FIRSTSUN CAPITAL BANCORP
For the period ended Dec 31, 2024. Filed Mar 7, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 7, 2025
FSUN$38.91-1.9%Stored close · as of Nov 6, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-07.
0001709442-24-000013
Item 1A. Risk FactorsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-07.
0001709442-25-000008
Item 1A. Risk FactorsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 277 previous paragraphs and 260 current paragraphs.
189 unchanged; 48 reworded; 23 added; 38 removed; 2 previous and 0 current paragraphs rearranged.
Tables are not compared: 0 previous and 0 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (23)
Current report
In addition to being affected by general economic conditions, our earnings and growth are affected by the policies of the Federal Reserve. An important function of the Federal Reserve is to regulate the money supply and credit conditions. Among the instruments used by the Federal Reserve to implement these objectives are open market purchases and sales of U.S. government securities, adjustments to the discount rate and changes in banks’ reserve requirements against bank deposits. These instruments are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits. Their use also affects interest rates charged on loans or paid on deposits. The monetary policies and regulations of the Federal Reserve have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. The effects of such policies upon our business, financial condition and results of operations cannot be predicted.
Current report
Adverse developments affecting the financial services industry, such as recent bank failures or concerns involving liquidity, may have a material adverse effect on our operations.
Current report
The 2023 high-profile bank failures involving Silicon Valley Bank, Signature Bank, and First Republic Bank caused general uncertainty and concern regarding the liquidity adequacy of the banking sector. Although we were not directly affected by these bank failures, the resulting speed and ease in which news, including social media commentary, led depositors to withdraw or attempt to withdraw their funds from these and other financial institutions caused the stock prices of many financial institutions to become volatile. In 2024 and into 2025, continued concerns regarding the stability of certain regional banks and potential liquidity risks have further contributed to market volatility and investor caution. Additional bank failures could have an adverse effect on our financial condition and results of operations, either directly or through an adverse impact on certain of our customers.
Current report
In response to the bank failures and the resulting market reaction, in March 2023 the Secretary of the Treasury approved actions enabling the FDIC to complete its resolutions of the failed banks in a manner that fully protects depositors by utilizing the Deposit Insurance Fund, including the use of Bridge Banks to assume all of the deposit obligations of the failed banks, while leaving unsecured lenders and equity holders of such institutions exposed to losses. In addition, the Federal Reserve announced it would make available additional funding to eligible depository institutions under a Bank Term Funding Program to help assure banks have the ability to meet the needs of all their depositors. In an effort to strengthen public confidence in the banking system and protect depositors, regulators announced that any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law, which increased our FDIC insurance assessment and increased our costs of doing business. However, it is uncertain whether these steps by the government will continue to be sufficient to calm financial markets, reduce the risk of significant depositor withdrawals at other institutions and thereby reduce the risk of additional bank failures. As a result of this uncertainty, we face the potential for reputational risk, deposit outflows, increased costs and competition for liquidity, and increased credit risk which, individually or in the aggregate, could have a material adverse effect on our business, financial condition and results of operations.
Current report
We face risks related to the adoption of future legislation and potential changes in federal regulatory agency leadership, policies, and priorities.
Current report
In 2025, the U.S. political landscape remains uncertain, with the Republicans holding the majority in both the U.S. House of Representatives and the U.S. Senate. A unified Republican Congress has created conditions for potential shifts in policy, though partisan division may still result in challenges to enacting sweeping reforms. Under the Biden Administration, Congressional committees with jurisdiction over the banking sector pursued oversight and legislative initiatives in a variety of areas, including addressing climate-related risks, promoting diversity and equality within the banking industry and addressing other ESG matters, improving competition in the banking sector and enhancing oversight of bank mergers and acquisitions, establishing a regulatory framework for digital assets and markets, and oversight of pandemic responses and economic recovery. The Trump Administration, alongside a unified Republican Congress, may pursue policies or changes that (i) reverse or suspend key actions implemented under the Biden Administration, (ii) promote deregulation by easing regulatory burdens on financial institutions, (iii) adopt a technology-forward approach, and (iv) take a more favorable stance on bank mergers and acquisitions, potentially streamlining the approval process to encourage consolidation within the banking sector. The prospects for the enactment of major banking reform legislation remain unclear at this time.
Current report
Furthermore, leadership changes within federal banking agencies and financial regulators continue to shape the regulatory environment. Since the change in presidential administration in 2020, key positions across agencies—including the Comptroller of the Currency, CFPB, CFTC, SEC, and the U.S. Treasury—experienced significant turnover. While some leadership positions were filled, others remained vacant, leading to ongoing shifts in regulatory priorities and enforcement approaches. The unified Republican government could further alter the composition of these agencies, introducing new leadership and new policies and rules that could significantly impact the banking sector. The potential impact of the unified Republican government and any additional changes in agency personnel, policies and priorities on the financial services sector, including FirstSun and Sunflower Bank, cannot be fully predicted at this time. Regulations and laws may be modified at any time, and new legislation may be enacted that will affect us. Any future changes in federal and state laws and regulations, as well as the interpretation and implementation of such laws and regulations, could affect us in substantial and unpredictable ways, including those listed above or other ways that could have a material adverse effect on our business, financial condition or results of operations.
Current report
The trading volumes in our common stock, may not provide adequate liquidity for investors.
Current report
Shares of our common stock are listed on the NASDAQ Global Select Market; however, the average daily trading volume in our common stock is less than that of larger financial services companies. A public trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the marketplace of a sufficient number of willing buyers and sellers of the common stock at any given time. This presence depends on the individual decisions of investors and general economic and market conditions over which we have no control and which may be limited. Under such circumstances, you could have difficulty selling your shares of our common stock on short notice. Given the current daily average trading volume of our common stock, significant sales of our common stock in a brief period of time, or the expectation of these sales, could cause a significant decline in the price of our common stock.
Current report
The trading price of our common stock may be subject to continued significant fluctuations and volatility.
Current report
The market price of our common stock could be subject to significant fluctuations due to, among other things:
Current report
•actual or anticipated quarterly fluctuations in our operating and financial results, particularly if such results vary from the expectations of management, securities analysts and investors, including with respect to credit losses on loans or unfunded commitments we may incur;
Current report
•announcements regarding significant transactions in which we may engage;
Current report
•changes or perceived changes in our operations or business prospects;
Current report
•legislative or regulatory changes affecting our industry generally or our businesses and operations;
Current report
•a weakening of general market and economic conditions, particularly with respect to economic conditions in the markets in which we operate;
Current report
•the operating and share price performance of companies that investors consider to be comparable to us;
Current report
•future offerings by us of debt, preferred stock or trust preferred securities, each of which would be senior to our common stock upon liquidation and for purposes of dividend distributions;
Current report
•actions of our current stockholders, including future sales of common stock by existing stockholders and our directors and executive officers; and
Current report
•other changes in U.S. or global financial markets, economies and market conditions, such as interest or foreign exchange rates, stock, commodity, credit or asset valuations or volatility.
Current report
As a result, the market price of our common stock may continue to be subject to similar market fluctuations that may or may not be related to our operating performance or prospects. Increased volatility could result in a decline in the market price of our common stock.
Removed paragraphs (38)
Previous report
The Federal Reserve has implemented significant economic strategies that have affected interest rates, inflation, asset values, and the shape of the yield curve. These strategies have had, and will continue to have, a significant impact on our business and on many of our clients.
Previous report
To illustrate: in response to the recession in 2008-09 and the following uneven recovery, the Federal Reserve implemented a series of domestic monetary initiatives designed to lower rates and make credit easier to obtain. The Federal Reserve changed course in 2015, raising rates several times through 2018. The last raise in 2018 was accompanied by a substantial and broad stock market decline. In 2019, the Federal Reserve began to lower rates. In 2020, in response to economic disruption associated with the COVID-19 pandemic, the Federal Reserve quickly reduced short-term rates to extremely low levels and acted to influence the markets to reduce long-term rates as well. During 2021, the Federal Reserve significantly reduced its “easing” actions that held down long-term rates. During 2022, the Federal Reserve switched to a tightening policy. It raised short term rates significantly and rapidly over most of the year. Those actions triggered a significant decline in the values of most categories of U.S. stocks and bonds; significantly raised recessionary expectations for the
Previous report
U.S.; and inverted the yield curve in the U.S. for much of the last two quarters of 2022. During the first half of 2023, the Federal Reserve continued to raise short term rates, leading to continuing yield curve inversion. Subsequent to July 2023 and continuing into 2024, the Federal Reserve has held short term interest rates flat, but has not specifically indicated as to when interest rates may change.
Previous report
Federal Reserve strategies can, and often are intended to, affect the domestic money supply, inflation, interest rates, and the shape of the yield curve.
