Fourth Quarter 2023 Highlights:

• Net income of $24.0 million, $0.94 per diluted share
• Net interest margin of 4.08%
• Return on average total assets of 1.26%
• Return on average stockholders’ equity of 11.19%
• Average deposit growth of 7.6% annualized
• Loan growth of 5.7% annualized
• 19.3% noninterest income to total revenue¹

FirstSun Capital Bancorp (“FirstSun”) (OTCQX: FSUN) reported net income of $24.0 million for the fourth quarter of 2023 compared to net income of $24.6 million for the fourth quarter of 2022. Earnings per diluted share were $0.94 for the fourth quarter of 2023 compared to $0.96 for the fourth quarter of 2022.

Neal Arnold, FirstSun’s President and Chief Executive Officer, commented, “We are pleased to deliver another strong quarter of earnings driven by our well diversified business mix and the continued economic strength of the Southwest region. Highlights this quarter include a net interest margin of 4.08%, along with growth in both deposits and loans. We believe our performance amidst the difficult banking environment continues to position us uniquely amongst our peers. Our consistent focus on our C&I and consumer businesses as well as our service fee businesses has enabled us to continue to deliver strong, sustainable performance and ultimately a record earnings year for fiscal 2023. I want to thank all of our hard-working team members across all of our markets as their dedication to customer service has enabled us to deliver our record performance for the year.

We are also very excited about the strategic merger we announced last week with HomeStreet, Inc. We believe they further our ability to diversify our business and to deliver strong shareholder value. We look forward to expanding our geographic presence in the Southern California and Pacific Northwest markets. We will work together to thoughtfully integrate our two organizations.”

Fourth Quarter 2023 Results

Net income totaled $24.0 million, or $0.94 per diluted share, during the fourth quarter of 2023, compared to $25.2 million, or $1.00 per diluted share, during the prior quarter. The return on average total assets was 1.26% in the fourth quarter of 2023, compared to 1.34% in the prior quarter, and the return on average stockholders’ equity was 11.19% in the fourth quarter of 2023, compared to 12.03% in the prior quarter.

Net Interest Income and Net Interest Margin

Net interest income totaled $72.1 million during the fourth quarter of 2023, a decrease of $1.3 million compared to the prior quarter. Our net interest margin decreased 15 basis points to 4.08% compared to the prior quarter. Results in the fourth quarter of 2023, compared to the prior quarter, were driven by an increase of 27 basis points in the cost of interest-bearing liabilities, partially offset by an increase of seven basis points in yield on earning assets.

Average loans, including loans held-for-sale, increased by $99.7 million in the fourth quarter of 2023, compared to the prior quarter. Loan yield increased by seven basis points to 6.51% in the fourth quarter of 2023, compared to the prior quarter, primarily due to higher yields on new originations as compared to amortizing and maturing balances. Average interest-bearing deposits increased $176.8 million in the fourth quarter of 2023, compared to the prior quarter. Total cost of deposits increased by 29 basis points to 2.93% in the fourth quarter of 2023, compared to the prior quarter, primarily due to rising deposit costs as a result of the elevated interest rate environment and an increasing mix of certificates of deposits. Average FHLB borrowings decreased $10.2 million in the fourth quarter of 2023, compared to the prior quarter. The cost of FHLB borrowings increased by 24 basis points to 5.64% in the fourth quarter of 2023, compared to the prior quarter, primarily due to the rising interest rate environment.

Asset Quality and Provision for Credit Losses

The provision for credit losses totaled $6.6 million during the fourth quarter of 2023, an increase of $2.7 million from $3.9 million in the prior quarter, primarily due to loan growth and a charge-off on a specific customer relationship in our loan portfolio.

Net charge-offs during the fourth quarter of 2023 were $4.7 million, primarily due to deterioration on a specific customer relationship in our loan portfolio, resulting in an annualized ratio of net charge-offs to average loans of 0.30%, compared to net charge-offs of $2.3 million, or an annualized ratio of net-charge offs to average loans of 0.15% in the prior quarter. The allowance for credit losses as a percentage of total loans was 1.28% at December 31, 2023, an increase of one basis point from the prior quarter.

