FIRSTSUN CAPITAL BANCORP (Form: 10-Q, Received: 11/05/2021 16:06:09)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from to

Commission File Number 333-258176

FIRSTSUN CAPITAL BANCORP

(Exact name of registrant as specified in its charter)


Delaware						81-4552413
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

1400 16th Street, Suite 250

Denver, Colorado 80202

(303) 831-6704

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

As of November 4, 2021, there were approximately 18,321,659 shares of the registrant’s common stock outstanding.

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			Page
Cautionary Note Regarding Forward-Looking Statements			4
Part I - Financial Information			6
Item 1. Financial Statements (Unaudited)			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			42
Item 3. Quantitative and Qualitative Disclosures About Market Risk			68
Item 4. Controls and Procedures			68
Part II - Other Information			69
Item 1. Legal Proceedings			69
Item 1A. Risk Factors			69
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			69
Item 3. Defaults Upon Senior Securities			69
Item 4. Mine Safety Disclosures			69
Item 5. Other Information			69
Item 6. Exhibits			69
Signatures			71

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q 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 failure to obtain necessary regulatory approvals for the merger (the “merger”) of Pioneer with and into FirstSun Capital Bancorp (“FirstSun”) when expected or at all (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the transaction);

•the failure of either party to satisfy any of the other closing conditions to the transaction 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;

•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;

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•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 in the “Risk Factors” section of our proxy statement/prospectus dated August 10, 2021 that we filed with the SEC on August 12, 2021, pursuant to Securities Act Rule 424(b)(3) in connection with our proposed merger with Pioneer. 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.

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Part I - Financial Information

Item 1. Financial Statements (Unaudited)

FIRSTSUN CAPITAL BANCORP

and Subsidiaries

Consolidated Balance Sheets

(Unaudited)


(In thousands, except par and share amounts)	September 30, 2021		December 31, 2020
Assets
Cash and cash equivalents	$	949,541	$	201,978
Securities available-for-sale	531,395		468,586
Securities held-to-maturity, fair value of $20,693 and $33,328, respectively	19,811		32,188
Loans held-for-sale, at fair value	122,217		193,963
Loans, net of allowance for loan losses of $47,868 and $47,766, respectively	3,756,113		3,798,591
Mortgage servicing rights, at fair value	43,971		29,144
Premises and equipment, net	54,094		56,758
Other real estate owned and foreclosed assets, net	5,747		3,354
Bank-owned life insurance	54,536		53,582
Restricted equity securities	16,927		23,175
Goodwill	33,050		33,050
Core deposits and other intangible assets, net	8,605		9,667
Accrued interest receivable	16,649		15,416
Deferred tax assets, net	21,457		23,763
Prepaid expenses and other assets	48,972		52,242
Total assets	$	5,683,085	$	4,995,457

Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Noninterest-bearing accounts	$	1,578,306	$	1,054,458
Interest-bearing accounts	3,279,679		3,099,091
Total deposits	4,857,985		4,153,549

Securities sold under agreements to repurchase	117,001		115,372
Federal Home Loan Bank advances	40,000		70,411

Convertible notes payable, net	19,256		18,696
Subordinated debt, net	49,928		49,666
Accrued interest payable	2,768		2,592
Accrued expenses and other liabilities	76,226		99,384
Total liabilities	5,163,164		4,509,670

Commitments and contingencies (Note 15)

Stockholders’ equity:
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, none issued or outstanding, respectively	—		—
Common stock, $0.0001 par value; 50,000,000 shares authorized; 19,878,713 shares issued; 18,321,659 shares outstanding, respectively	2		2
Additional paid-in capital	260,864		259,363
Treasury stock, 1,557,054 shares, respectively	(38,148)		(38,148)
Retained earnings	289,798		255,451
Accumulated other comprehensive income, net	7,405		9,119
Total stockholders’ equity	519,921		485,787
Total liabilities and stockholders’ equity	$	5,683,085	$	4,995,457

The accompanying notes are an integral part of these consolidated financial statements.

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FIRSTSUN CAPITAL BANCORP

and Subsidiaries

Consolidated Statements of Income and Comprehensive Income

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands, except per share amounts)	2021		2020		2021		2020
Interest income:
Interest and fee income on loans:
Taxable	$	37,225	$	30,496	$	102,068	$	88,781
Tax exempt	3,471		6,255		16,612		17,696
Interest and dividend income on securities:
Taxable	1,949		2,097		5,634		8,229
Tax exempt	5		3		12		9
Other interest income	611		309		1,450		1,095
Total interest income	43,261		39,160		125,776		115,810
Interest expense:
Interest expense on deposits	1,978		3,348		6,731		12,881
Interest expense on securities sold under agreements to repurchase	13		23		49		139
Interest expense on other borrowed funds	1,305		1,451		4,214		3,634
Total interest expense	3,296		4,822		10,994		16,654
Net interest income	39,965		34,338		114,782		99,156
Provision for loan losses	3,500		4,800		1,750		15,100
Net interest income after provision for loan losses	36,465		29,538		113,032		84,056
Noninterest income:
Service charges on deposit accounts	3,471		2,428		8,659		7,042
Credit and debit card fees	2,472		2,107		7,140		5,865
Trust and investment advisory fees	1,974		1,282		5,871		3,222
Income from mortgage banking services, net	20,151		35,535		68,144		89,986
Gain on sales of available-for-sale securities, net	—		—		—		153
Gain on other real estate owned and foreclosed assets activity, net	93		443		591		242

Other noninterest income	523		924		4,443		2,604
Total noninterest income	28,684		42,719		94,848		109,114
Noninterest expense:
Salary and employee benefits	36,061		37,949		113,129		101,998
Occupancy and equipment	6,643		6,365		19,867		19,251

Amortization of intangible assets	354		371		1,062		1,093
Merger related expenses	705		—		1,984		—
Other noninterest expenses	10,807		9,688		30,332		26,796
Total noninterest expense	54,570		54,373		166,374		149,138
Income before income taxes	10,579		17,884		41,506		44,032
Provision for income taxes	1,851		3,130		7,159		7,707
Net income	$	8,728	$	14,754	$	34,347	$	36,325
Other comprehensive income:
Reclassification adjustment for net gain on sales of available-for-sale securities	—		—		—		(153)
Change in unrealized gain (loss) on available-for-sale securities	349		1,228		(2,270)		11,799
Income tax effect on other comprehensive income	(86)		(300)		556		(2,848)
Comprehensive income	$	8,991	$	15,682	$	32,633	$	45,123

Earnings per share:
Net income available to common stockholders	$	8,728	$	14,754	$	34,347	$	36,325
Basic	$	0.48	$	0.81	$	1.87	$	1.98
Diluted	$	0.46	$	0.81	$	1.83	$	1.98

The accompanying notes are an integral part of these consolidated financial statements.

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FIRSTSUN CAPITAL BANCORP

and Subsidiaries

Consolidated Statements of Stockholders’ Equity

For the three months ended September 30,

(Unaudited)


(in thousands, except share amounts)	Issued shares of common stock	Common stock		Additional paid-in capital		Treasury stock		Retained earnings		Accumulated other comprehensive income		Total stockholders’ equity
2021
Balance, beginning of period	19,878,713	$	2	$	260,516	$	(38,148)	$	281,070	$	7,142	$	510,582
Share-based compensation, net of forfeitures	—	—		348		—		—		—		348
Net income	—	—		—		—		8,728		—		8,728
Other comprehensive income	—	—		—		—		—		263		263
Balance, end of period	19,878,713	$	2	$	260,864	$	(38,148)	$	289,798	$	7,405	$	519,921

2020
Balance, beginning of period	19,878,713	$	2	$	258,315	$	(38,189)	$	229,437	$	9,728	$	459,293
Stock option exercise (1,670 shares of treasury stock issued)	—	—		—		41		—		—		41
Share-based compensation, net of forfeitures	—	—		465		—		—		—		465
Net income	—	—		—		—		14,754		—		14,754
Other comprehensive income	—	—		—		—		—		928		928
Balance, end of period	19,878,713	$	2	$	258,780	$	(38,148)	$	244,191	$	10,656	$	475,481

The accompanying notes are an integral part of these consolidated financial statements.