Previous report
Effects on the yield curve often are most pronounced at the short end of the curve, which is of particular importance to us and other banks. Among other things, easing strategies are intended to lower interest rates, expand the money supply, and stimulate economic activity, while tightening strategies are intended to increase interest rates, discourage borrowing, tighten the money supply, and restrain economic activity. However, as noted above, since the second half of 2022 short term rates continued to rise faster than long term rates to the point that the yield curve remained inverted for 2023 and early 2024. It is not clear when long term rates are likely to catch up.
Previous report
Many external factors may interfere with the effects of these actions or cause them to be changed, sometimes quickly. Such factors include significant economic trends or events as well as significant international monetary policies and events. As exemplified by the March 2023 bank failures in the U.S., such strategies also can affect the U.S. and world-wide financial systems in ways that may be difficult to predict. Risks associated with interest rates and the yield curve and their potential effects on financial institutions are discussed in this Item 1A under the caption Interest Rate and Yield Curve Risks and Capital and Liquidity Risks.
Previous report
A flat or inverted yield curve may reduce our net interest margin and adversely affect our loan and investment portfolios.
Previous report
The yield curve is a reflection of interest rates applicable to short and long-term debt. The yield curve is steep when short-term rates are much lower than long-term rates; it is flat when short-term rates and long-term rates are nearly the same; and it is inverted when short-term rates exceed long-term rates. Historically, the yield curve is usually upward sloping (higher rates for longer terms). However, the yield curve can be relatively flat or inverted (downward sloping), which has happened several times in the past few years. A flat or inverted yield curve, which tends to decrease net interest margin, would adversely impact our lending businesses and investment portfolio. The Federal Reserve, consistent with long-term goals, has raised rates in response to inflation, and the yield curve has remained inverted in early 2024. We cannot predict how long those conditions will exist. There is significant risk, especially if inversion remains common and a recession begins, that our net interest margin could compress. See Risks Associated with Monetary Events in this Item 1A of this report.
Previous report
In particular, the success of the proposed HomeStreet merger, if completed, will depend in part on the combined company’s ability to retain the talents and dedication of employees currently employed by HomeStreet. The consummation of the proposed HomeStreet merger will expand FirstSun’s market areas to include operations in Washington, California, Hawaii, Oregon and other smaller markets, and retaining HomeStreet personnel within such markets is important to the success of the integration of the operations and business of HomeStreet and the success of the combined company. It is possible that these employees may decide not to remain with HomeStreet or FirstSun while the proposed HomeStreet merger is pending or with the combined company after the proposed HomeStreet merger is consummated. If employees terminate their employment, or if an insufficient number of employees are retained to maintain effective operations, the combined company’s business activities may be adversely affected and management’s attention may be diverted from successfully integrating HomeStreet to hiring suitable replacements, all of which may cause the combined company’s business to suffer. In addition, FirstSun may not be able to locate suitable replacements for any such employees who leave the combined company, or to offer employment to potential replacements on reasonable terms. Further, FirstSun’s lack of operating experience in HomeStreet’s existing markets may adversely impact the combined company’s ability to successfully compete in such market areas without retaining HomeStreet’s employees.
Previous report
In connection with our entry into the HomeStreet merger agreement, FirstSun issued 2,461,538 shares of our common stock to certain institutional investors in a private placement that closed on January 17, 2024. FirstSun is also contractually obligated, concurrently with and subject to the closing of the proposed HomeStreet merger, to issue to those institutional investors warrants (which we refer to as the “Warrants”) to purchase approximately 1.15 million shares of FirstSun common stock with such Warrants having an initial exercise price of $32.50 per share. The Warrants will carry a term of three years. In the event the proposed HomeStreet merger is not consummated, no Warrants will be issued. Concurrently with our entry into the HomeStreet merger agreement, FirstSun entered into an acquisition finance securities purchase agreement with certain institutional investors (the “Acquisition Finance Securities Purchase Agreement”). Pursuant to the Acquisition Finance Securities Purchase Agreement, on the terms and subject to the conditions set forth therein, substantially concurrently with, and subject to, the closing of the proposed HomeStreet merger, certain institutional investors will invest an aggregate of $95 million in exchange for the sale andissuance, at a purchase price of $32.50 per share, of approximately 2.92 million shares of FirstSun common stock. We may need to incur additional debt or equity financing in the future in connection with strategic acquisitions, including the proposed HomeStreet merger, or investments or to strengthen our capital position.
Previous report
If the proposed HomeStreet merger is completed, holders of FirstSun common stock will have a reduced ownership and voting interest in the combined company and will exercise less influence over management. If the proposed HomeStreet merger is completed, each HomeStreet shareholder and equity award holder who receives shares of FirstSun common stock will become a FirstSun stockholder. Based on the number of shares of HomeStreet common stock and HomeStreet equity awards outstanding as of the date of the merger agreement, the total number of shares of FirstSun common stock estimated to be issued to holders of HomeStreet common stock and equity awards in connection with, and subject to, the completion of the merger is approximately 8.44 million shares. In addition, FirstSun is also obligated, substantially concurrently with the closing of the proposed HomeStreet merger, to issue to certain institutional investors Warrants (having an initial exercise price of $32.50 per share, and a term of three years) to purchase approximately 1.15 million shares of FirstSun common stock and to issue to certain institutional investors approximately 2.92 million shares of FirstSun common stock at a purchase price of $32.50 per share. Based on the number of shares of FirstSun and HomeStreet common stock outstanding as of the close of business on March 6, 2024, and based on the number of shares of FirstSun common stock estimated to be issued to holders of HomeStreet common stock and equity awards in the proposed HomeStreet merger and, in connection the closing of the merger, expected to be issued pursuant to the Acquisition Finance Securities Purchase Agreement, the former holders of HomeStreet common stock and equity awards, as a group, are estimated to own approximately 22% of the outstanding common shares of the combined company immediately after completion of the proposed HomeStreet merger, and the holders of FirstSun common stock, as a group, immediately prior to the HomeStreet merger, including and together with the institutional investors that purchase shares of FirstSun common stock pursuant to the Acquisition Finance Securities Purchase Agreement in connection with the completion of the HomeStreet merger, are estimated to own approximately 78% of the outstanding shares of the combined company immediately after completion of the proposed HomeStreet merger (assuming no exercise of FirstSun stock options prior to the closing of the HomeStreet merger, and excluding shares issuable upon exercise of the FirstSun stock options and the Warrants). And because of this, if the proposed the HomeStreet merger is completed, FirstSun stockholders may have less influence than they now have the management and policies of FirstSun.
Previous report
We face risks and uncertainties related to our proposed merger with HomeStreet.
Previous report
Before the transactions contemplated in the merger agreement can be completed, various approvals must be obtained, including approval of the Federal Reserve and the Office of the Comptroller of the Currency. The terms and conditions of the approvals that are granted may impose conditions, limitations, obligations or costs, or place restrictions on the conduct of the combined company’s business or require changes to the terms of the transactions contemplated by the merger agreement. There can be no assurance that regulators will not impose any such conditions, limitations, obligations or restrictions and that such conditions, limitations, obligations or restrictions will not have the effect of delaying the completion of any of the transactions contemplated by the merger agreement, imposing additional material costs on or materially limiting the revenues of the combined company following the merger or otherwise reduce the anticipated benefits of the merger if the merger were consummated successfully within the expected timeframe. In addition, there can be no assurance that any such conditions, terms, obligations or restrictions will not result in the delay or abandonment of the merger.
Previous report
If the proposed HomeStreet merger is completed, HomeStreet’s business, financial condition (including the value of its assets and liabilities), liquidity and results of operations, and our ability to successfully implement strategies to integrate HomeStreet’s business into FirstSun, will be of major significance with respect to the combined company and may materially impact the value of FirstSun common stock. HomeStreet’s total assets and total liabilities of approximately $9.4 billion and $8.9 billion, respe ctively, as of December 31, 2023, exceeded FirstSun’s total assets and total liabilities of approximately $7.9 billion and $7.0 billion, respectively, as of that date. If the proposed HomeStreet merger is completed, among other things, the net interest income, assets, such as securities and loans, and economic value of equity of the combined company are expected to have different sensitivities to changes in interest rates than the current sensitivities of net interest income, assets, such as securities and loans, and economic value of equity of FirstSun independently to changes in interest rates, which will present risks that are different from and in addition to those currently affecting FirstSun. Additionally, HomeStreet’s business and operations differ from FirstSun’s, and, if completed, the proposed HomeStreet merger will expand FirstSun’s market areas to include operations in Washington, California, Hawaii, Oregon and other smaller markets, which presents challenges and risk with respect to the integration of the operations and business of HomeStreet into FirstSun.
