FIRSTSUN CAPITAL BANCORP - Quarter Report: 2024 June (Form 10-Q)

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect our current views with respect to, among other things, statements relating to the Company’s assets, business, cash flows, condition (financial or otherwise), credit quality, financial performance, liquidity, short and long-term performance goals, prospects, results of operations, strategic initiatives, the benefits, cost and synergies of completed acquisitions or dispositions, and the timing, benefits, costs and synergies of future acquisitions, disposition and other growth opportunities, including statements regarding our pending merger with HomeStreet, Inc. (“HomeStreet”). They are not statements of historical or current fact nor are they assurances of future performance, and they generally can be identified by the use of forward-looking terminology, such as “believe,” “expect,” “anticipate,” “intend,” “target,” “estimate,” “continue,” “positions,” “plan,” “predict,” “project,” “forecast,” “guidance,” “goal,” “objective,” “prospects,” “possible” or “potential,” by future conditional verbs such as “assume,” “will,” “would,” “should,” “could” or “may,” or by variations of such words or by similar expressions. These forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time, are difficult to predict and are generally beyond our control and should be viewed with caution.

There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following:

•potential fluctuations or unanticipated changes in the interest rate environment, including interest rate changes made by the Board of Governors of the Federal Reserve, and their related impacts on macroeconomic conditions, customer and client behavior, our funding costs, and our loan and securities portfolios, as well as cash flow reassessments may reduce net interest margin and/or the volumes and values of loans made or held as well as the value of other financial assets;

•changes in the monetary and fiscal policies of the U.S. Government, including policies of the U.S. Department of the Treasury and the Federal Reserve;

•other actions of the Federal Reserve and legislative and regulatory actions and reforms;

•the potential effects of events beyond our control that may have a destabilizing effect on financial markets, economic growth, customer and client behavior and the economy in general, such as inflation and recessions, epidemics and pandemics, terrorist activities, wars and other foreign conflicts, essential utility outages, climate change, deterioration in the global economy, instability in the credit markets, disruptions in our customers’ supply chains or disruption in transportation;

•the potential effects of pandemics or public health conditions on the economic and business environments in which we operate, including the impact of actions taken by governmental authorities to address these situations, and the resulting effect of these items on our operations, liquidity and capital position, and on the financial condition of our borrowers and other customers;

•changes in legislation, regulation, policies or administrative practices, whether by judicial, governmental or legislative action and other changes pertaining to banking, securities, taxation, rent regulation and housing, financial accounting and reporting, environmental protection and insurance and the ability to comply with such changes in a timely manner;

•the risk that we may be required to make substantial expenditures to keep pace with regulatory initiatives and the rapid technological changes in the financial services market;

•competition from financial institutions and other financial service providers including non-bank financial technology providers and our ability to attract customers from other financial institutions;

•any unanticipated or greater than anticipated adverse conditions in the national or local economies in which we operate;

•our loan concentration in industries or sectors that may experience unanticipated or greater than anticipated adverse conditions than other industries or sectors in the national or local economies in which we operate;

•increased capital requirements, other regulatory requirements or enhanced regulatory supervision;

•cyber-security risks and the vulnerability of our network and online banking portals, and the systems or parties with whom we contract, to unauthorized access, cyber attacks, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security breaches that could adversely affect our business and financial performance or reputation;

•risks with respect to our ability to identify and complete future mergers or acquisitions, including our proposed merger with HomeStreet, as well as our ability to successfully expand and integrate those businesses and operations that we acquire;

•the failure to close our previously announced merger with HomeStreet when expected or at all because required regulatory approvals, our planned conversion to a Texas state-chartered bank and member of the Federal Reserve System, and other conditions to closing are not received or satisfied on a timely basis or at all, and the risk that

any regulatory approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the proposed merger;

•the dilutive effect of shares of FirstSun’s common stock to be issued at the completion of the proposed merger with HomeStreet and the related effects on our stock price;

•the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement with HomeStreet;

•any change in the purchase accounting assumptions used regarding the HomeStreet assets acquired and liabilities assumed to determine the fair value and credit marks, particularly in light of the current interest rate environment;

•the possibility that the anticipated benefits of the proposed merger with HomeStreet, including anticipated cost savings and strategic gains, are not realized when expected or at all;

•the proposed merger with HomeStreet being more expensive or taking longer to complete than anticipated, including as a result of unexpected factors or events;

•the diversion of management’s attention from ongoing business operations and opportunities due to the proposed merger with HomeStreet;

•potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the proposed merger with HomeStreet;

•additional regulatory burdens that may be imposed upon the completion of the HomeStreet merger due to having assets in excess of $10 billion;

•changes in FirstSun’s or HomeStreet’s share price before closing;

•the risks of expansion into new geographic or product markets;

•the inability to manage strategic initiatives and/or organizational changes;

•our ability to attract and retain key employees;

•volatility in the allowance for credit losses resulting from the CECL methodology, either alone or that may be affected by conditions affecting our business;

•changes in accounting principles, policies, practices or guidelines;

•our reliance on third parties to provide key components of our business infrastructure and services required to operate our business;

•the availability of and access to capital; failures of internal controls and other risk management systems;

•the outcome (including judgments, costs, fines, reputational harm, inability to obtain necessary approvals and/or other negative effects) of pending or threatened litigation or of matters before or involving regulatory agencies, whether currently existing or commencing in the future;

•losses due to fraudulent or negligent conduct of our customers, third-party service providers or employees; and

•limitations on our ability to declare and pay dividends and other distributions from our bank to our holding company, which could affect our holding company’s liquidity, including its ability to pay dividends to shareholders or take other capital actions.

We caution readers that the foregoing list of factors is not exclusive, is not necessarily in order of importance and readers should not place undue reliance on any forward-looking statements. You should also consider the risks, assumptions and uncertainties set forth under “Item 1.A. Risk Factors,” of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (“SEC”) on March 7, 2024 (our “2023 Annual Report”) as well as any additional factors that might be reported in future filings that we make with the SEC. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from our forward-looking statements. Accordingly, you should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made and we do not intend to and disclaim any obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, unless required to do so under the federal securities laws.

Part I - Financial Information

Item 1. Financial Statements (Unaudited)

Index to Consolidated Financial Statements

FIRSTSUN CAPITAL BANCORP

and Subsidiaries

Consolidated Balance Sheets

As of

(Unaudited)

(In thousands, except par and share amounts)

June 30,
2024

December 31,
2023

Assets

Cash and cash equivalents

Securities available-for-sale, at fair value

Securities held-to-maturity, fair value of $ and $, respectively

Loans held-for-sale, at fair value

Loans, net of allowance for credit losses of $ and $, respectively

Mortgage servicing rights, at fair value

Premises and equipment, net

Other real estate owned and foreclosed assets, net

Bank-owned life insurance

Restricted equity securities

Goodwill

Core deposits and other intangible assets, net

Accrued interest receivable

Deferred tax assets, net

Prepaid expenses and other assets

Total assets

Liabilities and Stockholders’ Equity

Liabilities:

Deposits:

Noninterest-bearing accounts

Interest-bearing accounts

Total deposits

Securities sold under agreements to repurchase

Federal Home Loan Bank advances

Subordinated debt, net

Accrued interest payable

Accrued expenses and other liabilities

Total liabilities

Commitments and contingencies (Note 15)

par value, shares authorized, issued or outstanding, respectively

Common stock, $ par value; shares authorized; and shares issued and outstanding, respectively

Additional paid-in capital

Retained earnings

Accumulated other comprehensive loss, net

()

Total stockholders’ equity

Total liabilities and stockholders’ equity

The accompanying notes are an integral part of these consolidated financial statements.

FIRSTSUN CAPITAL BANCORP

and Subsidiaries

Consolidated Statements of Income and Comprehensive Income

For the three and six months ended June 30,

(Unaudited)


	Three months ended June 30,		Six months ended June 30,
(In thousands, except per share amounts)	2024	2023	2024	2023
Interest income:
Interest and fee income on loans:
Taxable	$	$	$	$
Tax exempt
Interest and dividend income on securities:
Taxable
Tax exempt
Other interest income
Total interest income
Interest expense:
Interest expense on deposits
Interest expense on securities sold under agreements to repurchase
Interest expense on other borrowed funds
Total interest expense
Net interest income
Provision for credit losses
Net interest income after credit loss expense
Noninterest income:
Service charges on deposit accounts
Credit and debit card fees
Trust and investment advisory fees
Income from mortgage banking services, net

Gain on other real estate owned and foreclosed assets activity, net

Other noninterest income
Total noninterest income
Noninterest expense:
Salary and employee benefits
Occupancy and equipment

Amortization of intangible assets
Merger related expenses
Other noninterest expenses
Total noninterest expense
Income before income taxes
Provision for income taxes
Net income	$	$	$	$
Other comprehensive income (loss):
Net unrealized gain (loss) securities available-for-sale		()		()

Other comprehensive income (loss)		()		()
Comprehensive income	$	$	$	$

Earnings per share:
Net income available to common stockholders	$	$	$	$
Basic	$	$	$	$
Diluted	$	$	$	$

$()$ $()$ ()() $()$ $()$ ) () ()() $()$

The accompanying notes are an integral part of these consolidated financial statements.

FIRSTSUN CAPITAL BANCORP

and Subsidiaries

Consolidated Statements of Cash Flows

For the six months ended June 30,

(Unaudited)


(In thousands)	2024	2023
Cash flows from operating activities:
Net income	$	$
Adjustments to reconcile income to net cash provided by operating activities:
Provision for credit losses
Depreciation and amortization on premises and equipment
Deferred tax expense
Amortization of net premium on securities
Accretion of net discount on acquired loans	()	()
Net change in deferred loan origination fees and costs	()	()
Amortization of core deposits and other intangible assets


Amortization of premium on acquired deposits	()	()
Accretion of discount on subordinated debt
Amortization of issuance costs on subordinated debt
Accretion of discount on convertible notes payable

Increase in cash surrender value of bank-owned life insurance	()	()

Impairment of other real estate owned and foreclosed assets
Federal Home Loan Bank stock dividends	()	()
Share-based compensation expense
Decrease in fair value of mortgage servicing rights


Net loss on disposal of premises and equipment
Net gain on other real estate owned and foreclosed assets activity	()

Net gain on sales of loans held-for-sale	()	()
Origination of loans held-for-sale	()	()
Proceeds from sales of loans held-for-sale

Changes in operating assets and liabilities:
Lease right-of-use assets	()	()
Accrued interest receivable	()	()


Prepaid expenses and other assets	()	()
Accrued interest payable	()
Accrued expenses and other liabilities
Deferred tax assets
Net cash provided by operating activities	$	$

The accompanying notes are an integral part of these consolidated financial statements.

FIRSTSUN CAPITAL BANCORP

and Subsidiaries

Consolidated Statements of Cash Flows (continued)

For the six months ended June 30,

(Unaudited)


(In thousands)	2024	2023
Cash flows from operating activities: (previous page)	$	$

Cash flows from investing activities:


Proceeds from maturities of held-to-maturity securities
Purchases of available-for-sale securities	()	()
Proceeds from sale or maturities of available-for-sale securities
Loan originations, net of repayments	()	()


Purchases of premises and equipment	()	()
Proceeds from the sale of premises and equipment

Proceeds from sales of other real estate owned and foreclosed assets

Proceeds from bank-owned life insurance
Purchases of restricted equity securities	()	()
Proceeds from the sale or redemption of restricted equity securities
Purchase of other investments	()	()
Proceeds from the sale or redemption of other investments
Net cash used in investing activities	()	()

Cash flows from financing activities:
Net change in deposits
Net change in securities sold under agreements to repurchase	()	()
Proceeds from Federal Home Loan Bank advances
Repayments of Federal Home Loan Bank advances	()	()





Proceeds from issuance of common stock, net of issuance costs


Net cash provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period	$	$

Supplemental disclosures of cash flow information:
Interest paid on deposits	$	$
Interest paid on borrowed funds	$	$
Cash paid for income taxes, net	$	$
Non-cash investing and financing activities:


Net change in unrealized gain (loss) on available-for-sale securities	$	$	()
Loan charge-offs	$	$

Loans transferred to other real estate owned and foreclosed assets	$	$
Premises and equipment transferred from other assets	$	$	()
Mortgage servicing rights resulting from sale or securitization of mortgage loans	$	$

The accompanying notes are an integral part of these consolidated financial statements.