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FIRSTSUN CAPITAL BANCORP

and Subsidiaries

Consolidated Statements of Stockholders’ Equity (continued)

For the nine months ended September 30,

(Unaudited)


(in thousands, except share amounts)	Issued shares of common stock	Common stock		Additional paid-in capital		Treasury stock		Retained earnings		Accumulated other comprehensive income		Total stockholders’ equity
2021
Balance, beginning of period	19,878,713	$	2	$	259,363	$	(38,148)	$	255,451	$	9,119	$	485,787
Share-based compensation, net of forfeitures	—	—		1,501		—		—		—		1,501
Net income	—	—		—		—		34,347		—		34,347
Other comprehensive loss	—	—		—		—		—		(1,714)		(1,714)
Balance, end of period	19,878,713	$	2	$	260,864	$	(38,148)	$	289,798	$	7,405	$	519,921

2020
Balance, beginning of period	19,878,713	$	2	$	257,181	$	(36,706)	$	207,866	$	1,858	$	430,201
Issuance of treasury stock (100 shares)	—	—		—		2		—		—		2
Repurchase of treasury stock (63,844 shares)	—	—		—		(1,564)		—		—		(1,564)
Stock option exercise (4,892 shares of treasury stock issued)	—	—		(153)		120		—		—		(33)
Share-based compensation, net of forfeitures	—	—		1,752		—		—		—		1,752
Net income	—	—		—		—		36,325		—		36,325
Other comprehensive income	—	—		—		—		—		8,798		8,798
Balance, end of period	19,878,713	$	2	$	258,780	$	(38,148)	$	244,191	$	10,656	$	475,481

The accompanying notes are an integral part of these consolidated financial statements.

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FIRSTSUN CAPITAL BANCORP

and Subsidiaries

Consolidated Statements of Cash Flows

For the nine months ended September 30,

(Unaudited)


(In thousands)	2021		2020
Cash flows from operating activities:
Net income	$	34,347	$	36,325
Adjustments to reconcile income to net cash provided by operating activities:
Provision for loan losses	1,750		15,100
Depreciation	4,716		4,353
Deferred tax (benefit) expense	2,862		1
Accretion of net discount on securities	2,617		3,164
Net accretion of discount on acquired loans	(1,001)		(2,709)
Net change in deferred loan origination fees and costs	(407)		9,442
Amortization of core deposits and other intangible assets	1,062		1,093
Net amortization of lease marks	—		83
Amortization of software implementation costs	844		731
Accretion of fair value premium on acquired deposits	(45)		(124)
Amortization of fair value discount on subordinated debt	192		192
Amortization of issuance costs on subordinated debt	70		23
Amortization of fair value discount on convertible notes payable	559		564
Accretion of fair value premium on Federal Home Loan Bank advances	—		(165)
Increase in cash surrender value of bank-owned life insurance	(954)		(959)
Impairment of premises and equipment	23		—
Impairment of other real estate owned and foreclosed assets	240		246
Federal Home Loan Bank stock dividends	(306)		(298)
Share-based compensation expense	1,501		1,752
(Increase) decrease in fair value of mortgage servicing rights	3,706		19,077
Net gain on sales of available-for-sale securities	—		(153)
Net gain on sales of loans held-for-investment	698		1,094
Net loss (gain) on disposal of premises and equipment	75		212
Net (gain) loss on other real estate owned and foreclosed assets activity	(591)		(242)
Net gain on sales of loans held-for-sale	(50,224)		(49,069)
Origination of loans held-for-sale	(1,693,782)		(1,767,009)
Proceeds from sales of loans held-for-sale	1,797,219		1,746,030

Changes in operating assets and liabilities:
Accrued interest receivable	(1,233)		(5,149)
Prepaid expenses and other assets	2,231		(19,329)
Accrued interest payable	176		948
Accrued expenses and other liabilities	(23,610)		30,393

Net cash provided by operating activities	$	82,735	$	25,617

The accompanying notes are an integral part of these consolidated financial statements.

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FIRSTSUN CAPITAL BANCORP

and Subsidiaries

Consolidated Statements of Cash Flows (continued)

For the nine months ended September 30,

(Unaudited)


(In thousands)	2021		2020
Cash flows from operating activities: (previous page)	$	82,735	$	25,617

Cash flows from investing activities:
Net cash paid for acquisitions	—		(7,019)

Proceeds from maturities of held-to-maturity securities	12,097		16,827
Purchases of available-for-sale securities	(164,914)		(72,700)
Proceeds from sale or maturities of available-for-sale securities	97,499		151,144
Loan originations, net of repayments	19,632		(815,040)

Proceeds from the sale of loans held-for-sale previously classified as held-for-investment	18,544		97,832
Purchases of premises and equipment	(2,891)		(4,348)
Proceeds from the sale of premises and equipment	1,192		1,161

Proceeds from sales of other real estate owned and foreclosed assets	1,221		6,296


Purchases of restricted equity securities	(49)		(8,689)
Proceeds from the sale or redemption of restricted equity securities	6,603		298
Purchase of other investments	(324)		(122)
Proceeds from the sale or redemption of other investments	519		1
Net cash provided by (used in) investing activities	(10,871)		(634,359)

Cash flows from financing activities:
Net change in deposits	704,481		409,103
Net change in securities sold under agreements to repurchase	1,629		63,140
Proceeds from Federal Home Loan Bank advances	—		1,019,000
Repayments of Federal Home Loan Bank advances	(30,411)		(897,998)

Repayments of other borrowings	—		(6,000)
Proceeds from Subordinated debt	—		39,067


Issuance of treasury stock	—		(31)
Purchase of treasury stock	—		(1,564)

Net cash provided by financing activities	675,699		624,717
Net increase in cash and cash equivalents	747,563		15,975
Cash and cash equivalents, beginning of period	201,978		144,531
Cash and cash equivalents, end of period	$	949,541	$	160,506

Supplemental disclosures of cash flow information:
Interest paid on deposits	$	6,869	$	13,564
Interest paid on borrowed funds	$	4,362	$	4,119
Cash paid for income taxes, net	$	4,930	$	8,003
Non-cash investing and financing activities:
Net change in unrealized gain on available-for-sale securities	$	(2,270)	$	11,646
Loan charge-offs	$	3,242	$	1,785
Loans transferred to other real estate owned and foreclosed assets	$	3,264	$	3,110
Mortgage servicing rights resulting from sale or securitization of mortgage loans	$	18,533	$	15,879

The accompanying notes are an integral part of these consolidated financial statements.

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FIRSTSUN CAPITAL BANCORP and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

($ in thousands, except share and per share amounts)

NOTE 1. Organization and Basis of Presentation

Nature of Operations - The consolidated financial statements include the accounts of FirstSun Capital Bancorp (“FirstSun” or “Parent Company” and its wholly-owned subsidiaries, Sunflower Bank, N.A. (the “Bank”) and Logia Portfolio Management, LLC, and have been prepared using U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial statements. All significant intercompany balances and transactions have been eliminated in consolidation. These entities are collectively referred to as “our”, “us”, “we”, or “the Company”.

These consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for a full year presentation and certain disclosures have been condensed or omitted in accordance with rules and regulations of the SEC. These interim financial statements are unaudited, and include, in our opinion, all adjustments necessary for a fair statement of the results for the periods indicated, which are not necessarily indicative of results which may be expected for the full year. These unaudited consolidated financial statements and notes should be read in conjunction with FirstSun’s audited consolidated financial statements and footnotes thereto for the year ended December 31, 2020 included in our proxy statement/prospectus dated August 10, 2021 (the “Prospectus”) filed with the SEC on August 12, 2021, pursuant to Securities Act Rule 424(b)(3) in connection with our proposed merger with Pioneer Bancshares, Inc. (“Pioneer”). Certain prior period amounts have been reclassified to conform to the current period presentation. Reclassifications had no effect on our net income or stockholders’ equity.

Business Combination - On May 11, 2021, FirstSun and Pioneer entered into an Agreement and Plan of Merger that provides for the merger of Pioneer with and into FirstSun, with FirstSun as the surviving entity (the “merger”). If the merger is completed, each share of Pioneer common stock will be converted into the right to receive 1.0443 shares of FirstSun common stock plus cash in lieu of any fractional shares. In September 2021, the Pioneer stockholders approved the merger. Completion of the merger, among other things, is subject to the requisite approval of the appropriate regulatory bodies, and if approved is expected to close in the fourth quarter of 2021. Pioneer currently operates from its headquarters in Austin, Texas and has banking offices located primarily in the Austin, Houston, San Antonio, and Dallas metro areas. As of September 30, 2021 Pioneer had assets of $1.6 billion, total loans of $1.0 billion, and deposits of $1.3 billion.

Use of Estimates - The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions based on available information. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

These estimates are based on historical experience and on various assumptions about the future that are believed to be reasonable based on all available information. Our reported financial position or results of operations may be materially different under changed conditions or when using different estimates and assumptions, particularly with respect to significant accounting policies. In the event that estimates or assumptions prove to differ from actual results, adjustments are made in subsequent periods to reflect more current information.

Risks and Uncertainties - In the normal course of business, companies in the banking and mortgage industries encounter certain economic and regulatory risks. Economic risks include prepayment risk, market risk, interest rate risk, and credit risk. We are subject to interest rate risk to the extent that in a rising interest rate environment, we may experience a decrease in loan production, as well as decreases in the value of mortgage loans held-for-sale and in commitments to originate loans, which may adversely impact our earnings. Credit risk is the risk of default that may result from the borrowers’ inability or unwillingness to make contractually required payments.