Previous report
FirstSun and HomeStreet have operated and, until the completion of the merger, will continue to operate independently. There can be no assurances that the businesses of FirstSun and HomeStreet can be integrated successfully. It is possible that the integration process could result in the loss of key FirstSun employees or key HomeStreet employees, the loss of customers, the disruption of either company’s or both companies’ ongoing businesses, inconsistencies in standards, controls, procedures and policies, unexpected integration issues, higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated. The success of the merger will depend on, among other things, the ability of FirstSun and HomeStreet to combine their businesses in a manner that facilitates growth opportunities and realizes cost savings. However, if the combined company is not able to successfully achieve these objectives, the anticipated benefits of the merger may not be realized fully, or at all, or may take longer to realize than expected.
Previous report
In addition, the merger agreement contains provisions that restrict each of FirstSun’s and HomeStreet’s ability to, among other things, initiate, solicit, knowingly encourage or knowingly facilitate, inquiries or proposals with respect to, or, subject to certain exceptions generally related to its board of directors’ exercise of its fiduciary duties, engage in any negotiations concerning, or provide any confidential information relating to, any alternative acquisition proposals. These provisions, which include a $10.0 million termination fee payable under certain circumstances, might discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of FirstSun from considering or proposing that acquisition, or might result in a potential competing acquirer proposing to pay a lower per share price to acquire FirstSun than it might otherwise have proposed to pay.
Previous report
Failure to complete our proposed merger with HomeStreet could negatively impact our business, financial results and stock price. If we complete the proposed HomeStreet merger but do not successfully manage the risks associated with the proposed HomeStreet merger, the proposed HomeStreet merger could have a material adverse effect on our business, financial condition, and results of operations, including short-term and long‑term liquidity, our ability to successfully implement our strategic plan and our stock price.
Previous report
If HomeStreet shareholders exercise dissenters’ rights and the proposed HomeStreet merger is completed, FirstSun may incur significant additional costs.
Previous report
HomeStreet shareholders are entitled to exercise dissenters’ rights in connection with the proposed HomeStreet merger. If the proposed HomeStreet merger is completed, a HomeStreet shareholder who has complied with applicable requirements under the merger agreement and Chapter 23B.13 of the Washington Business Corporation Act may dissent and require FirstSun to pay in cash the appraised value of such shareholders’ dissenting shares instead of the merger consideration. FirstSun cannot predict the number of shares of HomeStreet common stock that may constitute dissenting shares, the amount of cash that FirstSun may be required to pay following the completion of the proposed HomeStreet merger with respect to the dissenting shares, or the expenses that FirstSun may incur in connection with the appraisal process. However, if the proposed HomeStreet merger is completed, FirstSun payments with respect to the dissenting shares and FirstSun expenses in connection with the dissent and potential appraisal process may negatively impact FirstSun’s liquidity and capital, which could adversely affect our business, stock price, financial condition, and results of operations, including short-term and long‑term liquidity, our ability to successfully close the merger, our ability to implement our strategic plan, and could also result in FirstSun taking steps to strengthen its liquidity or capital position, including by issuing additional stock or equity derivative securities.
Previous report
We expect to incur substantial expenses related to the proposed HomeStreet merger.
Previous report
We expect to incur substantial expenses in connection with completing the proposed HomeStreet merger and combining the business, operations, networks, systems, technologies, policies and procedures of FirstSun and those of HomeStreet. Although we have assumed that a certain level of transaction and combination expenses would be incurred, there are a number of factors beyond their control that could affect the total amount or the timing of combination expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. Due to these factors, the transaction and combination expenses associated with the proposed HomeStreet merger could, particularly in the near term, exceed the savings that the combined company expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings related to the combination of the businesses following the completion of the proposed HomeStreet merger.
Previous report
In addition, before completing the proposed HomeStreet merger, we will incur or have incurred substantial expenses in connection with the negotiation and completion of the transactions contemplated by the HomeStreet merger agreement. In preparation for the consummation of the proposed HomeStreet merger, we will also incur the additional costs and expenses of preparing and filing a merger registration statement with the SEC, printing and mailing the proxy statement/prospectus to solicit HomeStreet shareholder approval of the merger proposal, and all filing and other fees expected to be paid to the SEC, bank regulatory authorities and other governmental agencies in connection with the proposed HomeStreet merger. If the proposed HomeStreet merger is not completed, FirstSun would have to recognize these expenses without realizing the anticipated benefits of the proposed HomeStreet merger.
Previous report
If our proposed merger with HomeStreet is not completed for any reason, our ongoing business may be adversely affected, and, without realizing any of the benefits of having completed the merger, we will be subject to a number of risks, including the following:
Previous report
•we may be required, under certain circumstances, to pay HomeStreet a termination fee of $10.0 million under the merger agreement;
Previous report
•we will be required to pay certain costs relating to the merger, whether or not the merger is completed, such as legal, accounting, financial advisor and printing fees;
Previous report
•the merger agreement places certain restrictions on the conduct of both FirstSun’s and HomeStreet’s business prior to completion of the merger, which may adversely affect our ability to execute certain of our business strategies; and
Previous report
•matters relating to the merger may require substantial commitments of time and resources by our management, which could otherwise have been devoted to other opportunities that may have been beneficial to us, as an independent company.
Previous report
In addition, if the merger is not completed, we may experience negative reactions from the financial markets and from our customers and employees. For example, we may be impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the merger, without realizing any of the anticipated benefits of completing the merger. The market price of our common stock could decline to the extent that the current market prices reflect a market assumption that the merger will be completed. We also could be subject to litigation related to the proposed merger, any failure to complete the merger or to proceedings commenced against us to perform our obligations under the merger agreement. If the merger is not completed, we cannot assure you that the risks described above will not materialize and will not materially affect our business, financial results and stock price.
Previous report
•If we exceed $15 billion in assets through an acquisition (or make an acquisition after exceeding $15 billion in assets through organic growth), then our trust preferred securities will be excluded from Tier 1 capital and instead included in Tier 2 capital; and if the proposed HomeStreet merger is completed, we expect to have more than $15 billion in assets, and therefore any trust preferred securities of the combined company will be excluded from Tier 1 capital and instead included in Tier 2 capital (as of December 31, 2023, FirstSun had approximately $13.9 million in trust preferred securities and HomeStreet had approximately $62 million in trust preferred securities);
Previous report
There is a limited trading market in our common stock, which would hinder your ability to sell our common stock and may lower the market price of the stock.
Previous report
A closing condition to the HomeStreet merger agreements (and consistent with undertakings in the Acquisition Finance Securities Purchase Agreement), FirstSun is required to uplist its common stock to Nasdaq. And pursuant to undertakings in the Upfront Securities Purchase Agreement, FirstSun is required to use its reasonable best efforts to list its common stock on Nasdaq (or the New York Stock Exchange or the NYSE American) within 120 days of January 17, 2024, provided that, to the extent reasonably necessary to effect the transactions contemplated by the HomeStreet merger agreement, FirstSun may extend such deadline by up to 60 days with the prior written consent of the selling stockholders (which consent shall not be unreasonably withheld, delayed or conditioned), regardless of whether the HomeStreet merger is consummated. If the proposed HomeStreet merger is completed, the shares of FirstSun common stock which will be issued to HomeStreet shareholders in the proposed HomeStreet merger will be freely transferable. However, regardless of whether the HomeStreet merger is completed, there is a limited trading market in FirstSun common stock, which may hinder shareholders’ ability to sell FirstSun common stock and may lower the market price of the stock. The development of a trading market depends upon the existence of willing buyers and sellers, the presence of which is not within the control of FirstSun. Accordingly, investing in FirstSun stock could potentially be illiquid and a long-term investment. Even though the FirstSun stockholder base would increase as a result of the completion of the proposed HomeStreet merger and even if the FirstSun common stock begins trading on Nasdaq or any other stock exchange, there can be no assurance that an active and liquid trading market for FirstSun will develop, or once developed, will continue.
Previous report
Pursuant to the Stockholders’ Agreement, as amended, FirstSun stockholders also have certain rights and obligations related to its governance, transfer restrictions, rights of first refusal, tag-along rights, and with respect to the Significant Stockholders, certain preemptive rights. See “Item 13. Certain Relationships and Related Transactions, and Director Independence,” under the heading “Stockholders’ Agreement.”
Previous report
Shareholder litigation could prevent or delay the completion of the merger or otherwise negatively impact the business and operations of FirstSun and HomeStreet.
Previous report
Shareholders of FirstSun or HomeStreet may file lawsuits against FirstSun, HomeStreet and/or the directors and officers of either company in connection with the merger. One of the conditions to the closing is that there must be no order, injunction or decree issued by any court or governmental entity of competent jurisdiction or other legal restraint preventing the consummation of the merger or any of the other transactions contemplated by the merger agreement. If any plaintiff were successful in obtaining an injunction prohibiting FirstSun or HomeStreet from completing the merger or any of the other transactions contemplated by the merger agreement, then such injunction may delay or prevent the effectiveness of the merger and could result in significant costs to FirstSun or HomeStreet, including any cost associated with the indemnification of directors and officers of each company. FirstSun and HomeStreet may incur costs in connection with the defense or settlement of any stockholder or shareholder lawsuits filed in connection with the merger. Such litigation could have an adverse effect on the financial condition and results of operations of FirstSun and HomeStreet and could prevent or delay the completion of the merger.
