Firstsun Capital Bancorp(FSUN) - 2025 Q1 - Quarterly Report

Part I - Financial Information Financial Statements FirstSun Capital Bancorp's Q1 2025 unaudited financial statements show total assets increased to $8.22 billion and net income rose significantly to $23.6 million, primarily driven by a much lower provision for credit losses Consolidated Balance Sheets As of March 31, 2025, total assets reached $8.22 billion, driven by a $104.1 million increase in net loans, while deposits grew by $202.0 million and equity increased to $1.07 billion Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Assets | $8,216,458 | $8,097,387 | $119,071 | 1.5% | | Loans, net | $6,392,218 | $6,288,136 | $104,082 | 1.7% | | Total Deposits | $6,874,239 | $6,672,260 | $201,979 | 3.0% | | Federal Home Loan Bank advances | $35,000 | $135,000 | $(100,000) | -74.1% | | Total Stockholders' Equity | $1,068,295 | $1,041,366 | $26,929 | 2.6% | Consolidated Statements of Income and Comprehensive Income Q1 2025 net income surged to $23.6 million ($0.83 diluted EPS) from $12.3 million in Q1 2024, primarily due to a significantly lower provision for credit losses and a 5.2% rise in net interest income Q1 Performance Summary (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Net Interest Income | $74,478 | $70,806 | 5.2% | | Provision for Credit Losses | $3,800 | $16,500 | -77.0% | | Noninterest Income | $21,729 | $22,808 | -4.7% | | Noninterest Expense | $62,722 | $61,828 | 1.5% | | Net Income | $23,569 | $12,296 | 91.7% | | Diluted EPS | $0.83 | $0.45 | 84.4% | Consolidated Statements of Cash Flows In Q1 2025, net cash from operations was $26.4 million, investing activities used $116.2 million, and financing activities provided $95.3 million, leading to a $5.5 million net increase in cash Cash Flow Summary for Three Months Ended March 31, 2025 (in thousands) | Activity | Amount | | :--- | :--- | | Net Cash from Operating Activities | $26,353 | | Net Cash from Investing Activities | $(116,239) | | Net Cash from Financing Activities | $95,346 | | Net Increase in Cash | $5,460 | Note 2 - Securities As of March 31, 2025, the securities portfolio totaled $515.5 million, with $48.6 million in unrealized AFS losses primarily due to interest rate changes, not credit impairments Securities Portfolio Summary (March 31, 2025, in thousands) | Category | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | | :--- | :--- | :--- | :--- | :--- | | Available-for-Sale | $528,152 | $1,030 | $(48,567) | $480,615 | | U.S. treasury | $35,210 | $0 | $(2,869) | $32,341 | | Mortgage backed - commercial | $154,066 | $468 | $(11,643) | $142,891 | | Held-to-Maturity | $34,914 | $2 | $(5,035) | $29,881 | - The company does not consider the unrealized losses of $48.6 million on AFS securities to be credit-related, attributing them to interest rate changes. It does not plan to sell these securities before recovery of their amortized cost[47] Note 3 - Loans Total loans increased to $6.48 billion by March 31, 2025, with Commercial & Industrial as the largest segment, while the allowance for credit losses rose to $91.8 million and nonaccrual loans increased to $78.6 million Loan Portfolio Composition (in thousands) | Loan Type | March 31, 2025 | % of Total | | :--- | :--- | :--- | | Commercial and industrial | $2,635,028 | 40.6% | | Commercial real estate | $1,884,381 | 29.1% | | Residential real estate | $1,195,714 | 18.4% | | Public finance | $551,252 | 8.5% | | Total Loans | $6,484,008 | 100.0% | Allowance for Credit Losses Activity (Q1 2025, in thousands) | Description | Amount | | :--- | :--- | | Beginning Balance (Jan 1, 2025) | $88,221 | | Provision for credit losses | $4,200 | | Charge-offs | $(812) | | Recoveries | $181 | | Ending Balance (Mar 31, 2025) | $91,790 | - Nonaccrual loans increased from $67.5 million at year-end 2024 to $78.6 million at March 31, 2025, with the largest increase in the Commercial and Industrial portfolio[54] Note 4 - Mortgage Servicing Rights (MSRs) The fair value of Mortgage Servicing Rights (MSRs) was $82.9 million as of March 31, 2025, down from $84.3 million at