We generally sell loans to investors without recourse; therefore, the investors have assumed the risk of loss or default by the borrower. However, we are usually required by these investors to make certain standard representations and warranties relating to credit information, loan documentation, and collateral. To the extent that we do not comply with such representations, or there are early payment defaults, we may be required to repurchase the loans or indemnify these investors for any losses from borrower defaults. In addition, if loans pay off within a specified time frame, we may be required to refund a portion of the sales proceeds to the investors. We established reserves for potential losses related to these representations and warranties which is recorded within accrued expenses and other liabilities. In assessing the adequacy of the reserve, we evaluate various

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factors including actual write-offs during the period, historical loss experience, known delinquent and other problem loans, and economic trends and conditions in the industry. Further information is presented in Note 15. Commitments and Contingencies.

Adoption of New Accounting Standards - As an “emerging growth company” under Section 107 of the JOBS Act, we can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Therefore, we can delay the adoption of certain accounting standards until those standards would otherwise apply to non-public business entities. We intend to take advantage of the benefits of this extended transition period for an “emerging growth company” for as long as it is available to us. For standards that we have delayed adoption, we may lack comparability to other companies who have adopted such standards. There have been no material developments with respect to newly issued standards from those disclosed in our Prospectus. We have deferred adoption of ASU 2016-02, Leases (Topic 842) and ASU 2016-13, Financial Instruments - Credit Losses (Topic 326).

NOTE 2. Securities

The amortized cost, gross unrealized gains and losses, and fair values of available-for-sale and held-to-maturity debt securities by type follows:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
As of September 30, 2021
Available-for-sale:
U.S. treasury	$	20,454	$	241	$	—	$	20,695
U.S. agency	6,493		—		(104)		6,389
Obligations of states and political subdivisions	3,981		16		—		3,997
Mortgage backed - residential	132,062		2,998		(779)		134,281
Collateralized mortgage obligations	219,671		2,521		(31)		222,161
Mortgage backed - commercial	138,932		4,959		(19)		143,872

Total available-for-sale	$	521,593	$	10,735	$	(933)	$	531,395

Held-to-maturity:


Obligations of states and political subdivisions	$	720	$	30	$	—	$	750
Mortgage backed - residential	11,686		545		—		12,231
Collateralized mortgage obligations	7,405		307		—		7,712


Total held-to-maturity	$	19,811	$	882	$	—	$	20,693

As of December 31, 2020
Available-for-sale:

U.S. agency	$	9,204	$	—	$	(208)	$	8,996
Obligations of states and political subdivisions	3,427		8		—		3,435
Mortgage backed - residential	116,365		3,399		(202)		119,562
Collateralized mortgage obligations	200,496		2,743		(43)		203,196
Mortgage backed - commercial	127,022		6,426		(51)		133,397

Total available-for-sale	$	456,514	$	12,576	$	(504)	$	468,586

Held-to-maturity:

U.S. agency	$	5,099	$	26	$	—	$	5,125
Obligations of states and political subdivisions	730		41		—		771
Mortgage backed - residential	16,050		618		—		16,668
Collateralized mortgage obligations	10,309		455		—		10,764


Total held-to-maturity	$	32,188	$	1,140	$	—	$	33,328

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As of September 30, 2021 and December 31, 2020, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.

Certain debt securities that have gross unrealized losses and have been in a continuous unrealized loss position for more than one year follows:


	Less than 12 months				12 months or longer				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Number of Securities
As of September 30, 2021
Available-for-sale:

U.S. agency	$	—	$	—	$	6,389	$	(104)	$	6,389	$	(104)	7

Mortgage backed - residential	36,034		(769)		2,896		(10)		38,930		(779)		9
Collateralized mortgage obligations	13,024		(27)		610		(4)		13,634		(31)		8
Mortgage backed - commercial	—		—		24,170		(19)		24,170		(19)		2

Total available-for-sale	$	49,058	$	(796)	$	34,065	$	(137)	$	83,123	$	(933)	26


	Less than 12 months				12 months or longer				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Number of Securities
As of December 31, 2020
Available-for-sale:

U.S. agency	$	—	$	—	$	8,996	$	(208)	$	8,996	$	(208)	7

Mortgage backed - residential	15,251		(146)		7,601		(56)		22,852		(202)		8
Collateralized mortgage obligations	23,646		(43)		—		—		23,646		(43)		11
Mortgage backed - commercial	9,167		(15)		14,971		(36)		24,138		(51)		2

Total available-for-sale	$	48,064	$	(204)	$	31,568	$	(300)	$	79,632	$	(504)	28

There were no held-to-maturity securities in an unrealized loss position as of September 30, 2021 or December 31, 2020.

Estimated fair value is less than amortized cost primarily because of general economic conditions unrelated to the specific issuer. At September 30, 2021 and December 31, 2020, management does not believe these securities are other than temporarily impaired for the following reasons: no significant deterioration in the earnings performance, credit rating, asset quality, or business prospects of the issuer; no significant adverse change in the regulatory, economic, or technological environment of the issuer; and no significant adverse change in the general market condition of either the geographic area or the industry in which the issuer operates. Management has the ability and intends to hold these securities and it is likely that management will not be required to sell the securities prior to maturity or until such time as the full amount of investment principal will be returned.

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The amortized cost and fair value of our debt securities by contractual maturity as of September 30, 2021 are summarized in the following table. Maturities are based on the final contractual payment dates and do not reflect the impact of prepayments or earlier redemptions that may occur.


	Amortized Cost		Estimated Fair Value
Available-for-sale:
Due within 1 year	$	66	$	67
Due after 1 year through 5 years	20,442		21,008
Due after 5 years through 10 years	135,566		138,722
Due after 10 years	365,519		371,598
Total available-for-sale	$	521,593	$	531,395

Held-to-maturity:

Due after 1 year through 5 years	$	720	$	750
Due after 5 years through 10 years	702		749
Due after 10 years	18,389		19,194
Total held-to-maturity	$	19,811	$	20,693

Securities with a carrying value of $466,982 and $437,223 were pledged to secure public deposits, securities sold under agreements to repurchase and borrowed funds at September 30, 2021 and December 31, 2020, respectively.

There were no proceeds from sales and calls of securities for the nine months ended September 30, 2021. The proceeds from sales and calls of securities for the nine months ended September 30, 2020 was $56,159. For the nine months ended September 30, 2020, we recognized gross investment gains of $446 and gross investment losses of $293, resulting from the sale of securities.

NOTE 3. Loans

Loans held-for-investment consist of the following:


	September 30, 2021		December 31, 2020

Commercial	$	2,228,639	$	2,181,552
Commercial real estate	1,140,181		1,156,668
Residential real estate	426,044		503,828
Consumer	17,742		14,233
Total loans	3,812,606		3,856,281

Deferred costs, fees, premiums, and discounts	(8,625)		(9,924)

Allowance for loan losses	(47,868)		(47,766)

Total loans, net	$	3,756,113	$	3,798,591

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was signed into law. A provision in the CARES Act created the Paycheck Protection Program (PPP), a program administered by the Small Business Administration (“SBA”) to provide loans to small business during the COVID-19 pandemic. As of September 30, 2021 and December 31, 2020, we had $116,519 and $256,336 of PPP loans outstanding and deferred processing fees outstanding of $3,153 and $5,235, respectively. PPP loans are classified as Commercial loans in the consolidated financial statements. No allowance for loan losses has been recognized for PPP loans as such loans are fully guaranteed by the SBA.

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The following table presents the activity in the allowance for loan losses by portfolio type for the three months ended September 30,:


	Commercial		Commercial Real Estate		Residential Real Estate		Consumer		Total
2021
Allowance for loan losses:
Balance, beginning of period	$	28,173	$	13,149	$	1,305	$	351	$	42,978
Provision for (benefit from) loan losses	3,030		560		(31)		(59)		3,500
Loans charged off	—		—		—		(66)		(66)
Recoveries	1,440		—		3		13		1,456
Balance, end of period	$	32,643	$	13,709	$	1,277	$	239	$	47,868

2020
Allowance for loan losses:
Balance, beginning of period	$	22,541	$	13,212	$	1,868	$	275	$	37,896
Provision for (benefit from) loan losses	4,030		853		(126)		43		4,800
Loans charged off	(203)		(1)		—		(32)		(236)
Recoveries	225		—		3		13		241
Balance, end of period	$	26,593	$	14,064	$	1,745	$	299	$	42,701

The following table presents the activity in the allowance for loan losses by portfolio type for the nine months ended September 30,:


	Commercial		Commercial Real Estate		Residential Real Estate		Consumer		Total
2021
Allowance for loan losses:
Balance, beginning of period	$	32,009	$	13,863	$	1,606	$	288	$	47,766
Provision for (benefit from) loan losses	2,210		(163)		(350)		53		1,750
Loans charged off	(3,102)		—		(2)		(138)		(3,242)
Recoveries	1,526		9		23		36		1,594
Balance, end of period	$	32,643	$	13,709	$	1,277	$	239	$	47,868

2020
Allowance for loan losses:
Balance, beginning of period	$	17,509	$	9,645	$	1,056	$	336	$	28,546
Provision for loan losses	9,567		4,728		708		97		15,100
Loans charged off	(997)		(581)		(39)		(168)		(1,785)
Recoveries	514		272		20		34		840
Balance, end of period	$	26,593	$	14,064	$	1,745	$	299	$	42,701

We determine the allowance for loan losses estimate on at least a quarterly basis.

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The following table presents the balance in the allowance for loan losses and the recorded investment by portfolio type based on impairment method:


	Commercial		Commercial Real Estate		Residential Real Estate		Consumer		Total
As of September 30, 2021
Loans:
Individually evaluated for impairment	$	19,632	$	5,203	$	6,555	$	3	$	31,393
Collectively evaluated for impairment	2,209,007		1,134,978		419,489		17,739		3,781,213
Total loans	$	2,228,639	$	1,140,181	$	426,044	$	17,742	$	3,812,606

Allowance for loan losses:
Individually evaluated for impairment	$	3,823	$	387	$	148	$	—	$	4,358
Collectively evaluated for impairment	28,820		13,322		1,129		239		43,510
Total allowance for loan losses	$	32,643	$	13,709	$	1,277	$	239	$	47,868

As of December 31, 2020
Loans:
Individually evaluated for impairment	$	23,197	$	2,933	$	9,630	$	38	$	35,798
Collectively evaluated for impairment	2,158,355		1,153,735		494,198		14,195		3,820,483
Total loans	$	2,181,552	$	1,156,668	$	503,828	$	14,233	$	3,856,281

Allowance for loan losses:
Individually evaluated for impairment	$	3,972	$	12	$	96	$	—	$	4,080
Collectively evaluated for impairment	28,037		13,851		1,510		288		43,686
Total allowance for loan losses	$	32,009	$	13,863	$	1,606	$	288	$	47,766

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The following table presents information related to impaired loans by class of loans as of:


	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Recorded Investment
As of September 30, 2021
With no related allowance recorded:
Commercial	$	10,013	$	9,505	$	—	$	6,964
Commercial real estate	2,365		2,307		—		2,201
Residential real estate	4,717		4,732		—		3,153
Consumer	4		3		—		4
Total loans with no related allowance recorded	17,099		16,547		—		12,322

With an allowance recorded:
Commercial	10,386		10,127		3,823		6,962
Commercial real estate	2,949		2,896		387		1,940
Residential real estate	1,794		1,823		148		1,224

Total loans an allowance recorded	15,129		14,846		4,358		10,126
Total impaired loans	$	32,228	$	31,393	$	4,358	$	22,448

As of December 31, 2020
With no related allowance recorded:
Commercial	$	16,370	$	15,756	$	—	$	12,189
Commercial real estate	2,850		2,838		—		1,910
Residential real estate	9,021		8,933		—		5,855
Consumer	38		38		—		29
Total loans with no related allowance recorded	28,279		27,565		—		19,983

With an allowance recorded:
Commercial	7,610		7,441		3,972		5,304
Commercial real estate	133		95		12		67
Residential real estate	709		697		96		479

Total loans an allowance recorded	8,452		8,233		4,080		5,850
Total impaired loans	$	36,731	$	35,798	$	4,080	$	25,833

Interest income recorded on impaired loans was not material for the three and nine months ended September 30, 2021 and 2020.

Credit risk monitoring and management is a continuous process to manage the quality of the loan portfolio. We categorize loans into risk categories based on relevant information about the ability of borrowers to service their debt including current financial information, historical payment experience, credit documentation, public information and current economic trends among other factors. The risk rating system is used as a tool to analyze and monitor loan portfolio quality. Risk ratings meeting an internally specified exposure threshold are updated annually, or more frequently upon the occurrence of a circumstance that affects the credit risk of the loan. We use the following definitions for risk ratings:

Substandard - loans are considered “classified” and have a well-defined weakness, or weaknesses, such as loans that are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard loans are also characterized by the distinct possibility of loss in the future if the deficiencies are not corrected.

Doubtful - loans are considered “classified” and have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently

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existing facts, conditions and values, highly questionable and improbable. There were no loans categorized as doubtful as of September 30, 2021 and December 31, 2020.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass-rated loans.

The following table presents the credit risk profile of our loan portfolio based on our rating categories:


	Non-Classified		Classified		Total
As of September 30, 2021
Commercial	$	2,202,979	$	25,660	$	2,228,639
Commercial real estate	1,113,753		26,428		1,140,181
Residential real estate	419,557		6,487		426,044
Consumer	17,736		6		17,742
Total loans	$	3,754,025	$	58,581	$	3,812,606

As of December 31, 2020
Commercial	$	2,145,831	$	35,721	$	2,181,552
Commercial real estate	1,126,080		30,588		1,156,668
Residential real estate	494,155		9,673		503,828
Consumer	14,195		38		14,233
Total loans	$	3,780,261	$	76,020	$	3,856,281

The following table presents our loan portfolio aging analysis:


	Loans Not Past Due		Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans Greater than 90 Days Past Due, Still Accruing		Non-Accrual		Total
As of September 30, 2021
Commercial	$	2,208,361	$	1,639	$	—	$	—	$	18,639	$	2,228,639
Commercial real estate	1,123,875		9,420		1,681		—		5,205		1,140,181
Residential real estate	418,746		—		842		—		6,456		426,044
Consumer	17,721		18		—		—		3		17,742
Total loans	$	3,768,703	$	11,077	$	2,523	$	—	$	30,303	$	3,812,606

As of December 31, 2020
Commercial	$	2,147,310	$	11,415	$	48	$	—	$	22,779	$	2,181,552
Commercial real estate	1,144,801		8,933		—		—		2,934		1,156,668
Residential real estate	489,482		2,948		1,123		777		9,498		503,828
Consumer	14,187		8		—		—		38		14,233
Total loans	$	3,795,780	$	23,304	$	1,171	$	777	$	35,249	$	3,856,281

As of September 30, 2021 and December 31, 2020, we have a recorded investment in troubled debt restructurings (TDRs) of $18,750 and $13,975, respectively. We have no commitments to lend additional amounts at September 30, 2021.

The modification of the terms of the loans performed for the nine months ended September 30, 2021 and for the year ended December 31, 2020 respectively, included rate modifications, extensions of the maturity dates or a permanent reduction of the recorded investment in the loans.

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The following table presents loans by class modified as TDRs that occurred during the nine months ended September 30, 2021 and year ended December 31, 2020:


	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
September 30, 2021
Commercial	5	$	6,789	$	5,229



Total	5	$	6,789	$	5,229

December 31, 2020
Commercial	11	$	2,950	$	2,831

Residential real estate	5	917		907

Total	16	$	3,867	$	3,738

For the nine months ended September 30, 2021 and year ended December 31, 2020 the TDRs described above increased the allowance for loan losses by $1,441 and $1,464, respectively. There were no amounts charged-off during the nine months ended September 30, 2021 and year ended December 31, 2020. For the year ended December 31, 2020, there were loans modified as TDRs totaling $1,759 for which there was a payment default following the modification.

In order to assess whether a borrower is experiencing financial difficulty, an evaluation is performed to determine the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under our internal underwriting policy.

A loan is generally considered to be in payment default once it is 30 days contractually past due under the modified terms.

We are working with borrowers impacted by COVID-19 and providing modifications to include interest only deferral or principal and interest deferral. These modifications are excluded from TDR classification under Section 4013 of the CARES Act or under applicable interagency guidance of the federal banking regulators. As of September 30, 2021, we had actively modified loans under the CARES Act as follows:


	Number of Loans	Recorded Investment
September 30, 2021


Residential real estate	9	$	2,517

Acquired Loans and Loan Discounts:

Included in the net loan portfolio as of September 30, 2021 and December 31, 2020 is a net accretable discount related to loans acquired within a business combination in the approximate amounts of $770 and $2,043, respectively. The discount is accreted into income on a level-yield basis over the life of the loans.

Loans acquired with evidence of credit quality deterioration at acquisition, for which it was probable that we would not be able to collect all contractual amounts due, were accounted for as purchased credit impaired (“PCI”) loans. The outstanding balance represents the total amount owed, including accrued but unpaid interest, and any amounts previously charged off. The carrying amount of purchased credit impaired loans is not significant as of September 30, 2021 and December 31, 2020.