FIRSTSUN CAPITAL BANCORP and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

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

NOTE 1 -

shares of common stock of FirstSun. Shareholders of HomeStreet, subject to other exceptions, will also be entitled to receive cash in lieu of fractional shares of common stock of FirstSun. On June 18, 2024, HomeStreet’s shareholders approved the Merger Agreement.

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

million shares of our common stock in a private placement for $ million.

Under the terms of the Upfront Securities Purchase Agreement, FirstSun is also obligated, concurrently with the closing of the proposed HomeStreet merger, to issue to the Wellington Funds, warrants (the “Warrants”) to purchase approximately million shares of FirstSun common stock at an initial exercise price of $ per share. The Warrants will carry a term of . In the event the proposed HomeStreet merger is not consummated, no Warrants will be issued.

Acquisition Finance Securities Purchase Agreement - Concurrently with its entry into the HomeStreet merger agreement, FirstSun entered into an acquisition finance securities purchase agreement (the “Acquisition Finance Securities Purchase Agreement,” and together with the Upfront Securities Purchase Agreement, as the “Investment Agreements”), dated January 16, 2024, with the Wellington Funds. Pursuant to the Acquisition Finance Securities Purchase Agreement, on the terms and subject to the conditions set forth therein, substantially concurrently with the closing of the merger, the institutional investors will invest an aggregate of $ million in exchange for the sale and issuance, at a purchase price of $ per share, of approximately million shares of FirstSun common stock.

Concurrently with its entry into the Amendment, on April 30, 2024, FirstSun entered into a First Amendment to the Acquisition Finance Securities Purchase Agreement (the “AFSPA Amendment”), with certain funds managed by Wellington Management (“Wellington”) and certain other institutional accredited investors (each, an “Additional Investor” and, collectively with Wellington, the “Investors”). Pursuant to the AFSPA Amendment, on the terms and subject to the conditions set forth therein, substantially concurrently with the closing of the Merger, the Additional Investors will invest an additional $ million, in exchange for the sale and issuance, at a purchase price of $ per share, approximately million shares of FirstSun common stock.

Acquisition Finance Securities Purchase Agreement Joinder - On June 14, 2024, FirstSun entered into a Joinder (the “AFSPA Joinder”) to the Acquisition Finance Securities Purchase Agreement, as amended on April 30, 2024 by the AFSPA Amendment, with certain funds managed by Castle Creek Capital Partners VIII. L.P., Maltese Capital Management, LLC, and Philadelphia Financial Management of San Francisco, LLC (collectively, the “Joinder Investors”). Pursuant to the AFSPA Joinder, on the terms and subject to the conditions set forth therein, substantially concurrently with the closing of the Merger, the Joinder Investors will invest an aggregate of $ million, in exchange for the sale and issuance, at a purchase price of $ per share, of approximately thousand shares of FirstSun common stock. As a result, FirstSun’s total equity capital raised in connection with the Merger increased from an aggregate capital raise of $ million to $ million, inclusive of the $ million raised pursuant to the Upfront Securities Purchase Agreement.

Registration Rights Agreements - In connection with the Upfront Securities Purchase Agreement, FirstSun and the Wellington Funds also entered into a registration rights agreement (the “Upfront Registration Rights Agreement”), dated January 16, 2024, pursuant to which FirstSun agreed to, among other things, provide customary resale registration rights with respect to the shares of our common stock obtained by the Wellington Funds pursuant to the Investment Agreements, including those issued upon exercise of the Warrants. As required under the Upfront Securities Purchase Agreement, on July 11, 2024, FirstSun registered its common stock securities under Section 12(b) of the securities Exchange Act of 1934 and listed its common stock on The Nasdaq Stock Market LLC(Nasdaq). Pursuant to Amendment No. 3 to our Stockholders’ Agreement, upon listing on Nasdaq, the provisions of the Stockholders’ Agreement restricting the transfer of shares and providing specific stockholders with pre-emptive rights, tag-along rights and rights of first refusal, automatically terminated. As a result, among other terminated provisions, the parties to the Stockholders’ Agreement are no longer restricted under the Stockholders’ Agreement from transferring their shares. Certain parties to the Stockholders’ Agreement retain corporate governance rights as described in the Stockholders’ Agreement, as amended.

In addition, the Acquisition Finance Securities Purchase Agreement contemplates that, in connection with the closing of the investments under the Acquisition Finance Securities Purchase Agreement, FirstSun will enter into a resale registration rights agreement with each additional institutional investor (the “Acquisition Finance

million to $ million plus reimbursement of FirstSun’s transaction fees and expenses;

•An amended definition of requisite regulatory approvals such that the approval of the OCC is replaced with the approval of the Texas Department of Banking and additional approvals of the Federal Reserve Board;

•FirstSun’s issuance of $ million of subordinated debt concurrently with the closing of the merger, the proceeds of which will be contributed to Sunflower Bank to further support Sunflower Bank’s capital:

•HomeStreet’s disposition of approximately $ million of certain commercial real estate loans upon closing of the merger, or as soon as reasonably practicable afterward.

Charter Amendment - In connection with the proposed merger, the holders of a majority of the voting power of FirstSun common stock executed a written consent approving and adopting an amendment to our certificate of incorporation (the “Charter Amendment”) which will increase the number of FirstSun’s authorized shares of capital stock from to , consisting of shares of FirstSun common stock, and shares of preferred stock and will become effective upon FirstSun’s filing the Charter Amendment with the Secretary of State of the State of Delaware. We plan to file the Charter Amendment prior to the closing of the proposed merger.

Use of Estimates -

Risks and Uncertainties -

Further information is presented in Note 1 5 - Commitments and Contingencies.

Accounting Pronouncements Recently Adopted -

million, a reduction in the allowance for credit losses on unfunded commitments of $ million, an increase to deferred tax assets of $ million, and a corresponding one-time cumulative reduction to retained earnings, net of tax, of $ million in the consolidated balance sheet as of January 1, 2023.

The adoption of this ASU, as it relates to available-for-sale debt securities and held-to-maturity debt securities, did not have a material impact on the consolidated financial statements as of January 1, 2023.

Recent Accounting Pronouncements Not Yet Adopted - ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” ASU 2023-07 expands segment disclosure requirements for public entities to require disclosure of significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. ASU 2023-07 is not expected to have a significant impact on our financial statements.

ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” ASU 2023-09 requires public business entities to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and to provide more details about the reconciling items in some categories if items meet a quantitative threshold. ASU 2023-09 also requires all entities to disclose income taxes paid, net of refunds, disaggregated by federal, state and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold, among other things. ASU 2023-09 is effective for us on January 1, 2026, although early adoption is permitted. ASU 2023-09 is not expected to have a significant impact on our financial statements.

NOTE 2 -

$ $()$ U.S. agency () Obligations of states and political subdivisions () Mortgage backed - residential () Collateralized mortgage obligations () Mortgage backed - commercial () Other debt Total available-for-sale$ $ $()$ Held-to-maturity:Obligations of states and political subdivisions$ $ $()$ Mortgage backed - residential () Collateralized mortgage obligations () Total held-to-maturity$ $ $()$ December 31, 2023Available-for-sale:U.S. treasury$ $ $()$ U.S. agency () Obligations of states and political subdivisions () Mortgage backed - residential () Collateralized mortgage obligations () Mortgage backed - commercial () Other debt () Total available-for-sale$ $ $()$ Held-to-maturity:Obligations of states and political subdivisions$ $ $()$ Mortgage backed - residential () Collateralized mortgage obligations () Total held-to-maturity$ $ $()$

There was allowance for credit losses related to our investment securities as of June 30, 2024.

As of June 30, 2024 and December 31, 2023, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.

$ $ $()$ $() U.S. agency () () Obligations of states and political subdivisions () () Mortgage backed - residential () () Collateralized mortgage obligations () () () Mortgage backed - commercial () () Total available-for-sale$ $()$ $()$ $() Held-to-maturity:Obligations of states and political subdivisions$ $()$ $()$ $()Mortgage backed - residential () ()Collateralized mortgage obligations () ()Total held-to-maturity$ $()$ $()$ $()

$ $ $()$ $() U.S. agency () () Obligations of states and political subdivisions () () Mortgage backed - residential () () Collateralized mortgage obligations () () Mortgage backed - commercial () () () Other debt () () Total available-for-sale$ $()$ $()$ $() Held-to-maturity:Obligations of states and political subdivisions$ $ $ $()$ $()Mortgage backed - residential () ()Collateralized mortgage obligations () ()Total held-to-maturity$ $ $ $()$ $()

$ Due after 1 year through 5 years Due after 5 years through 10 years Due after 10 years Total available-for-sale$ $ Held-to-maturity:Due after 1 year through 5 years$ $ Due after 5 years through 10 years Due after 10 years Total held-to-maturity$ $

Securities with a carrying value of $ and $ were pledged to secure public deposits, securities sold under agreements to repurchase and borrowed funds at June 30, 2024 and December 31, 2023, respectively.

Available-for-sale debt securities with a carrying value of $ and $ were designated in fair value hedges at June 30, 2024 and December 31, 2023, respectively. See Note 5 - Derivative Financial Instruments for further information.

There were proceeds from sales and calls of securities for the three and six months ended June 30, 2024 and 2023.

NOTE 3 -

$ Commercial real estate:Non-owner occupied Owner occupied Construction and land Multifamily Total commercial real estate Residential real estate Public finance Consumer Other Total loans$ $ Allowance for credit losses()()Loans, net of allowance for credit losses$ $

As of June 30, 2024 and December 31, 2023, we had net deferred fees, (costs), (premiums) and discounts of $ and $, respectively, on our loan portfolio.

Accrued interest receivable on loans totaled $ and $ at June 30, 2024 and December 31, 2023, respectively, and is included in accrued interest receivable in the accompanying consolidated balance sheets.

$ $ $ $ $ $ Provision (benefit) for credit losses() Loans charged off() () () ()Recoveries Balance, end of period$ $ $ $ $ $ $ 2023Allowance for credit losses:Balance, beginning of period$ $ $ $ $ $ $ Provision (benefit) for credit losses () () () Loans charged off() () ()Recoveries Balance, end of period$ $ $ $ $ $ $

$ $ $ $ $ $ Provision (benefit) for credit losses () Loans charged-off() () () ()Recoveries Balance, end of period$ $ $ $ $ $ $ 2023Allowance for credit losses:Balance, beginning of period$ $ $ $ $ $ $ Impact of adopting

ASC 326

() Provision (benefit) for credit losses () () Loans charged-off() () ()Recoveries Balance, end of period$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

$ $ $ $ Commercial real estate:Non-owner occupied Owner occupied Construction and land Total commercial real estate Residential real estate Public Finance Consumer Other Total loans$ $ $ $ $ December 31, 2023Commercial & industrial$ $ $ $ $ Commercial real estate:Non-owner occupied Owner occupied Construction and land Total commercial real estate Residential real estate % % % % % % % %

Modifications made to the loans presented in the tables above to borrowers experiencing financial difficulty for the three and six months ended June 30, 2024 and 2023 consisted of short-term principal deferrals, short-term principal and interest deferrals, or reductions in the contractual interest rate.

There were commitments to lend additional funds to these borrowers at June 30, 2024.

The financial effects of our loan modifications made to borrowers experiencing financial difficulty during the three and six months ended June 30, 2024 and 2023 were not significant.