Previous report
Our historical operating results may not be indicative of our future operating results.
Previous report
We may not be able to sustain our historical rate of growth, and, consequently, our historical results of operations will not necessarily be indicative of our future operations. Various factors, such as economic conditions, regulatory and legislative considerations, and competition, may also impede our ability to expand our market presence. If we experience a significant decrease in our historical rate of growth, our results of operations and financial condition may be adversely affected because a high percentage of our operating costs are fixed expenses.
Reworded paragraphs (48)
Previous wording
Our financial performance generally, and in particular, the ability of borrowers to pay interest on and repay the principal of outstanding loans and the value of collateral securing those loans, as well as demand for loans and other products and services we offer and whose success we rely on to drive our growth, is highly dependent upon the business environment in the primary markets where we operate and in the United States as a whole. Unlike larger financial institutions that are more geographically diversified, we are a regional bank that provides banking and financial services to customers primarily in Texas, Kansas, Colorado, New Mexico and Arizona. HomeStreet operates in California, Hawaii, Oregon and Washington, and, if completed, the proposed HomeStreet merger will provide additional geographic diversity. However, the economic conditions in our current, and potential future, markets may be different from, and in some instances worse than, the economic conditions in the United States as a whole.
Current wording
Our financial performance generally, and in particular, the ability of borrowers to pay interest on and repay the principal of outstanding loans and the value of collateral securing those loans, as well as demand for loans and other products and services we offer and whose success we rely on to drive our growth, is highly dependent upon the business environment in the primary markets where we operate and in the United States as a whole. Unlike larger financial institutions that are more geographically diversified, we are a regional bank that provides banking and financial services to customers primarily in Texas, Kansas, Colorado, New Mexico, Arizona, California and Washington. However, the economic conditions in our current, and potential future, markets may be different from, and in some instances worse than, the economic conditions in the United States as a whole.
Previous wording
More specifically, the market conditions in the markets in which we have (and if the proposed HomeStreet merger is completed, the additional markets in which we will have) a presence may be different from, and could be worse than, the economic conditions in the United States as a whole. As discussed elsewhere in this Item 1A, inflationary pressures have caused the Federal Reserve to increase interest rates. Increases in interest rates in the past have led to recessions of various lengths and intensities and might lead to such a recession in the near future. Such a recession or any other adverse changes in business and economic conditions generally or specifically in the markets in which we operate could affect our business, including causing one or more of the following negative developments:
Current wording
More specifically, the market conditions in the markets in which we have a presence may be different from, and could be worse than, the economic conditions in the United States as a whole. Inflationary pressures caused the Federal Reserve to increase interest rates in 2022 and 2023, although the Federal Reserve began reducing interest rates in 2024. Increases in interest rates in the past have led to recessions of various lengths and intensities and might lead to such a recession in the near future. Such a recession or any other adverse changes in business and economic conditions generally or specifically in the markets in which we operate could affect our business, including causing one or more of the following negative developments:
Previous wording
The Federal Reserve has shifted its focus to limiting inflationary and other potentially adverse economic effects or market conditions, which signals the potential for a continued period of economic uncertainty. In addition, there are continuing concerns related to, among other things, the level of U.S. government debt and fiscal actions that may be taken to address that debt, the potential impacts of artificial intelligence, potential pandemic risks, the potential resurgence of economic and political tensions with China, the Middle East or the continuing Russian invasion of Ukraine, any of which may have a destabilizing effect on financial markets and economic activity. Economic pressure on consumers and overall economic uncertainty may result in changes in consumer and business spending, borrowing and saving habits. These economic conditions and/or other negative developments in the domestic or international credit markets may significantly affect the markets in which we do business, the value of our loans and investments, and our ongoing operations, costs and profitability. Declines in real estate values and sales volumes and high unemployment or underemployment may also result in higher than expected loan delinquencies, increases in our levels of nonperforming and classified assets and a decline in demand for our products and services. These negative events may cause us to incur losses and may adversely affect our capital, liquidity and financial condition.
Current wording
The Federal Reserve has shifted its focus to limiting inflationary and other potentially adverse economic effects or market conditions, which signals the potential for a continued period of economic uncertainty. In addition, there are continuing concerns related to, among other things, the level of U.S. government debt and fiscal actions that may be taken to address that debt, the potential impacts of artificial intelligence, potential pandemic risks, the potential resurgence of economic and political tensions with China, the Middle East or the Russian invasion of Ukraine, the growth of global trade and commerce, trade policies, tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements, and trade wars, any of which may have a destabilizing effect on financial markets and economic activity. Economic pressure on consumers and overall economic uncertainty may result in changes in consumer and business spending, borrowing and saving habits. These economic conditions and/or other negative developments in the domestic or international credit markets may significantly affect the markets in which we do business, the value of our loans and investments, and our ongoing operations, costs and profitability. Declines in real estate values and sales volumes and high unemployment or underemployment may also result in higher than expected loan delinquencies, increases in our levels of nonperforming and classified assets and a decline in demand for our products and services. These negative events may cause us to incur losses and may adversely affect our capital, liquidity and financial condition.
Previous wording
The United States generally and the regions in which we operate specifically have experienced significant inflationary pressures, evidenced by higher gas prices, higher food prices and other consumer items. Inflation represents a loss in purchasing power because the value of investments does not keep up with inflation and erodes the purchasing power of money and the potential value of investments over time. Accordingly, inflation can result in material adverse effects upon our customers, their businesses and, as a result, our financial position and results of operation. Inflation also can and does generally lead to higher interest rates, which have their own separate risks. Decreased deposit balances could result in our reliance upon higher cost funding sources. See Risks Associated with Monetary Events, Interest Rate and Yield Curve Risks and Capital and Liquidity Risks in this Item 1A of this report.
Current wording
The United States generally and the regions in which we operate specifically have experienced significant inflationary pressures, evidenced by higher gas prices, higher food prices and other consumer items. Inflation represents a loss in purchasing power because the value of investments does not keep up with inflation and erodes the purchasing power of money and the potential value of investments over time. Accordingly, inflation can result in material adverse effects upon our customers, their businesses and, as a result, our financial position and results of operation. Inflation also can and does generally lead to higher interest rates, which have their own separate risks. Decreased deposit balances could result in our reliance upon higher cost funding sources.
Previous wording
Our wealth management business may be negatively impacted by changes in economic and market conditions and clients may seek legal remedies for investment performance.
Current wording
Our trust and wealth management business may be negatively impacted by changes in economic and market conditions and clients may seek legal remedies for investment performance.
Previous wording
Our wealth management business may be negatively impacted by changes in general economic and market conditions because the performance of this businesses is directly affected by conditions in the financial and securities markets. The financial markets and businesses operating in the securities industry are highly volatile (meaning that performance results can vary greatly within short periods of time) and are directly affected by, among other factors, domestic and foreign economic conditions and general trends in business and finance, and by the threat, as well as the occurrence of global conflicts or events, all of which are beyond our control. We cannot assure you that broad market performance will be favorable in the future. Declines in the financial markets or a lack of sustained growth may result in a decline in the performance of our wealth management business and may adversely affect the market value and performance of the investment securities that we manage, which could lead to reductions in our wealth management fees, because they are based primarily on the market value of the securities we manage, and could lead some of our clients to reduce their assets under management by us or seek legal remedies for investment performance. If any of these events occur, the financial performance of our wealth management business could be materially and adversely affected.
Current wording
Our trust and wealth management business may be negatively impacted by changes in general economic and market conditions because the performance of this businesses is directly affected by conditions in the financial and securities markets. The financial markets and businesses operating in the securities industry are highly volatile (meaning that performance results can vary greatly within short periods of time) and are directly affected by, among other factors, domestic and foreign economic conditions and general trends in business and finance, and by the threat, as well as the occurrence of global conflicts or events, all of which are beyond our control. We cannot assure you that broad market performance will be favorable in the future. Declines in the financial markets or a lack of sustained growth may result in a decline in the performance of our trust and wealth management business and may adversely affect the market value and performance of the investment securities that we manage, which could lead to reductions in our trust and wealth management fees, because they are based primarily on the market value of the securities we manage, and could lead some of our clients to reduce their assets under management by us or seek legal remedies for investment performance. If any of these events occur, the financial performance of our trust and wealth management business could be materially and adversely affected.