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NOTE 4. Mortgage Servicing Rights

We have investments in mortgage servicing rights (“MSRs”) that result from the sale of loans to the secondary market for which we retain the servicing. We account for these MSRs at their fair value. A primary risk associated with MSRs is the potential reduction in fair value as a result of higher than anticipated prepayments due to loan refinancing prompted, in part, by declining interest rates or government intervention. Conversely, these assets generally increase in value in a rising interest rate environment to the extent that prepayments are slower than anticipated. We utilize derivatives as economic hedges to offset changes in the fair value of the MSRs resulting from the actual or anticipated changes in prepayments stemming from changing interest rate environments.

The unpaid principal loan balance of our servicing portfolio is presented in the following table as of:


	September 30, 2021		December 31, 2020

Federal National Mortgage Association	$	2,278,202	$	2,117,703
Federal Home Loan Mortgage Corporation	1,425,824		948,934
Government National Mortgage Association	757,859		722,138
Federal Home Loan Bank	148,214		245,246
Other	1,948		2,144
Total	$	4,612,047	$	4,036,165

The activity of MSRs carried at fair value is as follows:


	For the three months ended September 30,				For the nine months ended September 30,
	2021		2020		2021		2020

Balance, beginning of period	$	40,844	$	23,800	$	29,144	$	29,003
Additions:

Servicing resulting from transfers of financial assets	5,303		6,614		18,533		15,879


Changes in fair value:
Due to changes in valuation inputs or assumptions used in the valuation model	948		(2,114)		5,209		(13,215)
Changes in fair value due to pay-offs, pay-downs, and runoff	(3,124)		(2,495)		(8,915)		(5,862)
Balance, end of period	$	43,971	$	25,805	$	43,971	$	25,805

The following represents the weighted-average key assumptions used to estimate the fair value of MSRs as of:


	September 30, 2021		December 31, 2020		September 30, 2020

Discount rate	9.22	%	9.12	%	9.28	%
Total prepayment speeds	12.15	%	16.99	%	18.79	%
Cost of servicing each loan	$86/per loan		$85/per loan		$86/per loan

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Total servicing and ancillary fees earned from the mortgage servicing portfolio is presented in the following table:


	For the three months ended September 30,				For the nine months ended September 30,
	2021		2020		2021		2020

Servicing fees	$	3,101	$	2,400	$	8,853	$	6,773
Late and ancillary fees	118		92		317		277
Total	$	3,219	$	2,492	$	9,170	$	7,050

NOTE 5. Derivative Financial Instruments

Banking Derivative Financial Instruments:

We are exposed to changes in the fair value of certain of our fixed-rate assets due to changes in benchmark interest rates. We use interest rate swaps to manage our exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate, LIBOR. Interest rate swaps designated as fair value hedges involve the receipt of fixed-rate amounts from a counterparty in exchange for us making variable-rate payments over the life of the agreements without the exchange of the underlying notional amount. The carrying amount of hedged loans receivable as of September 30, 2021 and December 31, 2020 was $209,552 and $239,591, respectively. The cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged loans receivable as of September 30, 2021 and December 31, 2020 was $7,784 and $14,906, respectively. The hedges were determined to be effective during all periods presented and we expect the hedges to remain effective during their remaining terms.

Derivatives not designated as hedges are not speculative and result from a service we provide to certain customers. We execute interest rate swaps with banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting derivatives that we execute with a third party, such that we minimize our net risk exposure resulting from such transactions. As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings. These instruments are a component of prepaid expenses and other assets and accrued expenses and other liabilities.

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The components of our banking derivative financial instruments consisted of the following:


	Number of Transactions	Expiration Dates	Outstanding Notional		Estimated Fair Value
September 30, 2021
Derivative financial instruments designated as hedging instruments:
Assets:
Interest Rate Products	1	2029	$	20,378	$	1,142
Liabilities:
Interest Rate Products	12	2022-2029	$	181,390	$	8,898

Derivative financial instruments not designated as hedging instruments:
Assets:
Interest Rate Products	38	2024-2036	$	207,937	$	8,471
Liabilities:
Interest Rate Products	38	2024-2036	$	207,937	$	8,810

December 31, 2020
Derivative financial instruments designated as hedging instruments:
Assets:
Interest Rate Products	2	2026-2029	$	38,978	$	830
Liabilities:
Interest Rate Products	12	2022-2028	$	185,637	$	15,792

Derivative financial instruments not designated as hedging instruments:
Assets:
Interest Rate Products	28	2024-2031	$	171,609	$	11,348
Liabilities:
Interest Rate Products	28	2024-2031	$	171,609	$	12,117

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We recorded gains and losses on banking derivatives assets as follows:


	For the three months ended September 30,				For the nine months ended September 30,
	2021		2020		2021		2020

Recorded (loss) gain on banking derivative assets	$	(186)	$	(221)	$	(420)	$	8,608

Recorded gain (loss) on banking derivative liabilities	$	337	$	123	$	926	$	(9,432)

For the three months ended September 30, 2021 and 2020, our banking derivative financial instruments not designated as hedging instruments generated fee income of $246 and $1,406, respectively. For the nine months ended September 30, 2021 and 2020, our banking derivative financial instruments not designated as hedging instruments generated fee income of $1,080 and $2,967, respectively.

Credit-risk-related Contingent Features:

We have agreements with each of our derivative counterparties that contain a provision where if we either default or are capable of being declared in default on any of our indebtedness, then we could also be declared in default on our derivative obligations.

We also have agreements with our derivative counterparties that contain a provision where if we fail to maintain our status as a well-capitalized institution, then our derivative counterparties have the right but not the obligation to terminate existing swaps. As of September 30, 2021 and December 31, 2020, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $18,435 and $28,622, respectively. As of September 30, 2021 and December 31, 2020, we have minimum collateral posting thresholds with our derivative counterparties and have posted collateral of $22,342 and $31,400, respectively. If we had breached any of these provisions at September 30, 2021, we could have been required to settle our obligations under the agreements at their termination value of $18,435.

Mortgage Banking Derivative Financial Instruments:

The components of our mortgage banking derivative financial instruments consisted of the following:


	Expiration Dates	Outstanding Notional		Estimated Fair Value
September 30, 2021
Derivative financial instruments
Assets:
Forward MBS trades	2021	$	257,900	$	987
Interest rate lock commitments (IRLC)	2021	$	188,714	$	1,420

Liabilities:
Forward MBS trades	2021	$	150,900	$	2,258


December 31, 2020
Derivative financial instruments
Assets:
Forward MBS trades	2021	$	189,900	$	468
Interest rate lock commitments (IRLC)	2021	$	462,394	$	5,686

Liabilities:
Forward MBS trades	2021	$	433,400	$	2,883

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We recorded gains and losses on mortgage banking derivatives assets as follows:


	For the three months ended September 30,				For the nine months ended September 30,
	2021		2020		2021		2020

Recorded gain (loss) on mortgage banking derivative assets	$	9,175	$	(19,987)	$	(302)	$	7,638

Recorded (loss) gain on mortgage banking derivative liabilities	$	(10,241)	$	1,925	$	(7,714)	$	(989)

NOTE 6. Deposits

The composition of our deposits is as follows:


	As of
	September 30, 2021		December 31, 2020

Noninterest-bearing demand deposit accounts	$	1,578,306	$	1,054,458
Interest-bearing deposit accounts:
Interest-bearing demand accounts	201,510		164,870
Savings accounts and money market accounts	2,711,417		2,472,965
NOW accounts	37,888		95,297
Certificate of deposit accounts:
Less than $100	151,696		164,491
$100 through $250	104,864		113,006
Greater than $250	72,304		88,462
Total interest-bearing deposit accounts	3,279,679		3,099,091
Total deposits	$	4,857,985	$	4,153,549

The following table summarizes the interest expense incurred on our deposits:


	For the three months ended September 30,				For the nine months ended September 30,
	2021		2020		2021		2020

Interest-bearing deposit accounts:
Interest-bearing demand accounts	$	89	$	97	$	300	$	331
Savings accounts and money market accounts	1,155		1,635		3,668		5,901
NOW accounts	50		183		336		471
Certificate of deposit accounts	684		1,433		2,427		6,178
Total interest-bearing deposit accounts	$	1,978	$	3,348	$	6,731	$	12,881

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The remaining maturity on certificate of deposit accounts as of September 30, 2021 is as follows:


Remainder of 2021	$	59,117
2022	184,563
2023	47,911
2024	14,637
2025	11,001
2026	7,474
Thereafter	4,161
Total certificate of deposit accounts	$	328,864

NOTE 7. Securities Sold Under Agreements to Repurchase

Information concerning securities sold under agreements to repurchase is as follows for the periods ended:


	September 30, 2021			December 31, 2020

Amount outstanding at period-end	$	117,001		$	115,372
Average daily balance during the period	$	131,444		$	118,706
Average interest rate during the period	0.05		%	0.15		%
Maximum month-end balance during the period	$	160,865		$	149,844
Weighted average interest rate at period-end	0.04		%	0.05		%

At September 30, 2021 and December 31, 2020, such agreements were secured by investment and mortgage-related securities with an approximate carrying amount of $134,701 and $121,116, respectively. Pledged securities are maintained by safekeeping agents at the direction of the Bank. Our agreements to repurchase generally mature daily, and are considered to be in an overnight and continuous position.