The ratio of nonperforming assets to total assets was 0.85% at December 31, 2023, compared to 0.63% at September 30, 2023.

Noninterest Income

Noninterest income totaled $17.2 million during the fourth quarter of 2023, a decrease of $1.4 million from the prior quarter. Mortgage banking income decreased $2.5 million during the fourth quarter of 2023, primarily due to a decrease in the fair value of our mortgage servicing rights portfolio, net of derivative activity. Other noninterest income increased $1.2 million during the fourth quarter of 2023, primarily due to a gain on the disposal of an other real estate owned property in the quarter. Noninterest income as a percentage of total revenue¹ was 19.3%, a decrease of 1.0% from the prior quarter.

Noninterest Expense

Noninterest expense totaled $52.3 million during the fourth quarter of 2023, a decrease of $3.9 million from the prior quarter, primarily due to a decrease in salary and employee benefits of $3.8 million as a result of lower levels of variable compensation.

The efficiency ratio for the fourth quarter of 2023 was 58.58% compared to 61.02% in the prior quarter.

Tax Rate

The effective tax rate was 21.0% in the fourth quarter of 2023, compared to 21.1% in the prior quarter.

Loans

Loans were $6.3 billion at December 31, 2023, compared to $6.2 billion at September 30, 2023, an increase of $87.6 million in the fourth quarter of 2023, or 5.7% on an annualized basis.

Deposits

Average deposits were $6.5 billion for the fourth quarter of 2023, compared to $6.3 billion for the prior quarter, an increase of $120.4 million in the fourth quarter of 2023, or 7.6% on an annualized basis. Noninterest-bearing deposit accounts represented 24.0% of total deposits at December 31, 2023 and the loan-to-deposit ratio was 98.3% at December 31, 2023.

The ratio of total uninsured deposits to total deposits was estimated to be 31.2% at December 31, 2023, compared to 32.0% at September 30, 2023. The ratio of total uninsured and uncollateralized deposits to total deposits was estimated to be 25.1% at December 31, 2023, compared to 25.4% at September 30, 2023.²

Capital

Capital ratios remain strong and above “well-capitalized” thresholds. As of December 31, 2023, our common equity tier 1 risk-based capital ratio was 11.10%, total risk-based capital ratio was 13.25% and tier 1 leverage ratio was 10.52%. Book value per common share was $35.14 at December 31, 2023, an increase of $1.31 from September 30, 2023. Tangible book value per common share, a non-GAAP financial measure, was $30.96 at December 31, 2023, an increase of $1.36 from September 30, 2023.

Full Year 2023 Results

Full Year Highlights:

• Net income of $103.5 million, $4.08 per diluted share
• Net interest margin of 4.23%
• Return on average total assets of 1.38%
• Return on average stockholders’ equity of 12.50%
• Average deposit growth of 9.65%
• Loan growth of 6.01%
• 21.2% fee revenue to total revenue¹

Net income totaled $103.5 million, or $4.08 per diluted share, in 2023, compared to $59.2 million, or $2.48 per diluted share, in 2022. Net income included merger costs, net of tax, of $17.0 million in 2022. The return on average total assets was 1.38% in 2023, compared to 0.88% in 2022, and the return on average stockholders’ equity was 12.50% in 2023, compared to 8.55% in 2022. The unfavorable impact in 2022 of merger costs, net of tax, to return on average total assets was 0.25% and to return on average stockholders’ equity was 2.46%.

Net Interest Income and Net Interest Margin

Net interest income totaled $293.4 million in 2023, an increase of $51.8 million compared to 2022. Our net interest margin increased 36 basis points to 4.23% in 2023, compared to 2022. Results in 2023, compared to the prior year, were driven by an increase of 169 basis points in yield on earning assets, partially offset by an increase of 187 basis points in the cost of interest-bearing liabilities.

Average loans, including loans held-for-sale, increased by $962.2 million in 2023, compared to 2022. Loan yield increased by 149 basis points to 6.24% in 2023, compared to 2022, primarily due to the rising interest rate environment and its impact on variable rate loans in the loan portfolio and higher yields on new originations. Average deposits increased $698.8 million in 2023, compared to 2022. Total cost of deposits increased by 192 basis points to 2.27% in 2023, compared to 2022, primarily due to increased pricing on our deposit products as a result of the rising interest rate environment. Average FHLB borrowings increased $54.4 million in 2023, compared to 2022. The cost of FHLB borrowings increased by 216 basis points to 5.05% in 2023, compared to 2022, primarily due to the rising interest rate environment.

Asset Quality and Provision for Credit Losses

The provision for credit losses totaled $18.2 million in 2023, an increase of $0.2 million compared to the prior year or an increase of $3.1 million when excluding the $2.9 million merger related provision for credit losses in 2022 related to certain non-impaired loans acquired at a premium valuation. The adjusted increase of $3.1 million is primarily due to loan growth and charge-offs on two specific customer relationships in our loan portfolio.

Net charge-offs in 2023 were $7.8 million, or a ratio of net charge-offs to average loans of 0.13%, compared to net (recoveries) of $(0.3) million, or a ratio of net (recoveries) to average loans of (0.01)%, in 2022. The increase in net charge-offs (recoveries) in 2023 is primarily due to deterioration on two specific customer relationships in our loan portfolio.

The allowance for credit losses as a percentage of total loans was 1.28% at December 31, 2023, compared to 1.12% at December 31, 2022.

On January 1, 2023, we adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), which increased our allowance for credit losses as a percentage of total loans to 1.20% at adoption, or an eight basis point increase from 1.12% at December 31, 2022. The increase in our allowance for credit losses was a result of changing from an “incurred loss” model, which encompasses allowances for current known and incurred losses within the portfolio, to an “expected loss” model, which encompasses allowances for losses expected to be recognized over the life of the portfolio.

The ratio of nonperforming assets to total assets was 0.85% at December 31, 2023, compared to 0.48% at December 31, 2022.

Noninterest Income

Noninterest income totaled $79.1 million during 2023, a decrease of $10.5 million from 2022. Mortgage banking income decreased $14.9 million in 2023, primarily due to a decrease in net sale gains and fees from mortgage loan originations as the volume of mortgage loan sales decreased from the prior year. Service charges on deposits increased $3.1 million in 2023, primarily due to growth in treasury management services provided to our business customers, as compared to 2022. Noninterest income as a percentage of total revenue¹ totaled 21.2% in 2023, compared to 27.0% in 2022.

Noninterest Expense

Noninterest expense totaled $222.8 million in 2023, a decrease of $16.3 million from 2022, primarily due to merger costs of $18.8 million in 2022. The efficiency ratio for 2023 was 59.81% compared to 72.20% in 2022. The unfavorable impact of merger expenses to the efficiency ratio was 5.66% in 2022.

Tax Rate

The effective tax rate was 21.3% in 2023, compared to 20.0% in 2022.

Loans

Loans were $6.3 billion at December 31, 2023 compared to $5.9 billion at December 31, 2022, an increase of $355.3 million or 6.01%.

Deposits

Average deposits were $6.2 billion for the year ending December 31, 2023, compared to $5.6 billion for the prior year, an increase of $541.5 million or 9.65%. Noninterest-bearing deposit accounts represented 24.0% of total deposits at December 31, 2023 and the loan-to-deposit ratio was 98.3% at December 31, 2023.

The ratio of total uninsured deposits to total deposits was estimated to be 31.2% at December 31, 2023. The ratio of total uninsured and uncollateralized deposits to total deposits was estimated to be 25.1% at December 31, 2023.²

Capital

Capital ratios remain strong and above “well-capitalized” thresholds. As of December 31, 2023, our common equity tier 1 risk-based capital ratio was 11.10%, total risk-based capital ratio was 13.25% and tier 1 leverage ratio was 10.52%. Book value per common share was $35.14 at December 31, 2023, an increase of $4.06 from December 31, 2022. Tangible book value per common share, a non-GAAP financial measure, was $30.96 at December 31, 2023, an increase of $4.27 from December 31, 2022.