Previous wording
As of December 31, 2023, our commercial real estate loans were equal to 198.9% of our total risk-based capital. The banking regulators give commercial real estate lending greater scrutiny, and may require banks with higher levels of commercial real estate loans to implement enhanced underwriting, internal controls, risk management policies and portfolio stress testing, as well as possibly higher levels of allowances for losses and capital levels as a result of commercial real estate lending growth and exposures.
Current wording
As of December 31, 2024, our commercial real estate loans were equal to 169.5% of our total risk-based capital. The banking regulators give commercial real estate lending greater scrutiny, and may require banks with higher levels of commercial real estate loans to implement enhanced underwriting, internal controls, risk management policies and portfolio stress testing, as well as possibly higher levels of allowances for losses and capital levels as a result of commercial real estate lending growth and exposures.
Previous wording
A significant portion of our loans are secured by real estate. As of December 31, 2023, approximately 48.8% of our loan portfolio had real estate as primary collateral (owner occupied, non-owner occupied, non-residential construction, multifamily, and residential). Additionally, certain loans may have real estate as a secondary component of collateral. The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended. Deterioration in the real estate market could cause us to adjust our opinion of the level of credit quality in our loan portfolio. Such a determination may lead to an additional increase in our provisions for credit losses, which could also adversely affect our business, financial condition, and results of operations.
Current wording
A significant portion of our loans are secured by real estate. As of December 31, 2024, approximately 49.5% of our loan portfolio had real estate as primary collateral (owner occupied, non-owner occupied, non-residential construction, multifamily, and residential). Additionally, certain loans may have real estate as a secondary component of collateral. The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended. Deterioration in the real estate market could cause us to adjust our opinion of the level of credit quality in our loan portfolio. Such a determination may lead to an additional increase in our provisions for credit losses, which could also adversely affect our business, financial condition, and results of operations.
Previous wording
At December 31, 2023, we had a total of approximately $67.2 million of nonperforming assets or approximately 0.85% of total assets. Our nonperforming assets adversely affect our net income in various ways. We do not record interest income on nonaccrual loans or other real estate owned, thereby adversely affecting our net income and returns on assets and equity, increasing our loan administration costs and adversely affecting our efficiency ratio. When we take collateral in foreclosures and similar proceedings, we are required to mark the related asset to the then fair market value of the collateral, which may ultimately result in a loss. An increase in the level of nonperforming assets increases our risk profile and may impact the capital levels regulators believe are appropriate in light of the ensuing risk profile. In addition, the resolution of nonperforming assets requires significant commitments of time from management, which may materially and adversely impact their ability to perform their other responsibilities. If we experience increases in nonperforming loans and nonperforming assets, our net interest income may be negatively impacted and our loan administration costs could increase, each of which could have an adverse effect on our net income and related ratios, such as return on assets and equity.
Current wording
At December 31, 2024, we had a total of approximately $74.2 million of nonperforming assets or approximately 0.92% of total assets. Our nonperforming assets adversely affect our net income in various ways. We do not record interest income on nonaccrual loans or other real estate owned, thereby adversely affecting our net income and returns on assets and equity, increasing our loan administration costs and adversely affecting our efficiency ratio. When we take collateral in foreclosures and similar proceedings, we are required to mark the related asset to the then fair market value of the collateral, which may ultimately result in a loss. An increase in the level of nonperforming assets increases our risk profile and may impact the capital levels regulators believe are appropriate in light of the ensuing risk profile. In addition, the resolution of nonperforming assets requires significant commitments of time from management, which may materially and adversely impact their ability to perform their other responsibilities. If we experience increases in nonperforming loans and nonperforming assets, our net interest income may be negatively impacted and our loan administration costs could increase, each of which could have an adverse effect on our net income and related ratios, such as return on assets and equity.
Previous wording
We have traditionally obtained funds through local deposits and thus we have a base of lower cost transaction deposits. Generally, we believe local deposits are a cheaper and more stable source of funds than other borrowings because interest rates paid for local deposits are typically lower than interest rates charged for borrowings from the Federal Reserve or from other institutional lenders and reflect a mix of transaction and time deposits. Further, economic conditions and rising interest rates could result in a decrease of our transaction deposit account balances as customers seek to obtain maximum federal deposit insurance coverage or to seek higher interest rates. Our cost of funds has increased in the past 12 months due largely to overall increases in the cost of our deposits. These trends could continue in the remainder of 2024. Additionally, our costs of funds and our profitability and liquidity are likely to be adversely affected if, and to the extent, we have to rely upon higher cost borrowings from the Federal Reserve or other institutional lenders, such as the Federal Home Loan Bank, or upon brokers to fund liquidity needs, and changes in our deposit mix, pricing, and growth could adversely affect our profitability and the ability to expand our loan portfolio. Further, as a result of bank closures or other factors, regulators could increase the cost of our FDIC insurance assessments and affect our profitability.
Current wording
We have traditionally obtained funds through local deposits and thus we have a base of lower cost transaction deposits. Generally, we believe local deposits are a cheaper and more stable source of funds than other borrowings because interest rates paid for local deposits are typically lower than interest rates charged for borrowings from the Federal Reserve or from other institutional lenders and reflect a mix of transaction and time deposits. Further, economic conditions and rising interest rates could result in a decrease of our transaction deposit account balances as customers seek to obtain maximum federal deposit insurance coverage or to seek higher interest rates. Additionally, our costs of funds and our profitability and liquidity are likely to be adversely affected if, and to the extent, we have to rely upon higher cost borrowings from the Federal Reserve or other institutional lenders, such as the Federal Home Loan Bank, or upon brokers to fund liquidity needs, and changes in our deposit mix, pricing, and growth could adversely affect our profitability and the ability to expand our loan portfolio. Further, as a result of bank closures or other factors, regulators could increase the cost of our FDIC insurance assessments and affect our profitability.
Previous wording
Our profitability is highly dependent on our net interest income, which is the difference between the interest income paid to us on our loans and investments and the interest we pay to third parties such as our depositors, lenders and debt holders. Changes in interest rates can impact our profits and the fair values of certain of our assets and liabilities. Higher market interest rates and increased competition for deposits may result in higher interest expense, as we may offer higher rates to attract or retain customer deposits. Increases in interest rates also may increase the amount of interest expense we pay to creditors on short and long-term debt. Interest rate risk can also result from mismatches between the dollar amounts of re-pricing or maturing assets and liabilities and from mismatches in the timing and rates at which our assets and liabilities re-price. Changes in market values of investment securities classified as available for sale are impacted by interest rates and can negatively impact our other comprehensive income and equity levels through accumulated other comprehensive income, which includes net unrealized gains and losses on those securities. Further, such losses could be realized into earnings should liquidity and/or business strategy necessitate the sales of securities in a loss position.
Current wording
Our profitability is highly dependent on our net interest income, which is the difference between the interest income paid to us on our loans and investments and the interest we pay to third parties such as our depositors, lenders and debt holders. Changes in interest rates can impact our profits and the fair values of certain of our assets and liabilities. Higher market interest rates and increased competition for deposits may result in higher interest expense, as we may offer higher rates to attract or retain customer deposits. Increases in interest rates also may increase the amount of interest expense we pay to creditors on short and long-term debt. Interest rate risk can also result from mismatches between the dollar amounts of re-pricing or maturing assets and liabilities and from mismatches in the timing and rates at which our assets and liabilities re-price. Changes in market values of investment securities classified as available for sale are impacted by interest rates and can negatively impact our other comprehensive income and equity levels through accumulated other comprehensive income, which includes net unrealized gains and losses on those securities. Further, such losses could be realized into earnings should liquidity and/or business strategy necessitate the sales of securities in a loss position. We actively monitor and manage the balances of our maturing and re-pricing assets and liabilities to reduce the adverse impact of changes in interest rates, but there can be no assurance that we will be able to avoid material adverse effects on our net interest margin in all market conditions.
Previous wording
Mortgage activity decreased significantly in 2023 and 2022. We may not be able to return our mortgage business to the rates of growth achieved in previous years or even grow our mortgage business at all. The success of our mortgage division is dependent upon our ability to originate loans and sell them to investors, in each case at or near current volumes. Loan production levels are sensitive to changes in the level of interest rates and changes in economic conditions. Mortgage production, especially refinancing activity, declines in rising interest rate environments. Our mortgage origination volume could be materially and adversely affected by rising interest rates. Accordingly, when interest rates increase, we generally expect that our mortgage production will decline.
Current wording
The success of our mortgage division is dependent upon our ability to originate loans and sell them to investors, in each case at or near current volumes. Loan production levels are sensitive to changes in the level of interest rates and changes in economic conditions. Mortgage production, especially refinancing activity, declines in rising interest rate environments. Our mortgage origination volume could be materially and adversely affected by rising interest rates. Accordingly, when interest rates increase, we generally expect that our mortgage production will decline.