NOTE 8. Debt

FHLB advances:

The following is a breakdown of our FHLB advances and other borrowings outstanding as of:


	September 30, 2021				December 31, 2020
	Amount		Rate	Weighted Average Rate	Amount		Rate	Weighted Average Rate
Variable rate line-of-credit advance	$	—	N/A	N/A	$	20,000	0.35%	N/A
Fixed rate term advances	$	40,000	0.91% - 2.59%	1.49%	$	50,411	0.91% - 4.13%	1.78%
	$	40,000			$	70,411

The advances were collateralized by $842,678 and $943,376 of loans pledged to the FHLB as collateral as of September 30, 2021 and December 31, 2020, respectively.

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Future maturities of our FHLB borrowings is as follows:


2022	$	10,000


2025	20,000

Thereafter	10,000
Total	$	40,000

As of September 30, 2021 and December 31, 2020, the Bank had total borrowing capacity with the FHLB that is based on qualified collateral lending values of $675,641 and $702,540, respectively. Our additional borrowing availability with the FHLB at September 30, 2021 was $556,547. These borrowings can be in the form of additional term advances or a line-of-credit.

FRB advances:

We also had a $9,366 line-of-credit with the FRB. The agreement bears interest at the Fed Funds target rate plus 0.50% and is secured by municipal, agency, mortgage-related and corporate securities. The entire line was available at September 30, 2021.

Other borrowings:

We have lines-of-credit with certain other financial institutions totaling $95,000 as of September 30, 2021. No amounts were drawn on these lines-of-credit in 2021.

Convertible Notes Payable:

We have issued a total of $20,673 of convertible notes with a maturity date of August 31, 2023. The annual interest rate on these convertible notes is 3.29% with quarterly interest payments. With respect to conversion, each $1 (in thousands) principal amount of the convertible notes can be converted to 15.6717 shares of Parent Company common stock at any time until maturity.

The convertible notes were originally recorded with a discount of $4,682. As of and for the periods ended September 30, 2021 and December 31, 2020, the debt discount on the convertible notes totaled $1,418 and $1,977, respectively. The related accretion for the three months ended September 30, 2021 and 2020 was $186 and $188, respectively. The related accretion for the nine months ended September 30, 2021 and 2020 was $559 and $564, respectively.

Subordinated Debt:

Subordinated Notes:

In June and August 2020, we issued a total of $40,000 subordinated notes. The notes pay interest at a fixed rate of 6.00% through June 30, 2025 and subsequently, until maturity, pay interest at a floating rate of three month term SOFR plus 5.89% reset quarterly. Interest is payable on July 1 and January 1 of each year. Such notes are due on July 1, 2030. The notes are not redeemable within the first five years of issuance, except under certain very limited conditions. After five years, we may redeem the notes at our discretion.

We incurred and capitalized $933 of costs related to the issuance of the subordinated notes. As of and for the three and nine months ended September 30, 2021, the amortization associated with the debt issuance costs totaled $23 and $70.

Trust preferred securities:

We have issued $9,279 in trust preferred securities through a special-purpose trust, New Mexico Banquest Capital Trust I (“NMBCT I”). In addition, we have issued $4,640 in trust preferred securities through a special purpose trust, New Mexico Banquest Capital Trust II (“NMBCT II”, and together with NMBCT I, collectively referred to as “NMBCT Trusts”). Interest is payable quarterly at a rate of three-month LIBOR plus 3.35% (3.50% and 3.66% as of September 30, 2021 and 2020, respectively) for the trust preferred securities issued through NMBCT I and at a rate of three-month LIBOR plus 2.00% (2.15% and 2.36% as of September 30, 2021 and 2020, respectively) for the trust preferred securities issued through NMBCT II.

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This subordinated debt of $13,919 was originally recorded at a discount of $4,293. As of and for the three months ended September 30, 2021 and 2020, accretion associated with the fair value discount totaled $63, respectively. As of and for the nine months ended September 30, 2021 and 2020, accretion associated with the fair value discount totaled $192, respectively.

The Parent Company fully and unconditionally guarantees the obligations of the NMBCT Trusts on a subordinated basis. The trust preferred securities issued through the NMBCT Trusts are mandatorily redeemable upon the maturity of the debentures on December 19, 2032 and November 23, 2034, respectively, and are optionally redeemable, in part or in whole, by the Parent Company at each quarterly interest payment date. The Parent Company owns all of the outstanding common securities of the NMBCT Trusts, which have an aggregate liquidation valuation amount of $419 and is recorded in prepaid expenses and other assets on the consolidated balance sheet. The NMBCT Trusts are considered variable interest entities. Since the Parent Company is not the primary beneficiary of the NMBCT Trusts, the financial statements of the NMBCT Trusts are not included in our consolidated financial statements.

NOTE 9. Earnings Per Share

Basic earnings per share, excluding dilution, is computed by dividing earnings available to common stockholders’ by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock or resulted in the issuance of common stock that could then share in our earnings.

The following table sets forth the computation of basic and diluted earnings per share of common stock:


	For the three months ended September 30,				For the nine months ended September 30,
	2021		2020		2021		2020

Net income applicable to common stockholders	$	8,728	$	14,754	$	34,347	$	36,325
Weighted Average Shares
Weighted average common shares outstanding	18,321,659		18,320,606		18,321,659		18,327,164
Effect of dilutive securities
Stock-based awards	449,022		—		440,838		—
Weighted average diluted common shares	18,770,681		18,320,606		18,762,497		18,327,164

Earnings per common share
Basic earnings per common share	$	0.48	$	0.81	$	1.87	$	1.98
Effect of dilutive securities
Stock-based awards	(0.02)		—		(0.04)		—
Diluted earnings per common share	$	0.46	$	0.81	$	1.83	$	1.98

Convertible notes payable for 323,984 shares of common stock were not considered in computing diluted earnings per share for three and nine months ended September 30, 2021 and 2020 because they were antidilutive. Stock-based awards of 98,659 and 161,806 shares were antidilutive for the three and nine months ended September 30, 2020, respectively.

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NOTE 10. Stockholders’ Equity

Equity Incentive Plan:

We have established the FirstSun Capital Bancorp 2017 Equity Incentive Plan (the Plan). The Plan provides for the grant of stock options, stock appreciation rights, restricted stock and other stock awards to its employees, directors and consultants for up to 1,977,292 shares of FirstSun common stock in the aggregate.

A summary of stock option activity under the Plan as of September 30, 2021, and changes during the period then ended is presented below:


	Shares	Weighted-Average Exercise Price, per Share		Weighted-Average Remaining Contractual Term (years)
For the nine months ended September 30, 2021
Outstanding, beginning of period	1,428,940	$	19.97
Exercised	—	—
Granted	26,336	32.54
Forfeited	(42,376)	20.33
Outstanding, end of period	1,412,900	$	20.19	6.46
Options vested or expected to vest	1,412,900	$	20.19
Options exercisable, end of period	1,166,887	$	19.89	6.13

For the three months ended September 30, 2021 and 2020, we recorded total compensation cost of $348 and $526, respectively related to the Plan. For the nine months ended September 30, 2021 and 2020, we recorded total compensation cost of $1,501 and $1,752, respectively, related to the Plan.

At September 30, 2021, there was $1,390 of total unrecognized compensation cost related to non-vested stock options granted under the Plan. The unrecognized compensation cost at September 30, 2021 is expected to be recognized over the following 3.67 years. At September 30, 2021 and December 31, 2020, the intrinsic value of the stock options was $15,343 and $10,660, respectively.

NOTE 11. Income Taxes

The provision for income taxes in interim periods requires us to make a best estimate of the effective tax rate expected to be applicable for the full year, adjusted for any discrete items for the applicable period. This estimated effective tax rate is then applied to interim consolidated pre-tax operating income to determine the interim provision for income taxes.

The following table presents our provision for income tax and effective tax provision rate:


	For the three months ended September 30,						For the nine months ended September 30,
	2021			2020			2021			2020

Provision for income taxes	$	1,851		$	3,130		$	7,159		$	7,707
Effective tax provision rate	17.5		%	17.5		%	17.2		%	17.5		%

We do not believe that we have any material uncertain tax positions, and do not expect any material changes during the next twelve months.

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NOTE 12. Regulatory Capital Matters

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action.

Under the Basel III rules, the Parent Company and the Bank must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The fully phased in capital conservation buffer is 2.50% for all periods presented.

The net unrealized gain or loss on available for sale securities is not included in computing regulatory capital. As of September 30, 2021, both the Parent Company and the Bank met all capital adequacy requirements to which they were subject.

Prompt corrective action regulations provide five classifications: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. As of September 30, 2021 and December 31, 2020, the most recent regulatory notifications categorized the Bank as well-capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank’s category.