year-end 2024, primarily due to valuation changes and runoff, despite $2.7 million in new servicing rights MSR Fair Value Activity (Q1 2025, in thousands) | Description | Amount | | :--- | :--- | | Beginning Balance (Jan 1, 2025) | $84,258 | | Additions from transfers | $2,653 | | Change in fair value (inputs/assumptions) | $(1,389) | | Change in fair value (runoff) | $(2,595) | | Ending Balance (Mar 31, 2025) | $82,927 | Note 6 - Deposits Total deposits increased to $6.87 billion at March 31, 2025, from $6.67 billion at year-end 2024, with growth in both noninterest-bearing and interest-bearing accounts, primarily savings and money market Deposit Composition (in thousands) | Deposit Type | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Noninterest-bearing | $1,574,736 | $1,541,158 | | Interest-bearing | $5,299,503 | $5,131,102 | | Savings & money market | $2,974,774 | $2,834,123 | | Certificates of deposit | $1,576,140 | $1,565,575 | | Total Deposits | $6,874,239 | $6,672,260 | Note 11 - Regulatory Capital Matters As of March 31, 2025, both the Parent Company and the Bank were well-capitalized, with the Parent Company's CET1 ratio at 13.26% and Total risk-based capital ratio at 15.52%, exceeding all minimum requirements Parent Company Capital Ratios (March 31, 2025) | Ratio | Actual | For Capital Adequacy | | :--- | :--- | :--- | | CET1 to risk-weighted assets | 13.26% | 4.50% | | Tier 1 risk-based capital to risk-weighted assets | 13.26% | 6.00% | | Total risk-based capital to risk-weighted assets | 15.52% | 8.00% | | Tier 1 leverage capital to average assets | 12.47% | 4.00% | Note 13 - Segment Information For Q1 2025, the Banking segment's pre-tax income rose to $29.7 million due to lower credit loss provisions, while Mortgage Operations saw a decline to $2.3 million, and Corporate incurred a $2.3 million pre-tax loss Income (Loss) Before Income Taxes by Segment (Q1 2025 vs Q1 2024, in thousands) | Segment | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Banking | $29,661 | $16,089 | | Mortgage Operations | $2,347 | $3,104 | | Corporate | $(2,323) | $(3,907) | | Total | $29,685 | $15,286 | Note 14 - Commitments and Contingencies The company has $1.80 billion in unused loan commitments and faces litigation, including a proposed $0.45 million overdraft fee settlement and a $2.1 million check fraud judgment expected to be covered by insurance - As of March 31, 2025, the company had commitments to fund $1.64 billion in variable-rate loans and $160.9 million in fixed-rate loans[135] - A proposed settlement has been reached in the overdraft fee litigation, requiring the Bank to fund a $0.45 million settlement fund and forgive $0.07 million in uncollected fees[140] Management's Discussion and Analysis (MD&A) Management's discussion highlights strong Q1 2025 performance with net income of $23.6 million, improved net interest margin, annualized loan growth of 6.8%, and deposit growth of 12.3%, affirming a robust financial condition and capital position Financial Summary FirstSun's Q1 2025 net income reached $23.6 million ($0.83 diluted EPS), significantly up from Q1 2024, driven by a lower credit loss provision, alongside annualized loan growth of 6.8% and deposit growth of 12.3% Q1 2025 Key Performance Metrics | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income | $23.6 million | $12.3 million | | Diluted EPS | $0.83 | $0.45 | | Net Interest Margin | 4.07% | 4.01% | | Return on Average Assets | 1.20% | 0.65% | | Loan Growth (annualized) | 6.8% | N/A | | Deposit Growth (annualized) | 12.3% | N/A | - The significant increase in net income for Q1 2024 was heavily influenced by a large provision for credit loss of $10.6 million (net of tax) on a specific C&I loan in the prior year period[153] Results of Operations Q1 2025 net interest income increased by 5.2% to $74.5 million, driven by lower cost of funds, while the provision for credit losses sharply decreased, and noninterest income slightly declined due to lower mortgage banking income - Net interest income increased by $3.7 million YoY, driven by a $3.3 million decrease in total interest