Previous wording
Because we sell a substantial portion of the mortgage loans we originate, the profitability of our mortgage banking business also depends in large part on our ability to aggregate a high volume of loans and sell them in the secondary market at a gain. In fact, when rates rise, we expect increasing industry-wide competitive pressures related to changing market conditions to reduce pricing margins and mortgage revenues generally. If our level of mortgage production declines, our continued profitability will depend upon our ability to reduce our costs commensurate with the reduction of revenue from our mortgage operations. If we are unable to do so, our continued profitability may be materially and adversely affected. See Risks Associated With Monetary Events in this Item 1A of this report.
Current wording
Because we sell a substantial portion of the mortgage loans we originate, the profitability of our mortgage banking business also depends in large part on our ability to aggregate a high volume of loans and sell them in the secondary market at a gain. In fact, when rates rise, we expect increasing industry-wide competitive pressures related to changing market conditions to reduce pricing margins and mortgage revenues generally. If our level of mortgage production declines, our continued profitability will depend upon our ability to reduce our costs commensurate with the reduction of revenue from our mortgage operations. If we are unable to do so, our continued profitability may be materially and adversely affected.
Previous wording
In a period of rising interest rates, we expect our mortgage revenue to decrease due to decreased residential mortgage origination volume and pricing decisions of competitors may adversely affect our profitability.
Current wording
In a period of rising or high-interest rates, we expect our mortgage revenue to decrease due to decreased residential mortgage origination volume and pricing decisions of competitors may adversely affect our profitability.
Previous wording
Our mortgage division originates, sells and services residential mortgage loans. Changes in interest rates, housing prices, applicable government regulations and pricing decisions by our loan competitors may adversely affect demand for our residential mortgage loan products, the revenue realized on the sale of loans, the revenues received from servicing such loans for others and, ultimately, reduce our net income. In particular, when rates are higher, client activity (and our related income) tends to be muted. Lower rates tend to foster higher activity. Rising rates have substantially reduced our income from our mortgage division. Further reductions in income from our mortgage-related businesses are possible. In addition, new regulations, increased regulatory reviews, and/or changes in the structure of the secondary mortgage markets which we utilize to sell mortgage loans may increase costs and make it more difficult to operate a residential mortgage origination business. Our revenue from the mortgage banking business was $31.4 million in 2023 and $46.3 million in 2022. This revenue will likely decline in future periods if interest rates continue to rise or if the other risks highlighted in this paragraph are realized, which will adversely affect our profitability.
Current wording
Our mortgage division originates, sells and services residential mortgage loans. Changes in interest rates, housing prices, applicable government regulations and pricing decisions by our loan competitors may adversely affect demand for our residential mortgage loan products, the revenue realized on the sale of loans, the revenues received from servicing such loans for others and, ultimately, reduce our net income. In particular, when rates are higher, client activity (and our related income) tends to be muted. Lower rates tend to foster higher activity. Rising rates have substantially reduced our income from our mortgage division. Further reductions in income from our mortgage-related businesses are possible. In addition, new regulations, increased regulatory reviews, and/or changes in the structure of the secondary mortgage markets which we utilize to sell mortgage loans may increase costs and make it more difficult to operate a residential mortgage origination business. Our revenue from the mortgage banking business was $39.0 million in 2024 and $31.4 million in 2023. This revenue could decline in future periods if interest rates rise or remain elevated or if the other risks highlighted in this paragraph are realized, which will adversely affect our profitability.
Previous wording
We act as servicer for approximately $5.4 billion of residential loans owned by third parties as of December 31, 2023. As a servicer for those loans we have certain contractual obligations, including foreclosing on defaulted mortgage loans or, to the extent applicable, considering alternatives to foreclosure such as loan modifications or short sales. If we commit a material breach of our obligations as servicer, we may be subject to termination if the breach is not cured within a specified period of time following notice, causing us to lose servicing income.
Current wording
We act as servicer for approximately $5.8 billion of residential loans owned by third parties as of December 31, 2024. As a servicer for those loans we have certain contractual obligations, including foreclosing on defaulted mortgage loans or, to the extent applicable, considering alternatives to foreclosure such as loan modifications or short sales. If we commit a material breach of our obligations as servicer, we may be subject to termination if the breach is not cured within a specified period of time following notice, causing us to lose servicing income.
Previous wording
During 2023, we were notified, by our vendor, Progress Software Corporation, of vulnerabilities in Progress Software’s MOVEit file transfer software the Bank utilizes for securely transferring sensitive and confidential information and other data, resulting in unauthorized parties likely gaining access to certain Bank customer data that included personally identifiable information. We publicly disclosed this breach and provided appropriate notifications to potentially impacted customers. While our business has not been materially impacted by these cybersecurity incidents, similar incidents could have a material adverse effect on our business in the future. See “Vendor Incident” in Item 1.C, of this Annual Report on Form 10-K.
Current wording
During 2023, we were notified by our vendor, Progress Software Corporation, of vulnerabilities in Progress Software’s MOVEit file transfer software the Bank utilizes for securely transferring sensitive and confidential information and other data, resulting in unauthorized parties likely gaining access to certain Bank customer data that included personally identifiable information. We publicly disclosed this breach and provided appropriate notifications to potentially impacted customers. While our business has not been materially impacted by these cybersecurity incidents, similar incidents could have a material adverse effect on our business in the future.
Previous wording
Failure to perform in any of these areas could significantly weaken our competitive position, making it more difficult to attract new and retain existing clients and our net interest margin, net interest income and wealth management fees could decline, which would adversely affect our results of operations and could cause us to incur losses in the future.
Current wording
Failure to perform in any of these areas could significantly weaken our competitive position, making it more difficult to attract new and retain existing clients and our net interest margin, net interest income and trust and wealth management fees could decline, which would adversely affect our results of operations and could cause us to incur losses in the future.
Previous wording
In addition, our ability to successfully attract and retain wealth management clients is dependent on our ability to compete with competitors’ investment products, level of investment performance, client services and marketing and distribution capabilities. If we are not successful in attracting new and retaining existing clients, our business, financial condition, results of operations and prospects may be materially and adversely affected.
Current wording
In addition, our ability to successfully attract and retain trust and wealth management clients is dependent on our ability to compete with competitors’ investment products, level of investment performance, client services and marketing and distribution capabilities. If we are not successful in attracting new and retaining existing clients, our business, financial condition, results of operations and prospects may be materially and adversely affected.
Previous wording
As of December 31, 2023, we had a carrying amount of $553.7 million of investment securities. The fair value of our investment securities may be adversely affected by market conditions, including changes in interest rates, and the occurrence of any events adversely affecting the issuer of particular securities in our investments portfolio. We analyze our securities on a quarterly basis to determine if an expected credit loss has occurred. The process for determining whether a credit loss has occurred usually requires complex, subjective judgments about the future financial performance of the issuer in order to assess the probability of receiving all contractual principal and interest payments on the security. Because of changing economic and market conditions affecting issuers, we may be required to recognize expected credit losses on our securities in future periods, which could have a material adverse effect on our business, financial condition or results of operations.
Current wording
As of December 31, 2024, we had a carrying amount of $504.3 million of investment securities. The fair value of our investment securities may be adversely affected by market conditions, including changes in interest rates, and the occurrence of any events adversely affecting the issuer of particular securities in our investments portfolio. We analyze our securities on a quarterly basis to determine if an expected credit loss has occurred. The process for determining whether a credit loss has occurred usually requires complex, subjective judgments about the future financial performance of the issuer in order to assess the probability of receiving all contractual principal and interest payments on the security. Because of changing economic and market conditions affecting issuers, we may be required to recognize expected credit losses on our securities in future periods, which could have a material adverse effect on our business, financial condition or results of operations.
Previous wording
The FDIC insures deposits at FDIC-insured depository institutions, such as Sunflower Bank, up to the maximum federal deposit insurance level per account. Our regular assessments are based on its average consolidated total assets minus average tangible equity as well as by risk classification, which includes regulatory capital levels and the level of supervisory concern. In addition to ordinary assessments described above, the FDIC has the ability to impose special assessments in certain instances. If the proposed merger with HomeStreet is completed, we will have more than $10 billion in assets and will be subject to a modified methodology for calculating FDIC insurance assessments and potentially higher assessment rates as a result of institutions with $10 billion or more in assets being required to bear a greater portion of the cost of achieving the DIF minimum reserve ratio of 1.35% as required by the Dodd-Frank Act.
Current wording
The FDIC insures deposits at FDIC-insured depository institutions, such as Sunflower Bank, up to the maximum federal deposit insurance level per account. Our regular assessments are based on its average consolidated total assets minus average tangible equity as well as by risk classification, which includes regulatory capital levels and the level of supervisory concern. In addition to ordinary assessments described above, the FDIC has the ability to impose special assessments in certain instances.