Actual and required capital amounts at year end for the Parent Company are as follows:


	Actual				For Capital Adequacy Purposes				To be Well- Capitalized under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount	Ratio
As of September 30, 2021
Total risk-based capital to risk-weighted assets:	$	552,124	12.55	%	$	351,871	8.00	%	N/A	N/A
Tier 1 risk-based capital to risk-weighted assets:	$	453,740	10.32	%	$	263,904	6.00	%	N/A	N/A
Common Equity Tier 1 (CET 1) to risk-weighted assets:	$	453,740	10.32	%	$	197,928	4.50	%	N/A	N/A
Tier 1 leverage capital to average assets:	$	453,740	8.19	%	$	221,526	4.00	%	N/A	N/A

As of December 31, 2020
Total risk-based capital to risk-weighted assets:	$	513,949	12.19	%	$	337,327	8.00	%	N/A	N/A
Tier 1 risk-based capital to risk-weighted assets:	$	416,029	9.87	%	$	252,995	6.00	%	N/A	N/A
Common Equity Tier 1 (CET 1) to risk-weighted assets:	$	416,029	9.87	%	$	189,746	4.50	%	N/A	N/A
Tier 1 leverage capital to average assets:	$	416,029	8.53	%	$	195,074	4.00	%	N/A	N/A

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Actual and required capital amounts at year end for the Bank are as follows:


	Actual				For Capital Adequacy Purposes				To be Well- Capitalized under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of September 30, 2021
Total risk-based capital to risk-weighted assets:	$	559,556	12.76	%	$	350,802	8.00	%	$	438,502	10.00	%
Tier 1 risk-based capital to risk-weighted assets:	$	511,100	11.66	%	$	263,101	6.00	%	$	350,802	8.00	%
Common Equity Tier 1 (CET 1) to risk-weighted assets:	$	511,100	11.66	%	$	197,326	4.50	%	$	285,026	6.50	%
Tier 1 leverage capital to average assets:	$	511,100	9.23	%	$	221,444	4.00	%	$	276,805	5.00	%

As of December 31, 2020
Total risk-based capital to risk-weighted assets:	$	517,077	12.30	%	$	336,276	8.00	%	$	420,345	10.00	%
Tier 1 risk-based capital to risk-weighted assets:	$	468,823	11.15	%	$	252,207	6.00	%	$	336,276	8.00	%
Common Equity Tier 1 (CET 1) to risk-weighted assets:	$	468,823	11.15	%	$	189,155	4.50	%	$	273,224	6.50	%
Tier 1 leverage capital to average assets:	$	468,823	9.62	%	$	195,008	4.00	%	$	243,760	5.00	%

NOTE 13. Fair Value Measurements

We utilize fair value measurements to record or disclose the fair value on certain assets and liabilities. Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The determination of fair values of financial instruments often requires the use of estimates. In cases where quoted market values in an active market are not available, we use present value techniques and other valuation methods to estimate the fair values of our financial instruments. These valuation models rely on market-based parameters when available, such as interest rate yield curves or credit spreads. Unobservable inputs may be based on management’s judgement assumptions and estimates related to credit quality, our future earnings, interest rates and other relevant inputs. These valuation methods require considerable judgement and the resulting estimates of fair value can be significantly affected by the assumptions made and the methods used.

ASC Topic 820 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The hierarchy is based on the transparency of the inputs used in the valuation process with the highest priority given to quoted prices available in active markets and the lowest priority to unobservable inputs where no active market exists. The three levels of inputs that may be used to measure fair value are as follows:

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.

Level 3: Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own beliefs about the assumptions that market participants would use in pricing the assets or liabilities.

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A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input within the valuation hierarchy that is significant to the overall fair value measurement. Transfers between levels of the fair value hierarchy are recognized at the end of the reporting period.

The following table sets forth our assets and liabilities measured at fair value on a recurring basis:


	Level 1		Level 2		Level 3
	Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs		Total Estimated Fair Value
As of September 30, 2021
Available-for-sale securities	$	20,695	$	510,700	$	—	$	531,395
Loans held-for-sale	—		122,217		—		122,217
Mortgage servicing rights	—		—		43,971		43,971
Derivative financial instruments - assets	—		12,020		—		12,020
Derivative financial instruments - liabilities	—		(19,966)		—		(19,966)
Total	$	20,695	$	624,971	$	43,971	$	689,637

As of December 31, 2020
Available-for-sale securities	$	—	$	468,586	$	—	$	468,586
Loans held-for-sale	—		193,963		—		193,963
Mortgage servicing rights	—		—		29,144		29,144
Derivative financial instruments - assets	—		18,332		—		18,332
Derivative financial instruments - liabilities	—		(30,792)		—		(30,792)
Total	$	—	$	650,089	$	29,144	$	679,233

No assets or liabilities were valued on a recurring basis at Level 1 as of December 31, 2020, nor were there any transfers between Level 2 and Level 3 during the nine months ended September 30, 2021 and the year ended December 31, 2020.

For further details on our level 3 inputs related to MSRs, see Note 4. Mortgage Servicing Rights.

The following table presents a reconciliation for our Level 3 assets measured at fair value on a recurring basis:


	For the three months ended September 30,				For the nine months ended September 30,
	2021		2020		2021		2020

Balance, beginning of period	$	40,844	$	23,800	$	29,144	$	29,003
Total losses included in earnings	(2,176)		(4,609)		(3,706)		(19,077)
Purchases, issuances, sales and settlements:

Issuances	5,303		6,614		18,533		15,879


Balance, end of period	$	43,971	$	25,805	$	43,971	$	25,805

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Certain financial assets and financial liabilities are regularly measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). The following table sets forth our assets and liabilities that were measured at fair value on a non-recurring basis as of:


	Level 3
	September 30, 2021		December 31, 2020
Impaired loans:
Commercial	$	6,304	$	3,469
Commercial real estate	2,509		84
Residential real estate	1,675		601

Total impaired loans	$	10,488	$	4,154

Other real estate owned and foreclosed assets, net:

Commercial real estate	$	5,747	$	3,354

The fair value of the financial assets in the table above utilize the market approach valuation technique, with discount adjustments for differences between comparable sales.

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Fair value of financial instruments not carried at fair value:

The carrying amounts and estimated fair values of financial instruments not carried at fair value are as follows:


			Estimated Fair Value
	Carrying Value		Total		Level 1		Level 2		Level 3
As of September 30, 2021
Assets:
Cash and cash equivalents	$	949,541	$	949,541	$	949,541	$	—	$	—
Securities held-to-maturity	19,811		20,693		—		20,693		—
Loans (excluding impaired loans)	3,781,213		3,722,746		—		—		3,722,746
Restricted equity securities	16,927		16,927		—		16,927		—
Accrued interest receivable	16,649		16,649		—		1,129		15,520

Liabilities:
Deposits (excluding demand deposits)	$	3,078,169	$	3,203,052	$	—	$	3,203,052	$	—
Securities sold under agreements to repurchase	117,001		117,001		—		117,001		—
FHLB advances	40,000		41,821		—		41,821		—

Convertible notes payable, net	19,256		21,201		—		21,201		—
Subordinated debt, net	49,928		52,099		—		52,099		—
Accrued interest payable	2,768		2,768		—		2,768		—

As of December 31, 2020
Assets:
Cash and cash equivalents	$	201,978	$	201,978	$	201,978	$	—	$	—
Securities held-to-maturity	32,188		33,328		—		33,328		—
Loans (excluding impaired loans)	3,820,483		3,780,649		—		—		3,780,649
Restricted equity securities	23,175		23,175		—		23,175		—
Accrued interest receivable	15,416		15,416		—		986		14,430

Liabilities:
Deposits (excluding demand deposits)	$	2,934,221	$	2,947,287	$	—	$	2,947,287	$	—
Securities sold under agreements to repurchase	115,372		115,372		—		115,372		—
FHLB advances	70,411		72,770		—		72,770		—

Convertible notes payable, net	18,696		20,804		—		20,804		—
Subordinated debt, net	49,666		49,750		—		49,750		—
Accrued interest payable	2,592		2,592		—		2,592		—

NOTE 14. Segment Information

Our operations are conducted through two operating segments: Banking and Mortgage Operations. Corporate represents costs not allocated to the operating segments. Operating segments are defined as components of an enterprise that engage in business activity from which revenues are earned and expenses are incurred for which discrete financial information is available that is evaluated regularly by executive management in deciding how to allocate resources and in assessing performance. Operating segments have been determined based on the products and services offered and reflect the manner in which financial information is currently evaluated by management. Each segment operates under the same banking charter, but is reported on a segmented basis for this report. Each of the operating segments is complementary to each other and because of the

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interrelationship of the segments, the information presented is not indicative of how the segments would perform if they operated as independent entities.