$ $ $ $ $ Commercial real estate:Owner occupied Total loans$ $ $ $ $ $

NOTE 4 -

$ Federal Home Loan Mortgage Corporation Government National Mortgage Association Federal Home Loan Bank Other Total$ $ $ $ $ Additions:Servicing resulting from transfers of financial assets Changes in fair value:Due to changes in valuation inputs or assumptions used in the valuation model Changes in fair value due to pay-offs, pay-downs, and runoff()()()()Balance, end of period$ $ $ $

% % %Total prepayment speeds % % %Cost of servicing each loan

$/per loan

$ $ $ Late and ancillary fees Total$ $ $ $

NOTE 5 -

2028 - 2036$ $ Derivative financial instruments not designated as hedging instruments:Assets:Interest Rate Products2024 - 2037$ $ Other2025$ $ Liabilities:Interest Rate Products2024 - 2037$ $ Other2028$ $ December 31, 2023Derivative financial instruments designated as hedging instruments:Assets:Interest Rate Products2028 - 2036$ $ Derivative financial instruments not designated as hedging instruments:Assets:Interest Rate Products2024 - 2037$ $ Other2025$ $ Liabilities:Interest Rate Products2024 - 2037$ $ Other2028$ $ $ $ $ Recorded loss on banking derivative liabilities$()$()$()$()

For the three months ended June 30, 2024 and 2023, our banking derivative financial instruments not designated as hedging instruments generated fee income of $ and $, respectively. For the six months ended June 30, 2024 and 2023 our banking derivative financial instruments not designated as hedging instruments generated fee income of $, and $, respectively.

The carrying amount of hedged loans receivable as of June 30, 2024 and December 31, 2023 was $ and $, respectively. The cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged loans receivable as of June 30, 2024 and December 31, 2023 was $() and $(), respectively. The fair value hedging adjustment included in other noninterest income for the three months ended June 30, 2024 and 2023 was $ and $(), respectively. The fair value hedging adjustment included in other noninterest income for the six months ended June 30, 2024 and 2023 was $() and $, respectively.

and $, respectively. The cumulative amount of fair value hedging adjustment included in the amortized cost amount of the hedged available-for-sale debt securities as of as of June 30, 2024 and December 31, 2023 was $(), and $(), respectively. The fair value hedging adjustment included in interest income for the three months ended June 30, 2024 and 2023 was $() and $(), respectively. The fair value hedging adjustment included in interest income for the six months ended June 30, 2024 and 2023 was $() and $(), respectively.

Credit-risk-related Contingent Features:

We have agreements with each of our derivative counterparties that contain a provision where if we either default or are capable of being declared in default on any of our indebtedness, then we could also be declared in default on our derivative obligations.

We also have agreements with our derivative counterparties that contain a provision where if we fail to maintain our status as a well-capitalized institution, then our derivative counterparties have the right but not the obligation to terminate existing swaps. As of June 30, 2024 and December 31, 2023, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $ and $, respectively. As of June 30, 2024 and December 31, 2023, we have minimum collateral posting thresholds with our derivative counterparties and have posted collateral of $ and $, respectively. If we had breached any of these provisions at June 30, 2024, we could have been required to settle our obligations under the agreements at their termination value of $.

Mortgage Banking Derivative Financial Instruments:

$ Forward MBS trades2024$ $ Interest rate lock commitments (IRLC)2024$ $ December 31, 2023Derivative financial instrumentsAssets:Forward MBS trades2024$ $ Interest rate lock commitments (IRLC)2024$ $ Liabilities:Forward MBS trades2024$ $ )$()$()$()Recorded gain (loss) on mortgage banking derivative liabilities$ $ $ $()

NOTE 6 -

$ Interest-bearing deposit accounts:Interest-bearing demand accounts Savings accounts and money market accounts NOW accounts Certificate of deposit accounts:Less than $100 $100 through $250 Greater than $250 Total interest-bearing deposit accounts Total deposits$ $ $ $ $ Savings accounts and money market accounts NOW accounts Certificate of deposit accounts Total interest-bearing deposit accounts$ $ $ $ 2025 2026 2027 2028 2029 Thereafter Total certificate of deposit accounts$

NOTE 7 -

$ Average daily balance during the period$ $ Average interest rate during the period % %Maximum month-end balance during the period$ $ Weighted average interest rate at period-end % %

At June 30, 2024 and December 31, 2023, such agreements were secured by investment and mortgage-related securities with an approximate carrying amount of $ and $, respectively. Pledged securities are maintained by safekeeping agents at the direction of the Bank. Our agreements to repurchase generally mature daily, and they are considered to be in an overnight and continuous position.

NOTE 8 -

N/AN/A$ %Fixed rate term advances

% - %

% N/A$ $

Our FHLB advances are typically considered short-term borrowings with maturities less than one year and are used to manage liquidity as needed. Maturing advances are replaced by drawing on available cash, making additional borrowings or through increased customer deposits. The advances were collateralized by $ and $ of loans pledged to the FHLB as of June 30, 2024 and December 31, 2023, respectively.

As of June 30, 2024 and December 31, 2023, the Bank had total borrowing capacity with the FHLB that is based on qualified collateral lending values of $ and $, respectively. Our additional borrowing availability with the FHLB at June 30, 2024 was $. These borrowings can be in the form of additional term advances or a line-of-credit.

FRB advances

We also had a $ line-of-credit with the FRB. The agreement bears interest at the Fed Funds target rate plus % and is secured by $ of investment securities and loans pledged to the FRB as collateral. amounts were drawn on the line-of-credit as of June 30, 2024.

Other borrowings

We have lines-of-credit with certain other financial institutions totaling $ as of June 30, 2024. amounts were drawn on these lines-of-credit at June 30, 2024.

subordinated notes. The notes pay interest at a fixed rate of % through June 30, 2025 and subsequently, until maturity, pay interest at a floating rate of three month term SOFR plus %, reset quarterly. Interest is payable on July 1 and January 1 of each year. Such notes are due on July 1, 2030. The notes are not redeemable within the first of issuance, except under certain very limited conditions. After , we may redeem the notes at our discretion. We incurred and capitalized $ of costs related to the issuance of the subordinated notes. The amortization associated with the capitalized issuance costs is not significant for the periods presented.

Subordinated Note - 2022

On January 13, 2022, we issued a subordinated note totaling $. The note pays interest at a fixed rate of % through January 15, 2027 and subsequently, until maturity, pays interest at a floating rate of three month term SOFR plus %, reset quarterly. Interest is payable on July 15 and January 15 of each year. Such note is due on January 15, 2032. The note is not redeemable within the first of issuance, except under certain very limited conditions. After , we may redeem the note at our discretion. We incurred and capitalized $ of costs related to the issuance of the subordinated note. The amortization associated with the capitalized issuance costs is not significant for the periods presented.

Trust preferred securities

We have issued $ in trust preferred securities through a special-purpose trust, New Mexico Banquest Capital Trust I (“NMBCT I”). In addition, we have issued $ in trust preferred securities through a special purpose trust, New Mexico Banquest Capital Trust II (“NMBCT II”, and together with NMBCT I, collectively referred to as “NMBCT Trusts”). Interest is payable quarterly at a rate of three-month term SOFR plus % (% and % as of June 30, 2024 and 2023, respectively) for the trust preferred securities issued through NMBCT I and at a rate of three-month term SOFR plus % (% and % as of June 30, 2024 and 2023, respectively) for the trust preferred securities issued through NMBCT II.

This subordinated debt of $ was originally recorded at a discount of $. The accretion associated with the fair value discount is not significant for the periods presented.

The Parent Company fully and unconditionally guarantees the obligations of the NMBCT Trusts on a subordinated basis. The trust preferred securities issued through the NMBCT Trusts are mandatorily redeemable upon the maturity of the debentures on December 19, 2032 and November 23, 2034, respectively, and are optionally redeemable, in part or in whole, by the Parent Company at each quarterly interest payment date. The Parent Company owns all of the outstanding common securities of the NMBCT Trusts, which have an aggregate liquidation valuation amount of $ and is recorded in prepaid expenses and other assets on the consolidated balance sheet. The NMBCT Trusts are considered variable interest entities. Since the Parent Company is not the primary beneficiary of the NMBCT Trusts, the financial statements of the NMBCT Trusts are not included in our consolidated financial statements.

NOTE 9 -

$ $ $ Weighted Average SharesWeighted average common shares outstanding Effect of dilutive securitiesStock-based awards Weighted average diluted common shares Earnings per common shareBasic earnings per common share$ $ $ $ Effect of dilutive securitiesStock-based awards()()()()Diluted earnings per common share$ $ $ $

Convertible notes payable for shares of common stock were not considered in computing diluted earnings per share for the three and six months ended June 30, 2023, because they were antidilutive.

For information regarding the common shares and warrants to be issued upon the closing of our proposed merger with HomeStreet see Note 1 - Organization and Basis of Presentation.

NOTE 10 -

shares of preferred stock authorized, $ par value, of which were issued or outstanding, respectively.

As of June 30, 2024 and December 31, 2023, the Company has shares of common stock authorized, $ par value, of which and shares were issued and outstanding, respectively.

For potential changes to our authorized shares as a result of our proposed merger with HomeStreet, see Charter Amendment in Note 1 - Organization and Basis of Presentation.

Upfront Securities Purchase Agreement

On January 16, 2024 in accordance with the Upfront Securities Purchase Agreement, we issued we shares of our common stock in a private placement for $ million. For additional details see Upfront Securities Purchase Agreement in Note 1 - Organization and Basis of Presentation.

Equity Incentive Plans:

2017 Equity Incentive Plan

The 2017 Equity Incentive Plan (the “2017 Plan”) provides for the grant of stock options, stock appreciation rights, restricted stock and other stock awards to its employees, directors and consultants for up to shares of FirstSun common stock in the aggregate.

$ Exercised() Outstanding, end of period $ Options vested or expected to vest $ Options exercisable, end of period $

There were grants or forfeitures during the six months ended June 30, 2024:

At June 30, 2024, there was $ of total unrecognized compensation cost related to non-vested stock options. The unrecognized compensation cost at June 30, 2024 is expected to be recognized over the next . At June 30, 2024 the intrinsic value of the stock options was $.

2021 Equity Incentive Plan

The FirstSun Capital Bancorp 2021 Equity Incentive Plan (the “2021 Plan”) provides for the grant of stock options, stock appreciation rights, restricted stock and other stock awards to its employees, directors and consultants for up to shares of FirstSun common stock in the aggregate. Additionally, we established the FirstSun Capital Bancorp Long-Term Incentive Plan (“LTIP”), which became effective April 1, 2022. The LTIP is intended to qualify as a “top-hat” plan under ERISA that is unfunded and provides benefits only to a select group of management or highly compensated employees of FirstSun or the Bank.

In March 2024, we granted special restricted stock awards of shares and, on the closing date of the Merger, will grant an additional shares, totaling shares to certain officers of the Company (including those formerly with HomeStreet) for (i) retention purposes and (ii) to incentivize them in their efforts to work towards both a timely and efficient consummation of the Merger and a successful post-closing integration of the two companies. If the Merger does not close, the awards will be cancelled. Because the special restricted stock awards are contingent upon the closing of the Merger, no expense has been incurred during the three or six months ended June 30, 2024. These awards will vest one-third per year over a period, provided that the officer continues to provide services to the Company on the applicable vesting date, with accelerated vesting upon death, disability, or termination by the Company under certain conditions.

In March 2024, we issued shares of restricted stock that will fully vest in March 2025. In May 2023, we issued shares of restricted stock, shares were forfeited during 2024 prior to vesting, the remaining were fully vested in May 2024. In May 2022, we issued shares of restricted stock that were fully vested in May 2023. At June 30, 2024, there was $ of total unrecognized compensation cost related to the non-vested restricted stock.

In April 2024, we issued performance-based restricted stock under the LTIP that, subject to the achievement of performance conditions, will fully vest in April 2027. At June 30, 2024, we determined it is probable that shares will be issued based upon the probability that the performance conditions will be achieved. At June 30, 2024, there was $ of total unrecognized compensation cost related to the non-vested restricted stock granted on these probable shares.