expense[178] - The provision for credit losses was $3.8 million in Q1 2025, a sharp decrease from $16.5 million in Q1 2024, which included a large specific provision[188] - Income from mortgage banking services decreased by $0.4 million to $9.1 million in Q1 2025, as lower net sale gains and MSR capitalization changes offset higher servicing income[196] Financial Condition As of March 31, 2025, total assets were $8.2 billion, with the loan portfolio at $6.5 billion and Commercial & Industrial loans as the largest segment, while nonperforming assets increased to $83.5 million and deposits grew by $202 million Loan Portfolio Composition (March 31, 2025) | Loan Type | Amount (in billions) | % of Total | | :--- | :--- | :--- | | Commercial and industrial | $2.64 | 40.6% | | Commercial real estate | $1.88 | 29.1% | | Residential real estate | $1.20 | 18.4% | | Total Loans | $6.48 | 100.0% | Nonperforming Assets (in thousands) | Metric | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Nonaccrual loans | $78,575 | $67,517 | | Total nonperforming loans | $78,590 | $69,050 | | Total nonperforming assets | $83,504 | $74,188 | | NPA / Total Assets | 1.02% | 0.92% | - Total deposits increased by $202 million in Q1 2025, with growth in both consumer ($117.7 million) and business ($84.2 million) deposits[225] Liquidity and Capital Resources The company maintains a strong liquidity position, with the parent company holding $105.7 million in cash and the Bank having $3.7 billion in immediate funding availability, while stockholders' equity increased to $1.1 billion, ensuring the company remains well-capitalized Immediate Funding Availability (March 31, 2025, in thousands) | Source | Amount | | :--- | :--- | | FHLB borrowings available | $1,472,919 | | Fed Funds lines | $2,054,342 | | Unused lines with other financial institutions | $160,000 | | Total Immediate Funding | $3,687,261 | - At March 31, 2025, the Bank could pay dividends of approximately $194.1 million to the parent company without prior regulatory approval[230] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk, managed by ALCO, with simulations showing the balance sheet is positioned to benefit from falling interest rates, projecting a 1.8% NII increase and 2.2% EVE increase with a 100 basis point decline Interest Rate Sensitivity Analysis (As of March 31, 2025) | Rate Change (bps) | % Change in Net Interest Income | % Change in Economic Value of Equity | | :--- | :--- | :--- | | +300 | 5.6% | -7.7% | | +200 | 3.9% | -4.7% | | +100 | 2.0% | -2.0% | | -100 | 1.8% | 2.2% | | -200 | 2.5% | 2.4% | Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during Q1 2025 - The principal executive officer and chief financial officer concluded that disclosure controls and procedures were effective as of March 31, 2025[247] - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2025[248] Part II - Other Information Legal Proceedings The company is involved in litigation, including a proposed $0.45 million overdraft fee class action settlement and a $2.1 million check fraud judgment expected to be covered by insurance, with no material adverse effect anticipated on financials - An unopposed motion was filed to approve a settlement in the overdraft fee litigation, where the Bank would fund a $0.45 million class settlement fund and forgive $0.07 million in fees[140] - In the check fraud litigation, a jury awarded the plaintiff approximately $2.1 million. The company believes the judgment will be covered by insurance and will not have a material effect on its financial condition[141] Other Information At the Annual Meeting on May 7, 2025, stockholders approved all seven proposals, including the election of three Class II directors, board declassification, elimination of supermajority voting, and ratification of Crowe LLP as independent accountants - Stockholders elected Neal E. Arnold, David W. Levy, and Kevin T. Hammond as Class II directors[252] - Key governance changes were approved, including the declassification of the board of directors and the elimination of supermajority voting requirements[252][253]