Previous wording
We anticipate we will continue to rely primarily on deposits, loan repayments, and cash flows from our investment securities to provide liquidity. Additionally, when necessary, the secondary sources of borrowed funds described above will be used to augment our primary funding sources. During 2023, the Federal Reserve announced the creation of a new Bank Term Funding Program in an effort to minimize the need for banks to sell securities at a loss in times of stress. The Federal Reserve has announced that it will cease making new advances under this program after March 11, 2024. An inability to maintain or raise funds (including the inability to access secondary funding sources) in amounts necessary to meet our liquidity needs would have a substantial negative effect, individually or collectively, on our liquidity. Our access to funding sources in amounts adequate to finance our activities, or on terms attractive to us, could be impaired by factors that affect us specifically or the financial services industry in general. For example, factors that could detrimentally impact our access to liquidity sources include our financial results, a decrease in the level of our business activity due to a market downturn or adverse regulatory action against us, a reduction in our credit rating, any damage to our reputation, counterparty availability, changes in the activities of our business partners, changes affecting our loan portfolio or other assets, or any other event that could cause a decrease in depositor or investor confidence in our creditworthiness and business. Those factors may lead to depositors withdrawing their deposits or creditors limiting our borrowings. Our access to liquidity could also be impaired by factors that are not specific to us, such as general business conditions, interest rate fluctuations, severe volatility or disruption of the financial markets, bank closures or negative views and expectations about the prospects for the financial services industry as a whole, or legal, regulatory, accounting, and tax environments governing our funding transactions. In addition, our ability to raise funds is strongly affected by the general state of the U.S. and world economies and financial markets as well as the policies and capabilities of the U.S. government and its agencies, and may remain or become increasingly difficult due to economic and other factors beyond our control. Any such event or failure to manage our liquidity effectively could affect our competitive position, increase our borrowing costs and the interest rates we pay on deposits, limit our access to the capital markets and have a material adverse effect on our results of operations or financial condition.
Current wording
We anticipate we will continue to rely primarily on deposits, loan repayments, and cash flows from our investment securities to provide liquidity. Additionally, when necessary, the secondary sources of borrowed funds described above will be used to augment our primary funding sources. An inability to maintain or raise funds (including the inability to access secondary funding sources) in amounts necessary to meet our liquidity needs would have a substantial negative effect, individually or collectively, on our liquidity. Our access to funding sources in amounts adequate to finance our activities, or on terms attractive to us, could be impaired by factors that affect us specifically or the financial services industry in general. For example, factors that could detrimentally impact our access to liquidity sources include our financial results, a decrease in the level of our business activity due to a market downturn or adverse regulatory action against us, a reduction in our credit rating, any damage to our reputation, counterparty availability, changes in the activities of our business partners, changes affecting our loan portfolio or other assets, or any other event that could cause a decrease in depositor or investor confidence in our creditworthiness and business. Those factors may lead to depositors withdrawing their deposits or creditors limiting our borrowings. Our access to liquidity could also be impaired by factors that are not specific to us, such as general business conditions, interest rate fluctuations, severe volatility or disruption of the financial markets, bank closures or negative views and expectations about the prospects for the financial services industry as a whole, or legal, regulatory, accounting, and tax environments governing our funding transactions. In addition, our ability to raise funds is strongly affected by the general state of the U.S. and world economies and financial markets as well as the policies and capabilities of the U.S. government and its agencies, and may remain or become increasingly difficult due to economic and other factors beyond our control. Any such event or failure to manage our liquidity effectively could affect our competitive position, increase our borrowing costs and the interest rates we pay on deposits, limit our access to the capital markets and have a material adverse effect on our results of operations or financial condition.
Previous wording
Our merger and acquisition activities, including our proposed merger with HomeStreet, could involve a number of additional risks, including the risks of:
Current wording
Our merger and acquisition activities could involve a number of additional risks, including the risks of:
Previous wording
•the occurrence of a change in the interest rate environment, including the magnitude and duration of interest rate changes, which could adversely affect both ours and HomeStreet’s revenue and expenses, value of assets and obligations, andthe availability and cost of capital and liquidity, along with the consummation of the merger;
Current wording
•the occurrence of a change in the interest rate environment, including the magnitude and duration of interest rate changes, which could adversely affect our revenue and expenses, value of assets and obligations, and the availability and cost of capital and liquidity, along with the consummation of the merger;
Previous wording
•the ability to develop and maintain a strong core deposit base or other low cost funding sources necessary to fund ours and HomeStreet’s activities, particularly in a rising or high interest rate environment;
Current wording
•the ability to develop and maintain a strong core deposit base or other low-cost funding sources necessary to fund our activities, particularly in a rising or high-interest rate environment;
Previous wording
Future mergers and acquisitions may be delayed, impeded, or prohibited due to regulatory issues.
Current wording
Future mergers and acquisitions may be delayed, impeded, not approved or prohibited due to regulatory issues.
Previous wording
Our mergers and acquisitions, including our proposed merger with HomeStreet, are subject to approval by a variety of federal and state regulatory agencies. The process for obtaining these required regulatory approvals has become substantially more difficult in recent years. Regulatory approvals could be delayed, impeded, restrictively conditioned or denied due to existing or new regulatory issues we or the target company has, or may have, with regulatory agencies, including, without limitation, issues related to adverse public comments to merger applications, anti-money laundering/Bank Secrecy Act compliance, fair lending laws, fair housing laws, consumer protection laws, unfair, deceptive, or abusive acts or practices regulations, Community Reinvestment Act issues, anti-trust issues, and other similar laws and regulations. We may fail to pursue, evaluate or complete strategic and competitively significant acquisition opportunities as a result of our inability, or perceived or anticipated inability, to obtain regulatory approvals in a timely manner, under reasonable conditions or at all. Difficulties associated with potential mergers and acquisitions that may result from these factors could have a material adverse effect on our business, and, in turn, our financial condition and results of operations.
Current wording
Our mergers and acquisitions are subject to approval by a variety of federal and state regulatory agencies. The process for obtaining these required regulatory approvals has become substantially more difficult in recent years, including in connection with prior proposed mergers that we have pursued. Regulatory approvals could be delayed, impeded, restrictively conditioned or denied due to existing or new regulatory issues we or the target company has, or may have, with regulatory agencies, including, without limitation, issues related to adverse public comments to merger applications, anti-money laundering/Bank Secrecy Act compliance, fair lending laws, fair housing laws, consumer protection laws, unfair, deceptive, or abusive acts or practices regulations, Community Reinvestment Act issues, anti-trust issues, and other similar laws and regulations. We may fail to pursue, evaluate or complete strategic and competitively significant acquisition opportunities as a result of our inability, or perceived or anticipated inability, to obtain regulatory approvals in a timely manner, under reasonable conditions or at all. Difficulties associated with potential mergers and acquisitions that may result from these factors could have a material adverse effect on our business, and, in turn, our financial condition and results of operations.
Previous wording
The Dodd-Frank Act imposes additional regulatory requirements on institutions with $10 billion or more in assets. We had $7.88 billion in assets as of December 31, 2023. If the pending merger with HomeStreet is completed, then FirstSun expects to have more than $15 billion in assets and, as a result, will be subject to the additional regulatory requirements, increased supervision and increased costs, including the following:
Current wording
The Dodd-Frank Act imposes additional regulatory requirements on institutions with $10 billion or more in assets. We had $8.1 billion in assets as of December 31, 2024. Future organic growth or merger and acquisition activity could cause our assets to be more than $10 billion and, as a result, we will become subject to the additional regulatory requirements, increased supervision and increased costs, including the following:
Previous wording
may be protected from liability to a borrower for failing to make the necessary determinations. In response to these laws and related CFPB rules, we have tightened, and in the future may further tighten, our mortgage loan underwriting standards to determine borrowers’ ability to repay. Although it is our policy not to make predatory loans and to determine borrowers’ ability to repay, these laws and related rules create the potential for increased liability with respect to our lending and loan investment activities. They increase our cost of doing business and, ultimately, may prevent us from making certain loans and cause us to reduce the average percentage rate or the points and fees on loans that we do make.
Current wording
Federal, state and local laws have been adopted that are intended to eliminate certain lending practices considered “predatory.” These laws prohibit practices such as steering borrowers away from more affordable products, selling unnecessary insurance to borrowers, repeatedly refinancing loans and making loans without a reasonable expectation that the borrowers will be able to repay the loans irrespective of the value of the underlying property. The CFPB has issued several rules on mortgage lending, notably a rule requiring all home mortgage lenders to determine a borrower’s ability to repay the loan. Loans with certain terms and conditions and that otherwise meet the definition of a “qualified mortgage” may be protected from liability to a borrower for failing to make the necessary determinations. In response to these laws and related CFPB rules, we have tightened, and in the future may further tighten, our mortgage loan underwriting standards to determine borrowers’ ability to repay. Although it is our policy not to make predatory loans and to determine borrowers’ ability to repay, these laws and related rules create the potential for increased liability with respect to our lending and loan investment activities. They increase our cost of doing business and, ultimately, may prevent us from making certain loans and cause us to reduce the average percentage rate or the points and fees on loans that we do make.