Non-GAAP Financial Measures

This press release contains financial measures determined by methods other than in accordance with principles generally accepted in the United States (“GAAP”). FirstSun management uses these non-GAAP financial measures in their analysis of FirstSun’s performance and the efficiency of its operations. Management believes these non-GAAP measures provide a greater understanding of ongoing operations, enhance comparability of results with prior periods and demonstrate the effects of significant items in the current period. FirstSun believes a meaningful analysis of its financial performance requires an understanding of the factors underlying that performance. FirstSun management believes investors may find these non-GAAP financial measures useful. These non-GAAP financial measures, however, should not be viewed as a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Below is a listing of the non-GAAP measures used in this press release:

• Tangible common stockholders’ equity;
• Tangible assets;
• Tangible common stockholders’ equity to tangible assets;
• Tangible common stockholders’ equity to tangible assets, reflecting net unrealized losses on HTM securities, net of tax;
• Tangible book value per common share;
• Net income excluding merger costs;
• Return on average total assets excluding merger costs;
• Return on average stockholders’ equity excluding merger costs;
• Efficiency ratio excluding merger related expenses;
• Diluted earnings per share excluding merger related costs; and
• Fully tax equivalent (“FTE”) net interest income and net interest margin on FTE basis.

The tables within the “Non-GAAP Financial Measures and Reconciliations” section provide a reconciliation of each non-GAAP financial measure contained in this press release to the most comparable GAAP equivalent.

About FirstSun Capital Bancorp

FirstSun Capital Bancorp, headquartered in Denver, Colorado, is the financial holding company for Sunflower Bank, N.A., which operates as Sunflower Bank, First National 1870 and Guardian Mortgage. Sunflower Bank provides a full range of relationship-focused services to meet personal, business and wealth management financial objectives, with a branch network in five states and mortgage capabilities in 43 states. FirstSun had total consolidated assets of $7.9 billion as of December 31, 2023.

First National 1870 and Guardian Mortgage are divisions of Sunflower Bank, N.A. To learn more, visit ir.firstsuncb.com, SunflowerBank.com, FirstNational1870.com or GuardianMortgageOnline.com.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This communication contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In general, forward-looking statements can be identified through use of words such as “may,” “believe,” “expect,” “anticipate,” “intend,” “will,” “should,” “plan,” “estimate,” “predict,” “continue,” “forward” and “potential” or the negative of these terms or other comparable terminology, and include statements related to the expected timing, completion and benefits of the proposed merger with HomeStreet, Inc. (“HomeStreet”) (the “Merger”). Forward-looking statements are not historical facts and represent management’s beliefs, based upon information available at the time the statements are made, with regard to the matters addressed; they are not guarantees of future performance. Actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. Forward-looking statements are subject to numerous assumptions, risks and uncertainties that change over time and could cause actual results or financial conditions to differ materially from those expressed in or implied by such statements.

Factors that could cause or contribute to such differences include, but are not limited to, (1) expected cost savings, synergies and other financial benefits from the Merger not being realized within the expected time frames and costs or difficulties relating to integration matters being greater than expected, (2) the ability of HomeStreet to obtain the necessary approval by its shareholders, (3) the ability of FirstSun and HomeStreet to obtain required governmental approvals of the Merger, and (4) the failure of the closing conditions in the merger agreement with HomeStreet to be satisfied, or any unexpected delay in closing the Merger. Further information regarding additional factors that could affect the forward-looking statements can be found in the cautionary language included under the headings “Cautionary Note Regarding Forward-Looking Statements” (in the case of FirstSun), “Forward-Looking Statements” (in the case of HomeStreet), and “Risk Factors” in FirstSun’s and HomeStreet’s Annual Reports on Form 10-K for the year ended December 31, 2022, and other documents subsequently filed by FirstSun and HomeStreet with the SEC.