest on loans is discontinued, or the loan is placed on nonaccrual, when the full collection of principal and interest is in doubt. We do not generally accrue interest on loans that are 90 days or more past due. When a loan is placed on nonaccrual, previously accrued but unpaid interest is reversed and charged against interest income and future accruals of interest are discontinued. Payments by borrowers for loans on nonaccrual are applied to loan principal. Loans are returned to accrual status when, in our judgment, the borrower’s ability to satisfy principal and interest obligations under the loan agreement has improved sufficiently to reasonably assure recovery of principal and the borrower has demonstrated a sustained period of repayment performance. In general, we require a minimum of six consecutive months of timely payments in accordance with the contractual terms before returning a loan to accrual status.
The following table sets forth our nonperforming assets as of December 31,:
(In thousands) 2025 2024
Nonaccrual loans:
Commercial and industrial $ 33,710 $ 28,314
Commercial real estate 5,199 9,302
Residential real estate 21,126 20,220
Public finance — 7,226
Consumer 46 64
Other — 2,391
Total nonaccrual loans 60,081 67,517
Accrual loans greater than 90 days past due 690 1,533
Total nonperforming loans 60,771 69,050
Other real estate owned and foreclosed assets, net 11,514 5,138
Total nonperforming assets $ 72,285 $ 74,188
Nonaccrual loans to total loans 0.90 % 1.06 %
Nonperforming loans to total loans 0.91 % 1.08 %
Nonperforming assets to total assets 0.85 % 0.92 %
Allowance for credit losses to nonaccrual loans 141.50 % 130.66 %
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Deposits
Deposits represent our primary source of funds. Total deposits increased by $0.4 billion to $7.1 billion at December 31, 2025, compared to December 31, 2024.
We are focused on growing our core deposits through relationship-based banking with our business and consumer clients. The following table presents our deposits by customer type as of December 31,:
($ in thousands) 2025 2024
Consumer
Noninterest-bearing deposit accounts $ 404,666 $ 410,303
Interest-bearing deposit accounts:
Demand and NOW 110,155 61,987
Savings 308,655 326,916
Money market 1,880,973 1,516,577
Certificates of deposit 809,401 1,069,704
Total interest-bearing deposit accounts 3,109,184 2,975,184
Total consumer deposits $ 3,513,850 $ 3,385,487
Business
Noninterest-bearing deposit accounts $ 1,246,707 $ 1,130,855
Interest-bearing deposit accounts:
Demand and NOW 738,506 669,417
Savings 69,976 75,422
Money market 1,056,044 915,208
Certificates of deposit 57,349 51,131
Total interest-bearing deposit accounts 1,921,875 1,711,178
Total business deposits $ 3,168,582 $ 2,842,033
Wholesale deposits 1
$ 424,924 $ 444,740
Total deposits $ 7,107,356 $ 6,672,260
1 Wholesale deposits consist of brokered deposits included in our consolidated balance sheets within interest-bearing accounts and in Note 9 - Deposits within certificates of deposit and savings and money market accounts.
2025 2024
(Dollars in thousands) Average
Balance Average
Rate Paid Average
Balance Average
Rate Paid
Noninterest-bearing deposit accounts $ 1,615,511 — % $ 1,542,808 — %
Interest-bearing deposit accounts:
Demand and NOW 785,777 3.18 % 633,123 3.63 %
Savings 393,771 0.57 % 412,941 0.69 %
Money market 2,709,997 2.40 % 2,161,618 2.11 %
Certificates of deposit 1,432,539 3.71 % 1,756,755 4.51 %
Total interest-bearing deposit accounts 5,322,084 2.73 % 4,964,437 3.03 %
Total deposits $ 6,937,595 2.09 % $ 6,507,245 2.32 %
As of December 31, 2025 and December 31, 2024, approximately $2.6 billion or 36.6% and $2.3 billion or 34.8%, respectively, of our deposit portfolio was uninsured. As of December 31, 2025 and December 31, 2024, approximately $2.1 billion or 29.0% and $1.7 billion or 25.2%, respectively, of our deposit portfolio was uninsured and uncollateralized. The uninsured and uncollateralized amounts are estimates based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements.