Previous wording
Some of the services we provide, such as wealth management services require us to act as fiduciaries for our customers and others. Customers make claims and on occasion take legal action pertaining to our performance of our fiduciary responsibilities. Whether customer claims and legal action related to our performance of our fiduciary responsibilities are founded or unfounded, if such claims and legal action are not resolved in a manner favorable to us, they may result in significant financial liability and/or adversely affect the market perception of us and our products and services as well as impact customer demand for those products and services. Any financial liability or reputational damage could have a material adverse effect on our business, which, in turn, could have a material adverse impact on our financial condition and results of operations.
Current wording
Some of the services we provide, such as trust and wealth management services, require us to act as fiduciaries for our customers and others. Customers make claims and on occasion take legal action pertaining to our performance of our fiduciary responsibilities. Whether customer claims and legal action related to our performance of our fiduciary responsibilities are founded or unfounded, if such claims and legal action are not resolved in a manner favorable to us, they may result in significant financial liability and/or adversely affect the market perception of us and our products and services as well as impact customer demand for those products and services. Any financial liability or reputational damage could have a material adverse effect on our business, which, in turn, could have a material adverse impact on our financial condition and results of operations.
Previous wording
From time to time, we, our directors and our management are the subject of various claims and legal actions by customers, employees, stockholders and others. Whether such claims and legal actions are legitimate or unfounded, if such claims and legal actions are not resolved in our favor, they may result in significant financial liability and/or adversely affect our reputation and our products and services as well as impact customer demand for those products and services. In light of the potential cost and uncertainty involved in litigation, we have in the past and may in the future settle matters even when we believe we have a meritorious defense. Certain claims may seek injunctive relief, which could disrupt the ordinary conduct of our business and operations, increase our cost of doing business or delay or prevent our planned mergers or acquisitions.
Current wording
From time to time, we, our directors and our management are the subject of various claims and legal actions by customers, employees, stockholders and others. Whether such claims and legal actions are legitimate or unfounded, if such claims and legal actions are not resolved in our favor, they may result in significant financial liability and/or adversely affect our reputation and our products and services as well as impact customer demand for those products and services. In light of the potential cost and uncertainty involved in litigation, we have in the past and may in the future settle matters even when we believe we have a meritorious defense. Certain claims may seek injunctive relief, which could disrupt the ordinary conduct of our business and operations, increase our cost of doing business or delay or prevent our planned mergers or acquisitions. Our insurance or indemnities may not cover all claims that may be asserted against us. Any judgments or settlements in any pending litigation or future claims, litigation or investigation could have a material adverse effect on our business, reputation, financial condition and results of operations.
Previous wording
Maintaining and adapting our internal controls over financial reporting, disclosure controls and procedures and effective corporate governance policies and procedures (“controls and procedures”) is expensive and requires significant management attention. Moreover, as we continue to grow, including as a result of the proposed HomeStreet merger, if it is completed, our controls and procedures may become more complex and require additional resources to ensure they remain effective amid dynamic regulatory and other guidance. Failure to implement effective controls and procedures or circumvention of our controls and procedures could harm our business, results of operations and financial condition or cause us to fail to meet our public reporting obligations.
Current wording
Maintaining and adapting our internal controls over financial reporting, disclosure controls and procedures and effective corporate governance policies and procedures (“controls and procedures”) is expensive and requires significant management attention. Moreover, as we continue to grow, our controls and procedures may become more complex and require additional resources to ensure they remain effective amid dynamic regulatory and other guidance. Failure to implement effective controls and procedures or circumvention of our controls and procedures could harm our business, results of operations and financial condition or cause us to fail to meet our public reporting obligations.
Current wording
Risks Related to FirstSun Common Stock and Market Risk
Previous wording
Our common stock is currently quoted on the OTC Market Group, Inc.’s OTCQX Market. The development of an active trading market depends on the existence of willing buyers and sellers, the presence of which is not within our control, or that of any market maker. The number of active buyers and sellers of the shares of our common stock at any particular time may be limited. Under such circumstances, you could have difficulty selling your shares of our common stock on short notice. In addition, the total number of our outstanding shares less the shares beneficially owned by our directors, executive officers and greater than 5% stockholders, is quite limited. As a result, there is not currently an active trading market for our common stock. Accordingly, shareholders should consider the potential illiquid and long-term nature of an investment in FirstSun common stock.
Current wording
In addition, the total number of our outstanding shares less the shares beneficially owned by our directors, executive officers and greater than 5% stockholders, is quite limited. Accordingly, shareholders should consider the potential illiquid and long-term nature of an investment in FirstSun common stock.
Previous wording
FirstSun’s Significant Stockholders could exercise significant influence over FirstSun, and their interests in FirstSun may be different than yours.
Current wording
FirstSun’s Larger Stockholders could exercise significant influence over FirstSun, and their interests in FirstSun may be different than yours.
Previous wording
Certain of the Significant Stockholders of FirstSun (those identified under “Item 13. Certain Relationships and Related Transactions, and Director Independence,” under the heading “Stockholders’ Agreement”), own, in the aggregate, approximately 70.4% of our common stock. As a result, our Significant Stockholders exercise significant influence over FirstSun through such ownership.
Current wording
Certain of the larger stockholders of FirstSun own, in the aggregate, approximately 67.4% of our common stock. As a result, our larger stockholders exercise significant influence over FirstSun through such ownership.
Previous wording
In addition, under our Stockholders’ Agreement, as amended, certain of FirstSun’s Significant Stockholders, are entitled to designate nominees for nine of the ten directors, in each case, so long as certain stock ownership thresholds are maintained. The directors nominated by the Significant Stockholders will have significant authority to make decisions affecting our business, including, among others, the issuance of additional capital stock, the incurrence of additional indebtedness, mergers and acquisitions, the decision of whether or not to declare dividends and other extraordinary corporate matters.
Current wording
In addition, certain of FirstSun’s larger stockholders, are entitled to designate nominees for four of the ten director seats, in each case, so long as certain stock ownership thresholds are maintained. The directors nominated by these larger stockholders will have significant authority to make decisions affecting our business, including, among others, the issuance of additional capital stock, the incurrence of additional indebtedness, mergers and acquisitions, the decision of whether or not to declare dividends and other extraordinary corporate matters.
Previous wording
The interests of FirstSun’s Significant Stockholders may conflict with the interests of our stockholders. For example, some or all of FirstSun’s Significant Stockholders may support certain long-term strategies or objectives for FirstSun that may not be accretive to our stockholders in the short term. The concentration of ownership may also delay, defer or even prevent a change in control of FirstSun, even if such a change in control would benefit our other stockholders, and may make some transactions more difficult or impossible without the support of FirstSun’s Significant Stockholders.
Current wording
The interests of FirstSun’s larger stockholders may conflict with the interests of our stockholders. For example, some or all of FirstSun’s larger stockholders may support certain long-term strategies or objectives for FirstSun that may not be accretive to our stockholders in the short term. The concentration of ownership may also delay, defer or even prevent a change in control of FirstSun, even if such a change in control would benefit our other stockholders, and may make some transactions more difficult or impossible without the support of FirstSun’s larger stockholders.
Previous wording
Some provisions of our organizational documents, our Stockholders’ Agreement and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders.
Current wording
Some provisions of our organizational documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders.
Previous wording
Provisions in our certificate of incorporation, bylaws and Stockholders’ Agreement, as well as provisions of the DGCL, could make it more difficult for a third-party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions include:
Current wording
Provisions in our certificate of incorporation and bylaws, as well as provisions of the DGCL, could make it more difficult for a third-party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions include:
Showing the first 40 of 48 pairs. Open the source sections for the rest.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Federal, state and local laws have been adopted that are intended to eliminate certain lending practices considered “predatory.” These laws prohibit practices such as steering borrowers away from more affordable products, selling unnecessary insurance to borrowers, repeatedly refinancing loans and making loans without a reasonable expectation that the borrowers will be able to repay the loans irrespective of the value of the underlying property. The CFPB has issued several rules on mortgage lending, notably a rule requiring all home mortgage lenders to determine a borrower’s ability to repay the loan. Loans with certain terms and conditions and that otherwise meet the definition of a “qualified mortgage”
Previous report — wording carried elsewhere
Our insurance or indemnities may not cover all claims that may be asserted against us. Any judgments or settlements in any pending litigation or future claims, litigation or investigation could have a material adverse effect on our business, reputation, financial condition and results of operations.