In April 2023, we issued performance-based restricted stock under the LTIP that, subject to the achievement of performance conditions, will fully vest in April 2026. At June 30, 2024, we determined it is probable that shares will be issued based upon the probability that the performance conditions will be achieved. At June 30, 2024, there was $ of total unrecognized compensation cost related to the non-vested restricted stock granted on these probable shares.

In April 2022, we issued performance-based restricted stock under the LTIP that, subject to the achievement of performance conditions, will fully vest in April 2025. At June 30, 2024, we determined it is probable that shares will be issued based upon the probability that the performance conditions will be achieved. At June 30, 2024,

of total unrecognized compensation cost related to the non-vested restricted stock granted on these probable shares.

For the three months ended June 30, 2024 and 2023, we recorded total compensation cost from the 2017 and 2021 Plans of $ and $, respectively. For the six months ended June 30, 2024 and 2023, we recorded total compensation cost from the 2017 and 2021 Plans of $ and $, respectively.

Acquired Equity Incentive Plans

In conjunction with a previous acquisition, we assumed certain options that had been granted under such option plans. All assumed options were fully vested and exercisable. further options will be granted under the plans.

$ Exercised() Outstanding, vested, and exercisable, end of period $

At June 30, 2024 the intrinsic value of the stock options was $.

NOTE 11 -

$ $ $ Effective tax provision rate % % % %

We do not believe that we have any material uncertain tax positions, and do not expect any material changes during the next twelve months.

NOTE 12 -

%$ %N/AN/ATier 1 risk-based capital to risk-weighted assets:$ %$ %N/AN/ACommon Equity Tier 1 (CET 1) to risk-weighted assets:$ %$ %N/AN/ATier 1 leverage capital to average assets:$ %$ %N/AN/ADecember 31, 2023Total risk-based capital to risk-weighted assets:$ %$ %N/AN/ATier 1 risk-based capital to risk-weighted assets:$ %$ %N/AN/ACommon Equity Tier 1 (CET 1) to risk-weighted assets:$ %$ %N/AN/ATier 1 leverage capital to average assets:$ %$ %N/AN/A

%$ %$ %Tier 1 risk-based capital to risk-weighted assets:$ %$ %$ %Common Equity Tier 1 (CET 1) to risk-weighted assets:$ %$ %$ %Tier 1 leverage capital to average assets:$ %$ %$ %December 31, 2023Total risk-based capital to risk-weighted assets:$ %$ %$ %Tier 1 risk-based capital to risk-weighted assets:$ %$ %$ %Common Equity Tier 1 (CET 1) to risk-weighted assets:$ %$ %$ %Tier 1 leverage capital to average assets:$ %$ %$ %

NOTE 13 -

$ $ $ Loans held-for-sale Mortgage servicing rights Derivative financial instruments - assets Derivative financial instruments - liabilities () ()Total$ $ $ $ December 31, 2023Available-for-sale securities$ $ $ $ Loans held-for-sale Mortgage servicing rights Derivative financial instruments - assets Derivative financial instruments - liabilities () ()Total$ $ $ $

For further details on our Level 3 inputs related to MSRs, see Note 4 - Mortgage Servicing Rights.

$ $ $ () ()()Purchases, issuances, sales and settlements:Issuances Balance, end of period$ $ $ $

$ Commercial real estate Residential real estate Public finance Other Total collateral dependent loans$ $ Other real estate owned and foreclosed assets, net:Commercial real estate$ $ Residential real estate Total other real estate owned and foreclosed assets, net:$ $

The fair value of the financial assets in the table above utilize the market approach valuation technique, with discount adjustments for differences between comparable sales.

$ $ $ $ Securities held-to-maturity Loans (excluding collateral dependent loans at fair value) Restricted equity securities Accrued interest receivable Liabilities:Deposits (excluding demand deposits)$ $ $ $ $ Securities sold under agreements to repurchase FHLB advances Subordinated debt, net Accrued interest payable December 31, 2023Assets:Cash and cash equivalents$ $ $ $ $ Securities held-to-maturity Loans (excluding collateral dependent loans at fair value) Restricted equity securities Accrued interest receivable Liabilities:Deposits (excluding demand deposits)$ $ $ $ $ Securities sold under agreements to repurchase FHLB advances Subordinated debt, net Accrued interest payable

NOTE 14 -

operating segments: Banking and Mortgage Operations. Corporate represents costs not allocated to the operating segments. Operating segments are defined as components of an enterprise that engage in business activity from which revenues are earned and expenses are incurred for which discrete financial information is available that is evaluated regularly by executive management in deciding how to allocate resources and in assessing performance. Operating segments have been determined based on the products and services offered and reflect the manner in which financial information is currently evaluated by management. Each segment operates under the same banking charter, but is reported on a segmented basis for this report. 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.

$ $()$ Provision for credit losses Noninterest income:Service charges on deposit accounts () Credit and debit card fees Trust and investment advisory fees (Loss) income from mortgage banking services, net() Other noninterest income Total noninterest income Noninterest expense:Salary and employee benefits Occupancy and equipment Other noninterest expenses Total noninterest expense Income (loss) before income taxes$ $ $()$ Other InformationDepreciation expense$ $ $ $ Identifiable assets$ $ $ $

$ $()$ Provision for credit losses Noninterest income:Service charges on deposit accounts Credit and debit card fees Trust and investment advisory fees (Loss) income from mortgage banking services, net() Other noninterest income Total noninterest income Noninterest expense:Salary and employee benefits Occupancy Other noninterest expenses Total noninterest expense Income (loss) before income taxes$ $ $()$ Other InformationDepreciation expense$ $ $ $ Identifiable assets$ $ $ $

Significant segment totals are reconciled to the financial statements as follows for the six months ended June 30,:


	Banking	Mortgage Operations	Corporate		Total Segments
2024
Summary of Operations
Net interest income (expense)	$	$	$	()	$

Provision (benefit) for credit losses		()

Noninterest income:
Service charges on deposit accounts		()
Credit and debit card fees
Trust and investment advisory fees
(Loss) income from mortgage banking services, net	()
Other noninterest income
Total noninterest income

Noninterest expense:
Salary and employee benefits
Occupancy and equipment
Other noninterest expenses
Total noninterest expense

Income (loss) before income taxes	$	$	$	()	$

Other Information
Depreciation expense	$	$	$		$
Identifiable assets	$	$	$		$


	Banking	Mortgage Operations		Corporate		Total Segments
2023
Summary of Operations
Net interest income (expense)	$	$		$	()	$

Provision for credit losses

Noninterest income:
Service charges on deposit accounts
Credit and debit card fees
Trust and investment advisory fees
(Loss) income from mortgage banking services, net	()
Other noninterest income
Total noninterest income

Noninterest expense:
Salary and employee benefits
Occupancy
Other noninterest expenses
Total noninterest expense

Income (loss) before income taxes	$	$	()	$	()	$

Other Information
Depreciation expense	$	$		$		$
Identifiable assets	$	$		$		$

NOTE 15 -

and $ and variable-rate loans totaling $ and $, respectively. The fixed-rate loan commitments have interest rates ranging from % to % at June 30, 2024 and December 31, 2023, and maturities ranging from month to years at June 30, 2024 and from month to years at December 31, 2023.

Standby letters of credit

Standby letters of credit are conditional commitments to guarantee the performance of a customer to a third-party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Since many of the loan commitments and letters of credit expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on our credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, owner occupied real estate, and/or income-producing commercial properties. As of June 30, 2024 and December 31, 2023, our standby letters of credit commitment totaled $ and $, respectively.

MPF Master Commitments

The Bank has executed MPF Master Commitments (Commitments) with the FHLB to deliver mortgage loans and to guarantee the payment of any realized losses that exceed the FHLB’s first loss account for mortgages delivered under the Commitments. The Bank receives credit enhancement fees from the FHLB for providing this guarantee and continuing to manage the credit risk of the MPF Program mortgage loans. As of June 30, 2024 and December 31, 2023, the Bank considered the amount of any of its liability for the present value of the credit enhancement fees less any expected losses in the mortgages delivered under the Commitments to be immaterial, and has not recorded a liability and offsetting receivable. As of June 30, 2024 and December 31, 2023, the maximum potential amount of future payments that the Bank would have been required to make under the Commitments was $ and $, respectively. Under the Commitments, the Bank agrees to service the loans and therefore, is responsible for any necessary foreclosure proceedings. Any future recoveries on any losses would not be paid by the FHLB under the Commitments. The Bank has not experienced any material losses under these guarantees.

Contingencies

We generally sell loans to investors without recourse; therefore, the investors have assumed the risk of loss or default by the borrower. However, we are usually required by these investors to make certain standard representations and warranties relating to credit information, loan documentation, and collateral. To the extent that we do not comply with such representations, we may be required to repurchase the loans or indemnify these investors for any losses from borrower defaults. We establish reserves for potential losses related to these representations and warranties if deemed appropriate and such reserves would be recorded within accrued expenses and other liabilities. In assessing the adequacy of the reserve, we evaluate various factors including actual write-offs during the period, historical loss experience, known delinquent and other problem loans, and economic trends and conditions in the industry.

From time to time, we are a defendant in various claims, legal actions, and complaints arising in the ordinary course of business. We periodically review all outstanding pending or threatened legal proceedings and determine if such matters will have an adverse effect on our business, financial condition, results of operations or cash flows.

million from RESI. The complaint sought compensatory, exemplary, statutory and punitive damages, as well as payment of RESI’s legal fees and expenses. On January 18, 2024, the jury awarded RESI approximately $ million which included punitive damages. Judgment on the aforementioned jury award was formally entered on July 25, 2024. A supplemental award of RESI’s legal fees will likely be entered by January 1, 2025. We believe the judgment will be covered by insurance; therefore, such outcome will not have a material financial impact on the Bank.

We establish reserves for contingencies, including legal proceedings, when potential losses become probable and can be reasonably estimated. While the ultimate resolution of any legal proceedings, including the matters described above, cannot be determined at this time, based on information presently available, and after consultation with legal counsel, management believes that the ultimate outcome in these above legal proceedings, either individually or in the aggregate, will not have a material adverse effect on our financial statements. It is possible, however, that future developments could result in an unfavorable outcome for or resolution of any of these proceedings, which may be material to our results of operations for a given fiscal period.

NOTE 16 -

to years. Certain lease arrangements contain extension options which typically range from to years at the then fair market rental rates. As these extension options are not generally considered reasonably certain of exercise, they are not included in the lease term. $ Accumulated amortization()()ROU asset, net (included in prepaid expenses and other assets in our consolidated balance sheets)$ $ Lease liability (included in accrued expenses and other liabilities in our consolidated balance sheets)$ $ Weighted Average Remaining Life - Operating LeasesWeighted Average Rate - Operating Leases % % 2025 2026 2027 2028 2029 Thereafter Total undiscounted operating lease liability Imputed interest Total operating lease liability included in the accompanying balance sheet$

Total lease expense for three months ended June 30, 2024 and 2023 was $ and $, respectively. Total lease expense for the six months ended June 30, 2024 and 2023 was $ and $, respectively.

$ $ $ Short-term leases 202420232023%8.51 %15.81 %13.89 %%12.46 %10.56 %11.13 %%11.32 %9.33 %9.94 %(618)— — 1.11 $1.43 $2.14 $4.08

Segments

Banking

Three months ended June 30, 2024 and 2023

Income before income taxes decreased $4.9 million to $32.0 million for the second quarter of 2024, from $36.9 million for the same period in 2023. The period over period decrease was primarily due to a decrease in net interest income and an increase in salary and employee benefits partially offset by a decrease in provision for credit losses. Net interest income decreased $4.0 million to $69.7 million for the second quarter of 2024, compared to $73.6 million for the same period in 2023, primarily due to an increase in the cost of interest-bearing deposits amidst the elevated interest rate environment and a shift in mix to certificate of deposits. Salary and employee benefits increased $4.8 million to $31.0 million for the second quarter of 2024, from $26.2 million for the same period in 2023, primarily due to increased headcount, including the hiring of C&I bankers. Provision for credit losses decreased $3.5 million to $0.2 million for the second quarter of 2024, from $3.6 million for the same period in 2023. Identifiable assets for our Banking segment remained largely unchanged at $6.9 billion at June 30, 2024 and 2023.

