CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are not statements of historical or current fact nor are they assurances of future performance and generally can be identified by the use of forward-looking terminology, such as “believe,” “expect,” “anticipate,” “intend,” “target,” “estimate,” “continue,” “positions,” “plan,” “predict,” “project,” “forecast,” “guidance,” “goal,” “objective,” “prospects,” “possible” or “potential,” by future conditional verbs such as “assume,” “will,” “would,” “should,” “could” or “may,” or by variations of such words or by similar expressions. These forward-looking statements include, but are not limited to, statements related to our proposed merger with Pioneer Bancshares, Inc. (“Pioneer”), including the expected timing to close the merger, statements about the impact of COVID-19 on our operations, our belief that sources of available liquidity are adequate to meet our current and expected liquidity needs, our plans to meet future cash needs through the generation of deposits, our expectations that many of our unfunded commitments will expire without being drawn, and statements regarding our business plan and strategies. These forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time, are difficult to predict and are generally beyond our control.
There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following:
•the occurrence of any event, change or other circumstances that causes our bank regulators to revoke their approvals of the proposed merger with Pioneer or its subsidiary bank, respectively;
•the failure of either party to satisfy any of the closing conditions to the merger on a timely basis or at all;
•the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement with respect to the merger;
•the possibility that the anticipated benefits of the merger, including anticipated cost savings and strategic gains, are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy, competitive factors in the areas where FirstSun and Pioneer do business or as a result of other unexpected factors or events;
•the impact of purchase accounting with respect to the merger, or any change in the assumptions used regarding the assets purchased and liabilities assumed to determine their fair value;
•diversion of management’s attention from ongoing business operations and opportunities due to the merger;
•potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the merger;
•the integration of the business and operations of Pioneer, which may take longer than anticipated or be more costly than anticipated or have unanticipated adverse results relating to Pioneer’s existing business;
•challenges retaining or hiring key personnel;
•business disruptions resulting from or following the merger;
•delay in closing the merger and the bank merger;
•the outcome of pending or threatened litigation or of matters before regulatory agencies, whether currently existing or commencing in the future, including litigation related to the merger;
•increased capital requirements, other regulatory requirements or enhanced regulatory supervision;
•the inability to sustain revenue and earnings growth;
•the inability to efficiently manage operating expenses;
•changes in interest rates and capital markets;
•changes in asset quality and credit risk;
•adverse changes in economic conditions;
•capital management activities;
•customer borrowing, repayment, investment and deposit practices;
•the impact, extent and timing of technological changes;
•the continuing impact of COVID-19 and its variants on our business or Pioneer’s business, including the impact of the actions taken by governmental authorities to try and contain the virus or address the impact of the virus on the United States economy, and the resulting effect of these items on each party’s operations, liquidity and capital position, and on the financial condition of each party’s borrowers and other customers;
•changes in legislation, regulation, policies or administrative practices, whether by judicial, governmental or legislative action and other changes pertaining to banking, securities, taxation, rent regulation and housing, financial accounting and reporting, environmental protection and insurance and the ability to comply with such changes in a timely manner;
•changes in the monetary and fiscal policies of the U.S. Government, including policies of the U.S. Department of the Treasury and the Federal Reserve;
•changes in accounting principles, policies, practices or guidelines;
•the potential increase in reserves and allowance for loan losses as a result of the transition in 2023 to the current expected credit loss standard, or “CECL,” established by the Financial Accounting Standards Board to account for future expected credit losses;
•the potential impact of announcement or consummation of the merger on relationships with third parties, including customers, vendors, employees and competitors;
•failure to attract new customers and retain existing customers in the manner anticipated;
•any interruption or breach of security resulting in failures or disruptions in customer account management, general ledger, deposit, loan or other systems;
•the adverse effects of events beyond each party’s control that may have a destabilizing effect on financial markets and the economy, such as epidemics and pandemics (including COVID-19), war or terrorist activities, essential utility outages, deterioration in the global economy, instability in the credit markets, disruptions in each party’s customers’ supply chains or disruption in transportation;
•other actions of the Federal Reserve and legislative and regulatory actions and reforms;
•other risks and uncertainties disclosed in documents filed or furnished by us with or to the SEC, any of which could cause actual results to differ materially from future results expressed, implied or otherwise anticipated by such forward-looking statements.