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We actively participate in the IntraFi Cash Service (“ICS”) / Certificate of Deposit Account Registry Service (“CDARS”) program which provides FDIC insurance coverage for clients that maintain larger deposit balances. Deposits in the ICS / CDARS program totaled $0.9 billion, or 12.2% of all deposits as of December 31, 2025, and $0.7 billion, or 11.1% of all deposits as of December 31, 2024.
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, 2025:
(In thousands)
Three months or less $ 83,747
Over three months through six months 91,497
Over six through twelve months 33,174
Over twelve months through three years 1,292
Over three years 819
Total $ 210,529
Liquidity
Liquidity refers to our ability to maintain cash flow that is adequate to fund operations, support asset growth, maintain reserve requirements and meet present and future obligations of deposit withdrawals, lending obligations and other contractual obligations.
FirstSun (Parent Company)
FirstSun has routine funding requirements consisting primarily of operating expenses, debt service, and funds used for acquisitions. FirstSun can obtain funding to meet its obligations from dividends collected from its subsidiaries, primarily the Bank, and through the issuance of FirstSun common stock and varying forms of debt. At December 31, 2025, FirstSun had available cash and cash equivalents of $66.7 million and debt outstanding of $38.9 million. Management believes FirstSun has the ability to generate and obtain adequate amounts of liquidity to meet its requirements in the short-term and the long-term.
Federal banking laws regulate the amount of dividends that may be paid by banking subsidiaries without prior approval. The Bank may declare dividends without prior regulatory approval that do not exceed the total of retained net income for the current year combined with its retained net income for the preceding two years, subject to maintenance of minimum capital requirements. Prior regulatory approval to pay dividends was not required in 2024 or 2025 and is not currently required. At December 31, 2025, the Bank could pay dividends to FirstSun of approximately $268.3 million without prior regulatory approval. During the year ended December 31, 2025, the Bank paid dividends totaling $7.6 million to FirstSun. During the year ended December 31, 2025, Sunflower Wealth Advisors, LLC paid dividends totaling $0.2 million to FirstSun.
Bank
The Bank’s liquidity management policy and our asset and liability management policy, or ALM policy, provides the framework that we use to seek to maintain adequate liquidity and sources of available liquidity at levels that will enable us to meet all reasonably foreseeable short-term, long-term and strategic liquidity demands. Our Asset and Liability Management Committee, or ALCO, is responsible for oversight of our liquidity risk management activities in accordance with the provisions of our ALM Policy and applicable bank regulatory capital and liquidity laws and regulations. Our liquidity risk management process includes (i) ongoing analysis and monitoring of our funding requirements under various economic and interest rate scenarios, (ii) review and monitoring of lenders, depositors, brokers and other liability holders to ensure appropriate diversification of funding sources and (iii) liquidity contingency planning to address liquidity needs in the event of unforeseen market disruption, including appropriate allocation of funds to a liquid portfolio of marketable securities and investments. We continuously monitor our liquidity position in order for our assets and liabilities to be managed in a manner that we believe will meet our immediate and long-term funding requirements. We seek to manage our liquidity position to meet the daily cash flow needs of customers, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of our stockholders. We also monitor our liquidity requirements in light of interest rate trends, changes in the economy, and the scheduled maturity and interest rate sensitivity of our securities and loan portfolios and deposits. Liquidity management is made more complicated because different balance sheet components are subject to varying degrees of management control. For example, the timing of maturities of our
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investment portfolio is fairly predictable and subject to a high degree of control when we make investment decisions. Net deposit inflows and outflows, however, are far less predictable and are not subject to the same degree of certainty.
Our liquidity position is supported by management of our liquid assets and liabilities and access to alternative sources of funds. Our short-term and long-term liquidity requirements are primarily to fund on-going operations, including payment of interest on deposits and debt, extensions of credit to borrowers and capital expenditures. These liquidity requirements are met primarily through our deposits, FHLB advances and the principal and interest payments we receive on loans and investment securities. Cash, interest-bearing deposits in third-party banks, securities available for sale and maturing or prepaying balances in our investment and loan portfolios are our most liquid assets. Other sources of liquidity that are available to us include the sale of loans we hold for investment, the ability to acquire additional national market non-core deposits, borrowings through the Federal Reserve’s discount window and the issuance of debt or equity securities.
At December 31, 2025, our liquid assets, which consist of cash and amounts due from banks and interest-bearing deposits in other financial institutions, amounted to $642.2 million, or 7.6% of total assets, compared to $607.6 million, or 7.5% of total assets, at December 31, 2024. At December 31, 2025, approximately 72% of the investment securities portfolio was pledged as collateral to secure public deposits and repurchase agreements. Our unencumbered available-for-sale securities at December 31, 2025 were $132.6 million, or 1.6% of total assets, compared to $34.5 million, or 0.4% of total assets, at December 31, 2024.
The liability portion of our balance sheet serves as a primary source of liquidity. We plan to meet our future cash needs primarily through the generation of deposits. Customer deposits have historically provided a sizeable source of relatively stable and low-cost funds. At December 31, 2025, loans as a percentage of customer deposits were 93.9%, compared with 95.6% at December 31, 2024. For additional information related to our deposits, see the “Deposits” section above. We are also a member of the FHLB and FRB, from which we can borrow for leverage or liquidity purposes. The FHLB and FRB require that securities and qualifying loans be pledged to secure any advances. Liquidity sources available to us for immediate funding at December 31, 2025, are as follows:
FHLB borrowings available $ 1,350,157
Fed Funds lines 2,269,710
Unused lines with other financial institutions 160,000
Immediate funding availability $ 3,779,867
Management believes the Bank has the ability to generate and obtain adequate amounts of liquidity to meet its requirements in the short-term and the long-term.
Capital
Stockholders’ equity at December 31, 2025 was $1.2 billion, compared to $1.0 billion at 2024, an increase of $0.1 billion, or 10.8%. The increase in stockholders’ equity relates primarily to net income for the year ended December 31, 2025. We did not pay a dividend to our common shareholders during the years ended December 31, 2025 or 2024.
Capital Adequacy
We are subject to various regulatory capital requirements administered by the federal banking agencies. Management routinely analyzes our capital to seek to ensure an optimized capital structure. For further information on capital adequacy see Note 17 - Regulatory Capital Matters to the consolidated financial statements.
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Material Contractual Obligations, Commitments, and Contingent Liabilities
We have entered into contractual obligations in the normal course of business that involve elements of credit risk, interest rate risk and liquidity risk.
The following table summarizes our material contractual obligations as of December 31, 2025. Further discussion of each obligation or commitment is included in the referenced note to the consolidated financial statements.
(In thousands) Note
Reference Total Less than
1 Year 1 - 3
Years 3 - 5
Years More than
5 Years
Deposits:
Deposits without a stated maturity 9 $ 5,815,682 $ 5,815,682 $ — $ — $ —
Certificates of deposit 9 1,291,674 1,263,759 21,878 4,636 1,401
Securities sold under agreements to repurchase 10 11,160 11,160 — — —
Long-term debt:
Subordinated debt 11 38,919 — — — 38,919
Operating leases 23 31,963 8,000 11,969 8,143 3,851
We are party to various derivative contracts as a means to manage the balance sheet and our related exposure to changes in interest rates, to manage our residential real estate loan origination and sale activity, and to provide derivative contracts to our clients. Since the derivative liabilities recorded on the balance sheet change frequently and do not represent the amounts that may ultimately be paid under these contracts, these liabilities are not included in the table of contractual obligations presented above. Further discussion of derivative instruments is included in Note 7 - Derivative Financial Instruments to the consolidated financial statements.
In the normal course of business, various legal actions and proceedings are pending against us and our affiliates which are incidental to the business in which they are engaged. Further discussion of contingent liabilities is included in Note 22 - Commitments and Contingencies to the consolidated financial statements.
We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit, commercial letters of credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial condition. The contractual or notional amounts of those instruments reflect the extent of involvement we have in particular classes of financial instruments. Further discussion of contingent liabilities is included in Note 22 - Commitments and Contingencies to the consolidated financial statements.
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