Six months ended June 30, 2024 and 2023

Income before income taxes decreased $27.5 million to $48.1 million for the six months ended June 30, 2024, from $75.7 million for the same period in 2023. The period over period decrease was primarily due to a decrease in net interest income, an increase in provision for credit losses, and an increase in salary and employee benefits. Net interest income decreased $8.9 million to $138.2 million for the six months ended June 30, 2024 compared to $147.1 million for the same period in 2023, primarily due to an increase in the cost of interest-bearing deposits amidst the elevated interest rate environment and a shift in mix to certificate of deposits. Provision for credit losses increased $12.0 million to $18.0 million for the six months ended June 30, 2024, compared to $6.1 million for the same period in 2023, primarily due to a $17.4 million charge-off of a specific customer in our C&I portfolio. Salary and employee benefits increased $6.8 million to $60.8 million for the six months ended June 30, 2024, compared to $54.0 million for the same period in 2023, primarily due to increased headcount, including the hiring of C&I bankers.

Mortgage Operations

Three months ended June 30, 2024 and 2023

Income before income taxes increased $0.7 million to $1.7 million for the second quarter of 2024, compared to $1.0 million for the same period in 2023. The period over period increase was primarily due to an increase in net interest income partially offset by an increase in salary and employee benefits. Net interest income increased $3.0 million to $4.5 million for the second quarter of 2024, compared to $1.5 million for the same period in 2023, primarily due to higher average balance and higher average yield on residential real estate loans. Salary and employee benefits increased $1.2 million to $8.4 million for the second quarter of 2024, compared to $7.3 million for the same period in 2023, primarily due to higher levels of variable compensation associated with an increase in mortgage loan originations. Identifiable assets for our Mortgage Operations segment grew by $0.2 billion to $1.0 billion at June 30, 2024 from $0.8 billion at June 30, 2023. The growth in identifiable assets was primarily driven by organic growth in our residential mortgage portfolio.

Six months ended June 30, 2024 and 2023

Income (loss) before income taxes increased $6.2 million to $4.8 million for the six months ended June 30, 2024, compared to a loss of $1.4 million for the same period in 2023. The period over period increase was primarily due to an increase in net interest income and an increase in revenue from mortgage banking services, partially offset by an increase in salary and employee benefits. Net interest income increased $4.6 million to $8.0 million for the six months ended June 30, 2024, compared to $3.4 million for the same period in 2023, primarily due to higher average balance and higher average yield on residential real estate loans. Revenue from mortgage banking services increased $2.0 million to $21.7 million for the six months ended June 30, 2024, compared to $19.7 million for the same period in 2023, primarily due to an increase 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. Salary and employee benefits increased $1.6 million to $15.6 million for the six months ended June 30, 2024, compared to $14.0 million for the same period in 2023, primarily due to higher levels of variable compensation associated with an increase in mortgage loan originations.

Critical Accounting Estimates

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Our accounting and reporting estimates are in accordance with generally accepted accounting principles, or “U.S. GAAP,” and conform to general practices within the banking industry. Estimates that are susceptible to significant changes include accounting for the allowance for credit losses and fair value measurements of MSRs, both of which require significant judgments by management. Actual results could result in material changes to our consolidated financial condition or consolidated results of operations.

Certain policies inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. We have identified the determination of the allowance for credit losses and fair value measurements 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 we discuss them directly with the audit committee of our board of directors at least annually.

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 economics, database managers and operational engineers with a history of producing monthly economic forecasts for over 25 years.

Management has currently set an initial forecast period (“reasonable and supportable period”) of four years and a reversion period of one year, utilizing a straight-line approach and reverting back to the historical macroeconomic mean. After the reversion period, a historical loss forecast period covering the remaining contractual life, adjusted for prepayments, is used based on changes in key historical economic variables during representative historical expansionary and recessionary periods. Changes in economic forecasts impact the probability of default (“PD”), loss-given default (“LGD”), and exposure at default (“EAD”) for each instrument, and therefore influence the amount of future cash flows for each instrument that management does not expect to collect.

Further, management periodically considers the need for qualitative adjustments to the ACL. Qualitative adjustments may be related to and include, but not limited to, factors such as the following: (i) management’s assessment of economic forecasts used in the model and how those forecasts align with management’s overall evaluation of current and expected economic conditions; (ii) organization specific risks such as credit concentrations, collateral specific risks, nature, and size of the portfolio and external factors that may ultimately impact credit quality, and (iii) other limitations associated with factors such as changes in underwriting and loan resolution strategies, among others. The qualitative factors applied on June 30, 2024, and the importance and levels of the qualitative factors applied, may change in future periods depending on

the level of changes to items such as the uncertainty of economic conditions and management’s assessment of the level of credit risk within the loan portfolio as a result of such changes, compared to the amount of ACL calculated by the model. The evaluation of qualitative factors is inherently imprecise and requires significant management 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 the ACL is further discussed in “Note 1 - Basis of Presentation, Description of Business and Summary of Significant Accounting Policies” in our 2023 Annual Report.

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 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

The following table sets forth components of our results of operations:


	As of and for the three months ended June 30,								As of and for the six months ended June 30,
	2024				2023
73,835			$	143,705			$	147,952
		17,700				7,782
		46,082				43,221
		125,703				114,309
		46,384				69,082
		9,528				14,795
		36,856				54,287

1.11			$	1.32			$	2.14
%		0.95		%		1.46		%
%		7.62		%		13.46		%
%		4.00		%		4.31		%
%		4.07		%		4.39		%
%		66.23		%		59.79		%
%		24.28		%		22.61		%
(1) See section entitled “Non-GAAP Financial Measures and Reconciliations” for information regarding non-GAAP financial measures and a reconciliation to the most comparable GAAP equivalent.
(2) Total revenue is net interest income plus noninterest income.

General

Our results of operations depend significantly on net interest income, which is the difference between interest income on interest-earning assets, consisting primarily of interest income on loans and investment securities and interest expense on interest-bearing liabilities, consisting primarily of deposits and borrowings. Our results of operations are also dependent on our generation of noninterest income, consisting primarily of income from mortgage banking services, service charges on deposit accounts, trust and investment advisory fees and credit and debit card fees. Other factors contributing to our results of operations include our provisions for credit losses, income taxes, and noninterest expenses, such as salaries and employee benefits, occupancy and equipment, amortization of intangible assets and other operating costs.

Net Interest Income

Net interest income, representing interest income less interest expense, is a significant contributor to our revenues and earnings. We generate interest income from interest and dividends on interest-earning assets, which are principally comprised of loans and investment securities. We incur interest expense from interest owed or paid on interest-bearing liabilities, including interest-bearing deposits, FHLB advances and other borrowings. Net interest income and margin are shaped by the characteristics of the underlying products, including volume, term and structure of each product. We measure and monitor yields on our loans and other interest-earning assets, the costs of our deposits and other funding sources, our net interest spread and our net interest margin. Net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities. Net interest margin is calculated as net interest income divided by average interest-earning assets.

Interest earned on our loan portfolio is the largest component of our interest income. Our loan portfolios are presented at the principal amount outstanding net of deferred origination fees and unamortized discounts and premiums. Interest income is recognized based on the principal balance outstanding and the stated rate of the loan. Loan origination fees and certain direct origination costs are capitalized and recognized as an adjustment of the yield on the related loan. Non-PCD loans acquired are initially recorded at fair value and the resulting discount or premium are recognized as an adjustment of the yield on the related loans.

Our net interest income can be significantly influenced by a variety of factors, including overall loan demand, economic conditions, credit risk, the amount of non-earning assets including nonperforming loans and OREO, the amounts of and 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.

Three months ended June 30, 2024 and 2023

Our net interest income was $72.9 million for the second quarter of 2024, a decrease of $0.9 million, or 1.3%, compared to the same period in 2023. Interest income on loans increased by $9.9 million for the second quarter of 2024, compared to the same period in 2023. Interest income on investment securities increased by $0.5 million for the second quarter of 2024, compared to the same period in 2023. Interest expense from total interest-bearing liabilities increased by $13.4 million for the second quarter of 2024, compared to the same period in 2023.

Total average loans grew to $6.4 billion at June 30, 2024, an increase of $0.2 billion or 2.6%, compared to June 30, 2023, due to organic growth in our loan portfolio. Yield on loans increased 46 basis points for the second quarter of 2024, compared to the same period in 2023, primarily due to the elevated interest rate environment for the second quarter of 2024 as compared to the lower, yet rising interest rate environment for the second quarter of 2023, its impact on variable rate loans, and higher yields on new originations.

Average interest-bearing liabilities increased $0.3 billion, or 6.3%, for the second quarter of 2024, compared to the same period in 2023, primarily to support the growth in our loan portfolio. Average interest-bearing deposits increased $0.7 billion, or 15.7%, for the second quarter of 2024, compared to the same period in 2023. Average FHLB borrowings decreased $0.3 billion, or 72.3%, for the second quarter of 2024, compared to the same period in 2023.

Our net interest margin was 4.02% for the second quarter of 2024, compared to 4.24% for the same period in 2023, a decrease of 22 basis points. We experienced a 45 basis point increase in yield from earning assets while our total cost of funds increased by 90 basis points, for the second quarter of 2024 as compared to the same period in 2023. In the second quarter of 2024, compared to the same period in 2023, we saw the level of increase in our total cost of funds exceed the level of increase in yield from earning assets primarily as a result of the mix shift within our deposit base to certificates of deposits and the overall rising deposit cost across all deposit products.

Six months ended June 30, 2024 and 2023

Our net interest income was $143.7 million for the six months ended June 30, 2024, a decrease of $4.2 million, or 2.9%, compared to the same period in 2023. Interest income on loans increased by $23.5 million for the six months ended June 30, 2024, compared to the same period in 2023. Interest income on investment securities increased by $0.9 million for the six months ended June 30, 2024, compared to the same period in 2023. Interest expense from total interest-bearing liabilities increased by $31.9 million for the six months ended June 30, 2024, compared to the same period in 2023.

Total average loans grew to $6.3 billion at June 30, 2024, an increase of $0.2 billion, compared to June 30, 2023, primarily due to organic growth in our loan portfolios. Yield on loans increased 52 basis points for the six months ended June 30, 2024, compared to the same period in 2023, primarily due to the elevated interest rate environment for the six months ended June 30, 2024 as compared to the lower, yet rising interest rate environment for the same period in 2023, its impact on variable rate loans, and higher yields on new originations.

Average interest-bearing liabilities increased $0.4 billion, or 7.7%, for the six months ended June 30, 2024, compared to the same period in 2023. Average interest-bearing deposits increased $0.7 billion, or 17.4%, for the six months ended June 30, 2024, compared to the same period in 2023. Average FHLB borrowings decreased $0.3 billion, or 73.9%, for the six months ended June 30, 2024, compared to the same period in 2023.

Our net interest margin was 4.00% for the six months ended June 30, 2024, compared to 4.31% for the same period in 2023, a decrease of 31 basis points. We experienced a 52 basis point increase in yield from earning assets and our total cost of funds increased by 110 basis points for the six months ended June 30, 2024, compared to the same period in 2023. In the six months ended June 30, 2024, we saw the level of increase in our total cost of funds exceed the level of increase in yield from earning assets primarily as a result of the mix shift within our deposit base to certificates of deposits and the overall rising deposit cost across all deposit products.

The following tables set forth information related to our average balance sheet, average yields on assets, and average costs of liabilities for the periods presented. We derived these yields by dividing income or expense by the average balance of the corresponding assets or liabilities. We derived average balances from the daily balances throughout the periods indicated.

As of and for the three months ended June 30,:


	2024							2023
(In thousands)	Average Balance		Interest			Average Yield/Rate		Average Balance		Interest			Average Yield/Rate
Interest Earning Assets

Loans (1)	6,384,709		105,184			6.59	%	6,220,833		95,320			6.13	%
Investment securities	523,545		4,772			3.65	%	563,902		4,227			3.00	%
Interest-bearing cash and other assets	348,509		4,573			5.25	%	176,672		2,485			5.63	%
Total earning assets	7,256,763		114,529			6.31	%	6,961,407		102,032			5.86	%
Other assets	548,465							556,105
Total assets	$	7,805,228						$	7,517,512

Interest-bearing liabilities
Demand and NOW deposits	$	621,343	$	5,896		3.80	%	$	332,695	$	2,124		2.55	%
Savings deposits	413,699		715			0.69	%	448,059		491			0.44	%
Money market deposits	2,092,449		10,498			2.01	%	2,107,379		5,874			1.11	%
Certificates of deposits	1,823,522		21,375			4.69	%	1,392,847		12,240			3.52	%
Total deposits	4,951,013		38,484			3.11	%	4,280,980		20,729			1.94	%
Repurchase agreements	16,553		47			1.15	%	33,673		68			0.80	%
Total deposits and repurchase agreements	4,967,566		38,531			3.10	%	4,314,653		20,797			1.93	%
FHLB borrowings	130,871		1,855			5.67	%	472,105		6,121			5.19	%
Other long-term borrowings	75,522		1,244			6.59	%	80,440		1,279			6.36	%
Total interest-bearing liabilities	5,173,959		41,630			3.22	%	4,867,198		28,197			2.32	%
Noninterest-bearing deposits	1,517,560							1,694,961
Other liabilities	133,845							128,118
Stockholders' equity	979,864							827,235
Total liabilities and stockholders' equity	$	7,805,228						$	7,517,512

Net interest income			$	72,899						$	73,835
Net interest spread			3.09		%					3.54		%
Net interest margin			4.02		%					4.24		%
Net interest margin - FTE basis (non-GAAP) (2)			4.08		%					4.32		%
(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 non-GAAP financial measures and a reconciliation to the most comparable GAAP equivalent

As of and for the six months ended June 30,:


	2024							2023
(In thousands)	Average Balance		Interest			Average Yield/Rate		Average Balance		Interest			Average Yield/Rate
Interest Earning Assets

Loans (1)	6,349,282		207,452			6.53	%	6,125,441		183,921			6.01	%
Investment securities	535,252		9,259			3.46	%	567,273		8,391			2.96	%
Interest-bearing cash and other assets	294,009		7,858			5.35	%	166,523		4,623			5.55	%
Total earning assets	7,178,543		224,569			6.26	%	6,859,237		196,935			5.74	%
Other assets	548,553							555,040
Total assets	$	7,727,096						$	7,414,277

Interest-bearing liabilities
Demand and NOW deposits	$	585,417	$	10,757		3.67	%	$	280,224	$	3,358		2.40	%
Savings deposits	417,791		1,440			0.69	%	458,969		936			0.41	%
Money market deposits	2,077,885		20,444			1.97	%	2,201,401		10,942			0.99	%
Certificates of deposits	1,819,075		42,233			4.64	%	1,233,810		19,672			3.19	%
Total deposits	4,900,168		74,874			3.06	%	4,174,404		34,908			1.67	%
Repurchase agreements	18,904		104			1.10	%	31,683		98			0.62	%
Total deposits and repurchase agreements	4,919,072		74,978			3.05	%	4,206,087		35,006			1.66	%
FHLB borrowings	120,824		3,396			5.62	%	463,142		11,438			4.94	%
Other long-term borrowings	75,456		2,490			6.60	%	80,370		2,539			6.32	%
Total interest-bearing liabilities	5,115,352		80,864			3.16	%	4,749,599		48,983			2.06	%
Noninterest-bearing deposits	1,510,134							1,731,468
Other liabilities	134,106							126,343
Stockholders’ equity	967,504							806,867
Total liabilities and stockholders’ equity	$	7,727,096						$	7,414,277

Net interest income			$	143,705						$	147,952
Net interest spread			3.10		%					3.68		%
Net interest margin			4.00		%					4.31		%
Net interest margin - FTE basis (non-GAAP) (2)			4.07		%					4.39		%
(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 non-GAAP financial measures and a reconciliation to the most comparable GAAP equivalent

Rate-Volume Analysis

The tables below present the effect of volume and rate changes on interest income and expense. Changes due to volume are changes in the average balance multiplied by the previous period’s average rate. Changes due to rate are changes in the average rate multiplied by the average balance from the prior 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 three months ended June 30,
	2024 Versus 2023 Increase (Decrease) Due to:
(In thousands)	Rate		Volume		Total
Interest Earning Assets

Loans (1)	$	7,304	$	2,560	$	9,864
Investment securities	815		(270)		545
Interest-bearing cash	(155)		2,243		2,088
Total earning assets	7,964		4,533		12,497
Interest-bearing liabilities
Demand and NOW deposits	1,355		2,417		3,772
Savings deposits	258		(34)		224
Money market deposits	4,665		(41)		4,624
Certificates of deposits	4,743		4,392		9,135
Total deposits	11,021		6,734		17,755
Repurchase agreements	115		(136)		(21)
Total deposits and repurchase agreements	11,136		6,598		17,734
FHLB borrowings	631		(4,897)		(4,266)
Other long-term borrowings	50		(85)		(35)
Total interest-bearing liabilities	11,817		1,616		13,433
Net interest income	$	(3,853)	$	2,917	$	(936)
(1) Includes loans held-for-investment, including nonaccrual loans, and loans held-for-sale.


	For the six months ended June 30,
	2024 Versus 2023 Increase (Decrease) Due to:
(In thousands)	Rate		Volume		Total
Interest Earning Assets

Loans (1)	$	16,636	$	6,895	$	23,531
Investment securities	1,302		(434)		868
Interest-bearing cash	(166)		3,401		3,235
Total earning assets	17,772		9,862		27,634
Interest-bearing liabilities
Demand and NOW deposits	2,432		4,967		7,399
Savings deposits	579		(75)		504
Money market deposits	10,079		(577)		9,502
Certificates of deposits	11,060		11,501		22,561
Total deposits	24,150		15,816		39,966
Repurchase agreements	13		(7)		6
Total deposits and repurchase agreements	24,163		15,809		39,972
FHLB borrowings	1,846		(9,888)		(8,042)
Other long-term borrowings	132		(181)		(49)
Total interest-bearing liabilities	26,141		5,740		31,881
Net interest income	$	(8,369)	$	4,122	$	(4,247)
(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.

We had a provision for credit losses of $1.2 million for the second quarter of 2024, compared to $4.4 million for the same period in 2023, primarily due to lesser loan growth and more stable credit quality indicators in the loan portfolio.

We had a provision for credit losses of $17.7 million for the six months ended June 30, 2024, compared to $7.8 million for the same period in 2023. The increase in the provision for credit losses for the six months ended June 30, 2024 was primarily due to a $17.4 million charge-off on a specific customer in our C&I loan portfolio in the first quarter of 2024.

Noninterest Income

The following table presents noninterest income:


	For the three months ended June 30,				For the six months ended June 30,
(In thousands)	2024		2023		2024		2023
Service charges on deposit accounts	$	5,946	$	5,358	$	11,714	$	10,373
Credit and debit card fees	3,007		3,057		5,810		6,038
Trust and investment advisory fees	1,493		1,478		2,956		2,939
Income from mortgage banking services, net	11,043		11,659		20,545		19,088
Other	1,785		2,738		5,057		4,783
Total noninterest income	$	23,274	$	24,290	$	46,082	$	43,221

Three months ended June 30, 2024 and 2023

Our noninterest income decreased $1.0 million to $23.3 million for the second quarter of 2024 from $24.3 million for the same period in 2023.

Service charges on deposit accounts includes overdraft and non-sufficient funds charges, treasury management services provided to our business customers, and other maintenance fees on deposit accounts. For the second quarter of 2024, service charges on deposit accounts increased $0.6 million, compared to the same period in 2023, primarily due to increased treasury management service fee income.

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 $0.1 million for the second quarter of 2024 compared to the same period in 2023, as card transaction volumes decreased slightly.

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 were largely unchanged for the second quarter of 2024 as compared to the same period in 2023.

The components of income from mortgage banking services were as follows:


	For the three months ended June 30,
(In thousands)	2024		2023
Net sale gains and fees from mortgage loan originations, including loans held-for-sale changes in fair value and hedging	$	5,265	$	4,311

Mortgage servicing income	4,155		3,853
MSR capitalization and changes in fair value, net of derivative activity	1,623		3,495


Income from mortgage banking services, net	$	11,043	$	11,659

For the second quarter of 2024, income from mortgage banking services decreased $0.6 million, compared to the same period in 2023. Total loan originations sold were $282.5 million for the second quarter of 2024, an increase of $34.8 million from $247.8 million for the same period in 2023. The increase in loan originations sold and higher margins, resulted in the increase in revenue related to net sale gains and fees from loan originations, including fair value changes in the held-for-sale portfolio and hedging activity. MSR capitalization and changes in fair value, net of derivative activity, decreased $1.9 million in the second quarter of 2024, compared to the same period in 2023. The decrease in revenue related to our MSRs was primarily the result of changes in market interest rates and our corresponding hedging positions. 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. We also maintain a hedging strategy to manage a portion of the risk associated with changes in the fair value of our MSR portfolio. Changes in fair value of the derivative instruments used to economically hedge the MSRs are also included as a component of income from mortgage banking services. Due to a number of factors and until we see a change in these factors, including elevated interest rates, low inventory in the housing market and lower refinance volumes, for the immediate future, we do not expect revenue from mortgage banking activities to return to levels seen in prior years which will reduce the amount of income from mortgage banking services, net, recorded in future periods in comparison to prior year periods.

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 June 30, 2024.


(In thousands)	10%		20%
Discount rate	$	(3,048)	$	(5,956)
Total prepayment speeds	(2,599)		(5,103)
Cost of servicing each loan	(844)		(1,704)

These hypothetical sensitivities should be evaluated with care. The effect on fair value of an adverse change in assumptions generally cannot be determined because the relationship of the change in assumptions to the fair value may not be linear. Additionally, the impact of a variation in a particular assumption on the fair value is calculated while holding other assumptions constant. In reality, changes in one factor may lead to changes in other factors, which could impact the above hypothetical effects.

We also maintain a hedging strategy to manage a portion of the risk associated with changes in the fair value of our MSR portfolio. Changes in fair value of the derivative instruments used to economically hedge the MSRs are also included as a component of income from mortgage banking services.

Other noninterest income decreased $1.0 million for the second quarter of 2024 compared to the same period in 2023, primarily due to a decrease in loan syndication and agency fees.

Six months ended June 30, 2024 and 2023

Our noninterest income increased $2.9 million to $46.1 million for the six months ended June 30, 2024 from $43.2 million for the same period in 2023.

For the six months ended June 30, 2024, service charges on deposit accounts increased $1.3 million, compared to the same period in 2023, primarily due to increased treasury management service fee income.

Credit and debit card fees decreased $0.2 million for the six months ended June 30, 2024 compared to the same period in 2023, as card transaction volumes decreased slightly.

Trust and investment advisory fees were largely unchanged for the six months ended June 30, 2024 as compared to the same period in 2023.

The components of income from mortgage banking services were as follows:

June 30,



	2023
10,236			$	7,757

		7,660
		3,671


20,545			$	19,088

For the six months ended June 30, 2024, income from mortgage banking services increased $1.5 million, compared to the same period in 2023. Total loan originations for sale were $492.4 million for the six months ended June 30, 2024, an increase of $58.5 million from $433.9 million for the same period in 2023. The increase in loan originations sold and higher margins, resulted in the increase in revenue related to net sale gains and fees from loan originations, including fair value changes in the held-for-sale portfolio and hedging activity. We retain servicing rights on the majority of mortgage loans that we sell, which drove the increase in servicing income of $0.6 million to $8.3 million for the six months ended June 30, 2024, from $7.7 million for the six months ended June 30, 2023. MSR capitalization and changes in fair value, net of derivative activity, decreased $1.6 million in the six months ended June 30, 2024, compared to the same period in 2023. The decrease in revenue related to our MSRs was primarily the result of changes in market interest rates and our corresponding hedging positions.