We caution readers that the foregoing list of factors is not exclusive, is not necessarily in order of importance and readers should not place undue reliance on any forward-looking statements. You should also consider the risks, assumptions and uncertainties set forth under “Item 1.A. ,” of this report. Further, any forward-looking statement speaks only as of the date on which it is made and we do not intend to and disclaim any obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, unless required to do so under the federal securities laws.
SUMMARY OF MATERIAL RISKS
An investment in our securities involves risks, including those summarized below. For a more complete discussion of the material risks facing our business, see “.”
Risk Related to the Mergers
•The success of the mergers and bank merger with Pioneer will depend on a number of uncertain factors, including our ability to complete the integration, limit deposit outflows, limit expenses, retain personnel and earn income from the acquired branches.
•Combining our operations with Pioneer may be more difficult, costly or time consuming than expected, and we may fail to realize the anticipated benefits of the mergers.
•We may be unable to retain Pioneer personnel successfully after the merger is completed.
•We expect to incur substantial expenses related to the mergers.
•Termination of the merger agreement could negatively affect us.
•The COVID-19 pandemic may delay and adversely affect the completion of the mergers.
Risks Related to Our Business
Economic and Geographic-Related Risks
•The ongoing COVID-19 pandemic could adversely impact our financial performance and results of operations.
•Our business, including our wealth management business, may be adversely affected by economic and market conditions.
Lending and Interest Rate Risks
•If we fail to effectively manage credit risk, our business and financial condition will suffer.
•Our estimated allowance for loan losses and fair value adjustments with respect to acquired loans may be insufficient to absorb actual losses in our loan portfolio, which may adversely affect our business, financial condition and results of operations.
•We are exposed to higher credit risk by commercial real estate (inclusive of construction lending) and commercial lending.
•A significant portion of our loan portfolio is secured by real estate, and events that negatively impact the real estate market could hurt our business.
•Nonperforming assets take significant time and resources to resolve and adversely affect our results of operations and financial condition.
•New accounting standards such as ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) (CECL) could require us to increase our allowance for loan losses and may have a material adverse effect on our reported financial condition and results of operations.
•We are subject to interest rate risk, which could adversely affect our financial condition and profitability.
Mortgage Banking Risks
•Our mortgage revenue is cyclical and is sensitive to the level of interest rates, changes in economic conditions, decreased economic activity, and slowdowns in the housing market.
•We are subject to certain risks related to originating and selling mortgage loans that could have a material adverse effect on our financial condition and results of operations.
•Decreased mortgage origination volume and pricing decisions of competitors may adversely affect our profitability.
•We are dependent on U.S. government‑sponsored entities and government agencies, and any changes in these entities, could materially and adversely affect our business, financial condition, liquidity and results of operations.
•We may be terminated as a servicer of mortgage loans, be required to repurchase a mortgage loan or reimburse investors for credit losses on a mortgage loan, or incur costs, liabilities, fines and other sanctions if we fail to satisfy our servicing obligations, including our obligations with respect to mortgage loan foreclosure actions.
•We may be required to repurchase mortgage loans or indemnify buyers against losses in some circumstances, which could harm our liquidity, results of operations and financial condition.
Operational Risks
•We are subject to losses due to errors, omissions or fraudulent behavior by our employees, clients or others.
•We are exposed to the possibility of technology failure and a disruption in our operations may adversely affect us.
•A failure in, or breach of, our operational or security systems or infrastructure, or those of our third party vendors or others, including as a result of cyber-attacks, could disrupt our businesses, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and cause losses.
•Our controls and procedures may fail or be circumvented, which could have a material adverse effect on us.
•Our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance.