Firstsun Capital Bancorp(FSUN) - 2022 Q4 - Annual Report

Loan Portfolio and Lending Practices - The commercial real estate loan portfolio includes $636.3 million in owner-occupied loans (10.7% of total loans) and $779.5 million in non-owner occupied loans (13.1% of total loans) as of December 31, 2022[52]. - The average FICO score for mortgage loans was 739 in 2022, indicating a focus on quality borrowers[59]. - The company funded 2,057 PPP loans to eligible small businesses and non-profit organizations, with terms of two to five years and an interest rate of 1%[49]. - The SBA guaranteed 90% of the principal amount of qualifying SBA loans originated under the 7(a) loan program through October 1, 2021, which will decrease to 75%-85% thereafter[48]. - The company aims to grow its commercial and industrial loan portfolio, which includes specialty lending products[46]. - The residential mortgage industry is highly competitive, with expectations of declining origination volume in 2023 due to elevated interest rates[62]. - The bank's loan portfolio is diversified across metropolitan and community markets, balancing consumer and commercial clients to mitigate credit risk[75]. - The company emphasizes disciplined underwriting and ongoing credit risk management to mitigate potential loan losses[70]. Capital and Regulatory Compliance - As of December 31, 2022, Sunflower Bank's legal lending limit for a single borrower was $122.3 million (15%) and $203.8 million (25% for fully secured loans)[77]. - The bank holding company must remain well managed and well capitalized to maintain its status as a financial holding company[98]. - The Federal Reserve mandates that a bank holding company serve as a source of financial strength to its subsidiary depository institutions[103]. - The Federal Reserve imposes a minimum common equity Tier 1 (CET1) risk-based capital ratio of 4.5% for bank holding companies[117]. - The total risk-based capital ratio must be at least 8% under Basel III regulations[117]. - As of December 31, 2022, the company maintained capital ratios that exceeded the minimum ratios established for a "well capitalized" institution[125]. - The capital conservation buffer of 2.5% became fully effective on January 1, 2019, resulting in an effective CET1 capital ratio of 7.0%[120]. - The company is subject to comprehensive capital adequacy requirements intended to protect against potential losses[116]. - The capital rules require that goodwill and other intangible assets be deducted from CET1 capital[121]. - The OCC evaluates the bank's capital adequacy, considering interest rate risk exposure[122]. - As of December 31, 2022, the Bank exceeded its capital requirements under applicable guidelines, allowing for potential dividend payments[134]. Consumer Protection and Compliance - The Bank is subject to various consumer protection regulations, including the Truth-In-Lending Act and the Fair Housing Act, which govern lending practices and consumer rights[140]. - The Bank's anti-money laundering program must comply with the Bank Secrecy Act and the USA PATRIOT Act, including enhanced due diligence for high-risk customers[146]. - The USA PATRIOT Act requires financial institutions to verify customer identification at account opening and report suspicious activities[148]. - The CFPB has broad authority to regulate consumer financial products and services, impacting the Bank's operations[143]. - The Bank must comply with federal laws regarding credit transactions, including the Fair Debt Collection Practices Act and the Secure and Fair Enforcement for Mortgage Licensing Act[140]. - The Bank's compliance with consumer protection laws is considered in the approval of any proposed expansionary proposals[145]. Employment and Corporate Governance - The total number of employees as of December 31, 2022, was 1,171, with 1,149 being full-time equivalent employees[79]. - The bank offers a competitive benefits package, including a 401(k) plan with employer matching contributions, healthcare benefits, and tuition reimbursement[80]. - FirstSun qualifies as an "emerging growth company," allowing it to take advantage of reduced reporting requirements under the JOBS Act[85]. - Under the Sarbanes-Oxley Act, the company is required to adhere to strict corporate governance and reporting measures[112]. - The company must seek regulatory approval prior to any redemption that would reduce its consolidated net worth by 10% or more[111]. Risk Management and Interest Rate Sensitivity - Interest rate risk is the primary market risk affecting net interest income, influenced by the maturity or repricing of assets and liabilities[479][480]. - A simulation model is used to analyze the sensitivity of net interest income to changes in interest rates, with a +300 basis point increase projected to increase net interest income by 6.8% as of December 2022[483][484]. - The Asset Liability Committee (ALCO) monitors interest rate risk and considers projected interest rate scenarios' impact on earnings and liquidity[481]. Deposit Insurance and Assessments - The FDIC insures deposits up to $250,000 per depositor, with assessments based on average total assets minus average tangible equity[157]. - As of July 1, 2016, the initial base rate for deposit insurance assessments ranges from 3 to 30 basis points, with total base assessments now between 1.5 and 40 basis points[158]. - The FDIC announced a uniform two basis point increase in the deposit insurance assessment rate starting in the first quarterly assessment period of 2023, aiming to reach a designated reserve ratio of 1.35% by September 30, 2028[159].