Other noninterest income increased $0.3 million for the six months ended June 30, 2024 compared to the same period in 2023, primarily due to an increase in income from BOLI.

Noninterest Expense

The following table presents noninterest expense:


	For the three months ended June 30,				For the six months ended June 30,
(In thousands)	2024		2023		2024		2023
Salary and employee benefits	$	39,828	$	34,056	$	77,181	$	69,105
Occupancy and equipment	8,701		8,135		17,296		16,490
Amortization of intangible assets	652		2,050		1,467		3,094
Merger-related expenses	1,046		—		3,535		—
Other	13,648		13,802		26,224		25,620
Total noninterest expenses	$	63,875	$	58,043	$	125,703	$	114,309

Three months ended June 30, 2024 and 2023

Our noninterest expenses increased $5.8 million to $63.9 million for the second quarter of 2024, from $58.0 million for the same period in 2023.

Salary and employee benefits increased $5.8 million to $39.8 million for the second quarter of 2024, from $34.1 million for the same period in 2023, primarily due to increased headcount, including the hiring of C&I bankers, and higher variable compensation due to an increase in mortgage loan originations.

Amortization of intangible assets decreased $1.4 million to $0.7 million for the second quarter of 2024, primarily due to accelerated amortization in the second quarter of 2023 of our core deposit intangible asset recognized in conjunction with a prior acquisition.

Noninterest expense for the second quarter of 2024 included $1.0 million in merger related expenses. There were no merger related expenses for the same period in 2023.

Six months ended June 30, 2024 and 2023

Our noninterest expenses increased $11.4 million to $125.7 million for the six months ended June 30, 2024, from $114.3 million for the same period in 2023.

Salary and employee benefits increased $8.1 million to $77.2 million for the six months ended June 30, 2024, from $69.1 million for the same period in 2023, primarily due to increased headcount, including the hiring of C&I bankers, and higher variable compensation due to an increase in mortgage loan originations.

Amortization of intangible assets decreased $1.6 million to $1.5 million for the six months ended June 30, 2024, from $3.1 million for the same period in 2023, primarily due to accelerated amortization in the second quarter of 2023 of our core deposit intangible asset recognized in conjunction with a prior acquisition.

Merger related expenses for the six months ended June 30, 2024 were $3.5 million. There were no merger related expenses during the same period in 2023.

Income Taxes

Three months ended June 30, 2024 and 2023

We had income tax expense for the second quarter of 2024 of $6.5 million, compared to income tax expense of $7.7 million for the same period in 2023. The decrease in income tax expense was due to our decreased income during the second quarter of 2024. Our effective tax rate was 21.0% for the second quarter of 2024, compared to 21.5% for the same period in 2023.

Six months ended June 30, 2024 and 2023

We had income tax expense for the six months ended June 30, 2024 of $9.5 million, compared to $14.8 million for the same period in 2023. The decrease in income tax expense was primarily due to our decreased income during the period ended June 30, 2024. Our effective tax rate was 20.5% for the six months ended June 30, 2024, compared to 21.4% for the same period in 2023.

Financial Condition

Balance Sheet

Our total assets were $8.0 billion and $7.9 billion, total liabilities were $7.0 billion and $7.0 billion, and total stockholders’ equity was $1.0 billion and $0.9 billion at June 30, 2024 and December 31, 2023, respectively.

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 June 30, 2024 and December 31, 2023. 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 $25.1 million to $491.6 million at June 30, 2024, compared to December 31, 2023. The decrease was primarily due to amortization of the portfolio. During the period ended June 30, 2024, the securities held-to-maturity decreased $0.7 million to $36.3 million.

The following table is a summary of our investment portfolio as of:


	June 30, 2024				December 31, 2023
(In thousands)	Carrying Amount		% of Portfolio		Carrying Amount		% of Portfolio
Available-for-sale:
U.S. treasury	$	39,347	8.0	%	$	54,234	10.5	%
U.S. agency	1,202		0.3	%	1,839		0.4	%
Obligations of states and political subdivisions	25,971		5.3	%	25,970		5.0	%
Mortgage backed - residential	99,735		20.3	%	106,433		20.6	%
Collateralized mortgage obligations	173,692		35.3	%	181,533		35.1	%
Mortgage backed - commercial	136,247		27.7	%	131,192		25.4	%
Other debt	15,455		3.1	%	15,556		3.0	%
Total available-for-sale	$	491,649	100.0	%	$	516,757	100.0	%
Held-to-maturity:


Obligations of states and political subdivisions	$	25,627	70.6	%	$	25,542	69.1	%
Mortgage backed - residential	7,119		19.6	%	7,548		20.4	%
Collateralized mortgage obligations	3,564		9.8	%	3,893		10.5	%


Total held-to-maturity	$	36,310	100.0	%	$	36,983	100.0	%

The following table shows the weighted average yield to average life of each category of investment securities as of June 30, 2024:


(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	$	8,050	1.29	%	$	31,297	1.28	%	$	—	—	%	$	—	—	%
U.S. agency	—		—	%	683		6.78	%	519		6.54	%	—		—	%
Obligations of states and political subdivisions	—		—	%	—		—	%	16,889		3.10	%	9,082		2.90	%
Mortgage backed - residential	1,593		1.33	%	22,113		2.72	%	34,519		2.06	%	41,510		2.66	%
Collateralized mortgage obligations	1,830		2.93	%	23,748		3.99	%	145,756		3.59	%	2,358		2.77	%
Mortgage backed - commercial	6,373		2.58	%	65,390		3.60	%	64,484		2.82	%	—		—	%
Other debt	—		—	%	3,908		3.71	%	9,718		2.53	%	1,829		3.75	%
Total available-for-sale	$	17,846	1.92	%	$	147,139	3.05	%	$	271,885	3.15	%	$	54,779	2.74	%
Held-to-maturity:


Obligations of states and political subdivisions	$	—	—	%	$	1,009	2.06	%	$	—	—	%	$	24,618	3.52	%
Mortgage backed - residential	—		—	%	4,221		2.55	%	20		5.79	%	2,878		3.24	%
Collateralized mortgage obligations	—		—	%	2,343		2.83	%	1,221		2.98	%	—		—	%


Total held-to-maturity	$	—	—	%	$	7,573	2.57	%	$	1,241	3.02	%	$	27,496	3.49	%

Loans

Our loan portfolio represents a broad range of borrowers primarily in our markets in Texas, Kansas, Colorado, New Mexico, and Arizona, primarily comprised of commercial and industrial, commercial real estate, residential real estate, and public finance 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 held-for-investment, net of deferred fees, costs, premiums and discounts were $6.3 billion at June 30, 2024 and December 31, 2023.

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


	June 30, 2024				December 31, 2023
(In thousands)	Amount		% of total loans		Amount		% of total loans
Commercial and industrial	$	2,431,110	38.4	%	$	2,467,688	39.4	%
Commercial real estate:
Non-owner occupied	866,999		13.7	%	812,235		13.0	%
Owner occupied	660,511		10.4	%	635,365		10.2	%
Construction and land	350,878		5.5	%	345,430		5.5	%
Multifamily	94,220		1.5	%	103,066		1.6	%
Total commercial real estate	1,972,608		31.1	%	1,896,096		30.3	%
Residential real estate	1,146,989		18.1	%	1,110,610		17.7	%
Public finance	537,872		8.5	%	602,913		9.6	%
Consumer	42,129		0.7	%	36,371		0.6	%
Other	206,454		3.2	%	153,418		2.4	%
Total loans	$	6,337,162	100.0	%	$	6,267,096	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 80.9% of the Company’s risk-based capital, or 13.7% of total loans as of June 30, 2024. Non-owner occupied CRE loans associated with office space were $103.7 million, or 1.6% of total loans as of June 30, 2024. Owner occupied CRE loans associated with office space were $184.0 million, or 2.9% of total loans as of June 30, 2024.

Residential real estate loans represent loans to consumers collateralized by a mortgage on a residence and include purchase money, refinancing, secondary mortgages, and home equity loans and lines of credit.

Public finance loans include loans to our charter school and municipal based customers.

Consumer loans include direct consumer installment loans, credit card accounts, overdrafts and other revolving loans.

Other loans consist of loans to nondepository financial institutions, lease financing receivables and loans for agricultural production.

Maturities and Sensitivity of Loans to Changes in Interest Rates

The information in the following tables is based on the contractual maturities of individual loans, including loans that may be subject to renewal at their contractual maturity. Renewal of these loans is subject to review and credit approval, as well as modification of terms upon maturity. Actual repayments of loans may differ from the maturities reflected below because 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 June 30, 2024:


(In thousands)	One year or less		After one through five years		After five through 15 years		After 15 years		Total
Commercial and industrial	$	477,653	$	1,636,765	$	291,056	$	25,636	$	2,431,110
Commercial real estate	363,384		1,124,795		426,455		57,974		1,972,608
Residential real estate	113,879		32,386		67,294		933,430		1,146,989
Public finance	26,033		86,073		307,182		118,584		537,872
Consumer	13,486		11,343		17,083		217		42,129
Other	63,246		114,882		24,716		3,610		206,454
Total loans	$	1,057,681	$	3,006,244	$	1,133,786	$	1,139,451	$	6,337,162


(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	$	18,517	$	272,427	$	191,058	$	540	$	482,542	$	464,025
Commercial real estate	187,279		602,976		69,905		1,284		861,444		674,165
Residential real estate	85,087		18,060		48,975		316,531		468,653		383,566
Public finance	26,033		83,485		303,848		118,584		531,950		505,917
Consumer	11,002		9,521		16,978		—		37,501		26,499
Other	12,474		14,401		24,061		3,610		54,546		42,072
Total fixed interest rate loans	$	340,392	$	1,000,870	$	654,825	$	440,549	$	2,436,636	$	2,096,244
Floating or adjustable interest rates
Commercial and industrial	$	459,136	$	1,364,338	$	99,998	$	25,096	$	1,948,568	$	1,489,432
Commercial real estate	176,105		521,819		356,550		56,690		1,111,164		935,059
Residential real estate	28,792		14,326		18,319		616,899		678,336		649,544
Public finance	—		2,588		3,334		—		5,922		5,922
Consumer	2,484		1,822		105		217		4,628		2,144
Other	50,772		100,481		655		—		151,908		101,136
Total floating or adjustable interest rate loans	$	717,289	$	2,005,374	$	478,961	$	698,902	$	3,900,526	$	3,183,237
Total loans	$	1,057,681	$	3,006,244	$	1,133,786	$	1,139,451	$	6,337,162	$	5,279,481

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.

The following table presents, by loan type, the changes in the allowance for credit losses:


	For the three months ended June 30,						For the six months ended June 30,						For the year ended December 31,
(In thousands)	2024			2023			2024			2023			2023
Balance, beginning of period	$	79,829		$	74,459		$	80,398		$	65,917		$	65,917
Impact of adopting ASC 326	—			—			—			5,256			5,256
Adjusted beginning balance	79,829			74,459			80,398			71,173			71,173
Loan charge-offs:
Commercial and industrial	(2,261)			(729)			(19,627)			(788)			(9,242)
Commercial real estate	—			—			—			—			(83)
Residential real estate	(38)			—			(38)			—			(13)
Public finance	—			—			—			—			—
Consumer	(161)			(68)			(301)			(132)			(334)
Other	—			—			—			—			—
Total loan charge-offs	(2,460)			(797)			(19,966)			(920)			(9,672)
Recoveries of loans previously charged-off:
Commercial and industrial	414			38			461			94			1,118
Commercial real estate	5			—			5			3			12
Residential real estate	—			21			8			21			682
Public finance	—			—			—			—			—
Consumer	32			21			54			31			50
Other	—			—			—			—			—
Total loan recoveries	451			80			528			149			1,862
Net (charge-offs) recoveries	(2,009)			(717)			(19,438)			(771)			(7,810)
Provision for credit losses (1)	1,140			3,620			18,000			6,960			17,035
Balance, end of period	$	78,960		$	77,362		$	78,960		$	77,362		$	80,398
Allowance for credit losses to total loans	1.25		%	1.26		%	1.25		%	1.26		%	1.28		%
Ratio of net charge-offs to average loans outstanding	0.13		%	0.05		%	0.62		%	0.03		%	0.13		%
(1) For the three months ended June 30, 2024 and 2023 we recorded a provision for credit losses on unfunded commitments of $60 and $802, respectively. For the six months ended June 30, 2024 and 2023 we recorded a provision for credit losses on unfunded commitments of $(300) and $822, respectively. For further information, see Note 3 - Loans.

The following table presents net charge-offs (recoveries) to average loans outstanding by loan category:


	For the three months ended June 30,				For the six months ended June 30,
(In thousands)	2024		2023		2024		2023
Commercial and industrial	0.26	%	0.10	%	1.38	%	0.05	%

Residential real estate	0.02	%	(0.01)	%	0.01	%	—	%

Consumer	1.26	%	0.46	%	1.23	%	0.49	%

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:


	June 30, 2024				December 31, 2023
(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	$	25,398	38.4	%	$	29,523	39.4	%
Commercial real estate	29,919		31.1	%	27,546		30.3	%
Residential real estate	15,982		18.1	%	16,345		17.7	%
Public finance	5,921		8.5	%	5,337		9.6	%
Consumer	666		0.7	%	717		0.6	%
Other	1,074		3.2	%	930		2.4	%
Total	$	78,960	100.0	%	$	80,398	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:


(In thousands)	June 30, 2024		December 31, 2023
Nonaccrual loans:
Commercial and industrial	$	19,525	$	8,004
Commercial real estate	9,688		4,063
Residential real estate	23,405		22,413
Public finance	7,226		—
Consumer	4		10
Other	2,616		2,837
Total nonaccrual loans	62,464		37,327

6,374,103
(1) Wholesale deposits primarily consist of brokered deposits included in our consolidated balance sheets within certificate of deposits.

The following table sets forth the average balance amounts and the average rates paid on deposits held by us:


	For the three months ended June 30,								For the six months ended June 30,
	2024				2023				2024				2023
(Dollars in thousands)	Average Balance		Average Rate Paid		Average Balance		Average Rate Paid		Average Balance		Average Rate Paid		Average Balance		Average Rate Paid
Noninterest-bearing demand deposit accounts	$	1,517,560	—	%	$	1,694,961	—	%	$	1,510,134	—	%	$	1,731,468	—	%
Interest-bearing deposit accounts:
Interest-bearing demand accounts	580,886		3.97	%	289,868		2.82	%	543,948		3.85	%	235,716		2.73	%
Savings accounts and money market accounts	2,506,148		1.79	%	2,555,438		1.00	%	2,495,676		1.76	%	2,660,370		0.89	%
NOW accounts	40,457		1.35	%	42,827		0.74	%	41,469		1.35	%	44,508		0.62	%
Certificate of deposit accounts	1,823,522		4.69	%	1,392,847		3.52	%	1,819,075		4.64	%	1,233,810		3.19	%
Total interest-bearing deposit accounts	4,951,013		3.11	%	4,280,980		1.94	%	4,900,168		3.06	%	4,174,404		1.67	%
Total deposits	$	6,468,573	2.38	%	$	5,975,941	1.39	%	$	6,410,302	2.34	%	$	5,905,872	1.18	%

As of June 30, 2024 and December 31, 2023, approximately $2.1 billion or 32.1% and $2.0 billion or 31.2%, respectively, of our deposit portfolio was uninsured. As of June 30, 2024 and December 31, 2023, approximately $1.7 billion or 25.5% and $1.6 billion or 25.1%, respectively, of our deposit portfolio was uninsured and uncollateralized. The uninsured and uninsured and uncollateralized amounts are estimates based on the methodologies and assumptions used for the Bank's regulatory reporting requirements.

We actively participate in the IntraFi Cash Service (“ICS”) / Certificate of Deposit Account Registry Service (“CDARS”) program which provides FDIC insurance coverage for clients that maintain larger deposit balances. Deposits in the ICS /

CDARS program totaled $0.6 billion, or 8.9% of all deposits as of June 30, 2024, and $0.6 billion, or 9.2% of all deposits as of December 31, 2023.

The following table sets forth the portion of the Bank's time deposits, by account, that are in excess of the FDIC insurance limit, by remaining time until maturity, as of June 30,:


(In thousands)	2024
Three months or less	$	107,782
Over three months through six months	109,962
Over six through twelve months	50,968
Over twelve months through three years	8,398
Over three years	1,215
Total	$	278,325

Liquidity

Liquidity refers to our ability to maintain cash flow that is adequate to fund operations, support asset growth, maintain reserve requirements and meet present and future obligations of deposit withdrawals, lending obligations and other contractual obligations.

FirstSun (Parent Company)

FirstSun has routine funding requirements consisting primarily of operating expenses, debt service, and funds used for acquisitions. FirstSun can obtain funding to meet its obligations from dividends collected from its subsidiaries, primarily the Bank, and through the issuance of varying forms of debt. At June 30, 2024, FirstSun had available cash and cash equivalents of $109.9 million and debt outstanding of $78.9 million. Management believes FirstSun has the ability to generate and obtain adequate amounts of liquidity to meet its requirements in the short-term and the long-term.

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 2023 and is not currently required. At June 30, 2024, the Bank could pay dividends to FirstSun of approximately $183.4 million without prior regulatory approval. During the six months ended June 30, 2024, the Bank did not pay dividends to FirstSun. Upon conversion to a Texas state chartered bank with membership with the Federal Reserve, regulations related to dividends will change, including the amount of dividends available to be paid without prior regulatory approval.

Bank

As more fully discussed in our 2023 Annual Report, we regularly monitor our liquidity position and make adjustments to the balance between sources and uses of funds as we deem appropriate. At June 30, 2024, our liquid assets, which consist of cash and amounts due from banks and interest-bearing deposits in other financial institutions, amounted to $527.6 million, or 6.6% of total assets, compared to $473.0 million, or 6.0% of total assets, at December 31, 2023. The increase in our liquid assets was primarily due to an increase in cash held at the Federal Reserve. At June 30, 2024, approximately 85% of the investment securities portfolio was pledged as collateral to secure public deposits and repurchase agreements. Our unencumbered available-for-sale securities at June 30, 2024 were $74.2 million, or 0.9% of total assets, compared to $81.5 million, or 1.0% of total assets, at December 31, 2023.

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 June 30, 2024, loans as a percentage of customer deposits were 95.7%, compared with 98.3% at December 31, 2023. For additional information related to our deposits, see Deposits section above. We are also a member of the FHLB and FRB, from which we can borrow for leverage or liquidity purposes. The FHLB and FRB requires that securities and qualifying loans be pledged to secure any advances. Liquidity sources available to us for immediate funding at June 30, 2024, are as follows:


FHLB borrowings available	$	1,328,722
Fed Funds lines	2,010,184
Unused lines with other financial institutions	160,000
Immediate funding availability	$	3,498,906

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 June 30, 2024 was $996.6 million, compared to $877.2 million at December 31, 2023, an increase of $119.4 million, or 13.6%. As previously announced, concurrent with the entry into the merger agreement with HomeStreet on January 16, 2024, we entered into an upfront securities purchase agreement with certain funds managed by Wellington Management Company, LLP, pursuant to which we issued 2.46 million shares of our common stock in a private placement for $80.0 million that closed on January 17, 2024.

We did not pay a dividend to our common shareholders for the three or six months ended June 30, 2024 and 2023.

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 1 2 - Regulatory Capital Matters to the consolidated financial statements.

Material Contractual Obligations, Commitments, and Contingent Liabilities

We have entered into contractual obligations in the normal course of business that involve elements of credit risk, interest rate risk and liquidity risk.

The following table summarizes our material contractual obligations as of June 30, 2024. 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	6	$	4,648,666	$	4,648,666	$	—	$	—	$	—
Certificates of deposit	6	1,970,859		1,897,651		64,316		6,275		2,617
Securities sold under agreements to repurchase	7	20,408		20,408		—		—		—
Short-term debt:

FHLB term advances	8	145,000		145,000		—		—		—
Long-term debt:

Item 4. Controls and Procedures

a.Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures (as such term is defined in Rule 15d-15(e) promulgated under the Securities and Exchange Act of 1934) as of June 30, 2024. Based on that evaluation, we concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

b.Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during the three months ended June 30, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II - Other Information

Item 1. Legal Proceedings

FirstSun and its subsidiaries are from time to time subject to claims and litigation arising in the ordinary course of business. For further information regarding legal proceedings, see Note 1 5 - Commitments and Contingencies under the subheading “Litigation” in our unaudited consolidated financial statements contained in this report. One or more unfavorable outcomes in any claim or litigation against us could have a material adverse effect for the period in which they are resolved. In addition, regardless of their merits or their ultimate outcomes, such matters are costly, divert management’s attention and may materially adversely affect our reputation, even if resolved in our favor.

Item 1A. Risk Factors

There have been no material changes to the risk factors set forth in the section titled “Risk Factors” included in our 2023 Annual Report.

Item 6. Exhibits


Exhibit No.						Description

2.1						Amendment No. 1 to the Agreement and Plan of Merger, dated as of April [30], 2024, by and among HomeStreet, Inc., FirstSun Capital Bancorp, and Dynamis Subsidiary, Inc.* (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 30, 2024)

3.1						Amended and Restated Certificate of Incorporation of FirstSun Capital Bancorp, as amended (incorporated by reference to Exhibit 3.1 to the proxy statement/prospectus contained in the Registration Statement on Form S-4 (File No. 333-258176) filed with the SEC on July 26, 2021).

3.2						Certificate of Amendment dated November 3, 2021 to the Amended and Restated Certificate of Incorporation of FirstSun (incorporated by reference to Exhibit 3.2 of the Company’s Form 10-Q for the Quarter Ended September 30, 2021).

3.3						Bylaws of FirstSun Capital Bancorp as amended and restated through October 29, 2021 (incorporated by reference to Exhibit 3.3 of the Company’s Form 10-Q for the Quarter Ended September 30, 2021).

10.1						Form of First Amendment to Acquisition Finance Securities Purchase Agreement, dated as of April 30, 2024, by and among FirstSun and the parties signatories thereto*(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 30, 2024)

31.1						Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a).

31.2						Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a).

32.1						Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101						The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, were formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income and Comprehensive Income, (iii) Consolidated Statements of Stockholders’ Equity, (iv) Consolidated Statements of Cash Flows, (v) Notes to Consolidated Financial Statements.

104						Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		FIRSTSUN CAPITAL BANCORP
		(Registrant)
		/s/ Neal E. Arnold


Date:	August 9, 2024
		Neal E. Arnold
		President and Chief Executive Officer
		(Principal Executive Officer)
		/s/ Robert A. Cafera, Jr.


Date:	August 9, 2024
		Robert A. Cafera, Jr.
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)


			Page
Consolidated Balance Sheets			6
Consolidated Statements of Income and Comprehensive Income			7
Consolidated Statements of Stockholders' Equity			8
Consolidated Statements of Cash Flows			10
Notes to Consolidated Financial Statements			12
Note 1 - Organization and Basis of Presentation			12
Note 2 - Securities			16
Note 3 - Loans			20
Note 4 - Mortgage Servicing Rights			30
Note 5 - Derivative Financial Instruments			31
Note 6 - Deposits			34
Note 7 - Securities Sold Under Agreements to Repurchase			35
Note 8 - Debt			35
Note 9 - Earnings Per Share			37
Note 1 0 - Stockholders' Equity			37
Note 1 1 - Income Taxes			39
Note 1 2 - Regulatory Capital Matters			39
Note 1 3 - Fair Value Measurements			41
Note 1 4 - Segment Information			44
Note 1 5 - Commitments and Contingencies			49
Note 1 6 - Lease Commitments			51

FIRSTSUN CAPITAL BANCORP - Quarter Report: 2024 June (Form 10-Q)

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