The Banking segment originates loans and provides deposits and fee based services to consumer, business, and mortgage lending customers. Products offered include a full range of commercial and consumer banking and financial services. The interest income on loans held-for-investment is recognized in the Banking segment, excluding newly originated residential first mortgages within the Mortgage Operations segment.

The Mortgage Operations segment originates, sells, services, and manages market risk from changes in interest rates on one-to-four family residential mortgage loans to sell or hold on our balance sheet. Loans originated-to-sell comprise the majority of the lending activity. The Mortgage Operations segment recognizes interest income on loans that are held-for-sale and newly originated residential mortgages held-for-investment, the gains from one to four family residential mortgage sales, and revenue for servicing loans and other ancillary fees following a sales transaction. Revenue from servicing activities is earned on a contractual fee basis. The Mortgage Operations segment services loans for the held-for-investment portfolio, for which it earns revenue via an intercompany service fee allocation which appears as a cost to Banking in mortgage fees. Forward traded loan purchases and sales settlements as well as mortgage servicing rights and related fair value adjustments are reported in this segment.

Corporate represents miscellaneous other expenses of a corporate nature as well as revenue and expenses not directly assigned or allocated to the Banking or Mortgage Operations segments. The majority of executive management’s time is spent managing operating segments; related costs have been allocated between the operating segments and Corporate.

Revenues are comprised of net interest income before the provision (benefit) for loan losses and non-interest income. Noninterest expenses are allocated to each operating segment. Provision for loan losses is primarily allocated to the Banking segment. Allocation methodologies may be subject to periodic adjustment as management systems evolve and/or the business or product lines within the segments change.

Significant segment totals are reconciled to the financial statements as follows for the three months ended September 30,:


	Banking		Mortgage Operations		Corporate		Total Segments
2021
Summary of Operations
Net interest income (expense)	$	39,297	$	1,810	$	(1,142)	$	39,965

Provision for (benefit from) loan losses	3,543		(43)		—		3,500

Noninterest income:
Service charges on deposit accounts	3,471		—		—		3,471
Credit and debit card fees	2,472		—		—		2,472
Trust and investment advisory fees	1,974		—		—		1,974
(Loss) income from mortgage banking services, net	(406)		20,557		—		20,151
Other noninterest income	616		—		—		616
Total noninterest income	8,127		20,557		—		28,684

Noninterest expense:
Salary and employee benefits	22,604		13,166		291		36,061
Occupancy and equipment	5,854		787		2		6,643
Other noninterest expenses	8,361		2,915		590		11,866
Total noninterest expense	36,819		16,868		883		54,570

Income (loss) before income taxes	$	7,062	$	5,542	$	(2,025)	$	10,579

Other Information
Depreciation expense	$	1,516	$	21	$	—	$	1,537
Identifiable assets	$	5,070,287	$	578,475	$	34,323	$	5,683,085

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	Banking		Mortgage Operations		Corporate		Total Segments
2020
Summary of Operations
Net interest income (expense)	$	33,452	$	1,991	$	(1,105)	$	34,338

Provision for (benefit from) loan losses	4,940		(140)		—		4,800

Noninterest income:
Service charges on deposit accounts	2,428		—		—		2,428
Credit and debit card fees	2,107		—		—		2,107
Trust and investment advisory fees	1,282		—		—		1,282
(Loss) income from mortgage banking services, net	(400)		35,935		—		35,535
Other noninterest income	1,388		(21)		—		1,367
Total noninterest income	6,805		35,914		—		42,719

Noninterest expense:
Salary and employee benefits	22,910		14,734		305		37,949
Occupancy	5,662		700		3		6,365
Other noninterest expenses	6,481		3,410		168		10,059
Total noninterest expense	35,053		18,844		476		54,373

Income (loss) before income taxes	$	264	$	19,201	$	(1,581)	$	17,884

Other Information
Depreciation expense	$	1,463	$	(7)	$	—	$	1,456
Identifiable assets	$	4,272,570	$	581,128	$	35,059	$	4,888,757

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Significant segment totals are reconciled to the financial statements as follows for the nine months ended September 30,:


	Banking		Mortgage Operations		Corporate		Total Segments
2021
Summary of Operations
Net interest income (expense)	$	112,517	$	5,674	$	(3,409)	$	114,782

Provision for (benefit from) loan losses	2,124		(374)		—		1,750

Noninterest income:
Service charges on deposit accounts	8,659		—		—		8,659
Credit and debit card fees	7,140		—		—		7,140
Trust and investment advisory fees	5,871		—		—		5,871
(Loss) income from mortgage banking services, net	(1,516)		69,660		—		68,144
Other noninterest income	5,041		(7)		—		5,034
Total noninterest income	25,195		69,653		—		94,848

Noninterest expense:
Salary and employee benefits	70,111		42,238		780		113,129
Occupancy and equipment	17,535		2,329		3		19,867
Other noninterest expenses	22,072		9,237		2,069		33,378
Total noninterest expense	109,718		53,804		2,852		166,374

Income (loss) before income taxes	$	25,870	$	21,897	$	(6,261)	$	41,506

Other Information
Depreciation expense	$	4,428	$	288	$	—	$	4,716
Identifiable assets	$	5,070,287	$	578,475	$	34,323	$	5,683,085

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	Banking		Mortgage Operations		Corporate		Total Segments
2020
Summary of Operations
Net interest income (expense)	$	95,789	$	5,750	$	(2,383)	$	99,156

Provision for (benefit from) loan losses	15,216		(116)		—		15,100

Noninterest income:
Service charges on deposit accounts	7,042		—		—		7,042
Credit and debit card fees	5,865		—		—		5,865
Trust and investment advisory fees	3,222		—		—		3,222
(Loss) income from mortgage banking services, net	(1,755)		91,741		—		89,986
Other noninterest income	3,020		(21)		—		2,999
Total noninterest income	17,394		91,720		—		109,114

Noninterest expense:
Salary and employee benefits	63,755		37,439		804		101,998
Occupancy	16,840		2,407		4		19,251
Other noninterest expenses	18,494		8,853		542		27,889
Total noninterest expense	99,089		48,699		1,350		149,138

(Loss) income before income taxes	$	(1,122)	$	48,887	$	(3,733)	$	44,032

Other Information
Depreciation expense	$	4,061	$	292	$	—	$	4,353
Identifiable assets	$	4,272,570	$	581,128	$	35,059	$	4,888,757

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NOTE 15. Commitments and Contingencies

Commitments:

We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include loan commitments, standby letters of credit, and documentary letters of credit and involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the financial statements. Our exposure to credit loss in the event of nonperformance by the other party of these loan commitments and standby letters of credit is represented by the contractual amount of those instruments. We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet financial instruments.

Operating leases:

We lease certain facilities and equipment under non-cancelable operating leases. Operating lease amounts exclude renewal option periods, property taxes, insurance, and maintenance expenses on leased properties. Our facility leases typically provide for rental adjustments for increases in base rent (up to specific limits), property taxes, insurance, and general property maintenance that would be recorded in rent expense. Rent expense was $1,641 and $1,396 for the three months ended September 30, 2021 and 2020, respectively, and $4,955 and $4,926 for the nine months ended September 30, 2021 and 2020, respectively. Future minimum payments under all existing operating lease commitments are as follows:


Remainder 2021	$	6,721
2022	6,827
2023	6,529
2024	6,073
2025	3,831
2026	2,376
Thereafter	5,003
Total operating leases	$	37,360

Undistributed portion of committed loans and unused lines of credit:

Loan commitments are agreements to lend to a customer as long as there is no customer violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require a payment of a fee. As of September 30, 2021 and December 31, 2020, commitments included the funding of fixed-rate loans totaling $116,455 and $95,448 and variable-rate loans totaling $657,403 and $602,142, respectively. The fixed-rate loan commitments have interest rates ranging from 0.90% to 18.00% at September 30, 2021 and 0.90% to 18.00% at December 31, 2020, and maturities ranging from 1 month to 24 years at September 30, 2021 and from 1 month to 10 years at December 31, 2020.

Standby letters of credit:

Standby letters of credit are conditional commitments to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Since many of the loan commitments and letters of credit expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on our credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, owner-occupied real estate, and/or income-producing commercial properties. As of September 30, 2021 and December 31, 2020, our standby letters of credit commitment totaled $7,807 and $16,664, respectively.

MPF Master Commitments:

The Bank has executed MPF Master Commitments (Commitments) with the FHLB to deliver mortgage loans and to guarantee the payment of any realized losses that exceed the FHLB’s first loss account for mortgages delivered under the Commitments. The Bank receives credit enhancement fees from the FHLB for providing this guarantee and continuing to manage the credit risk of the MPF Program mortgage loans. The term of these Commitments is through December 31, 2021. As of September 30, 2021 and December 31, 2020, the Bank considered the amount of any of its liability for the present value of the credit enhancement fees less any expected losses in the mortgages delivered under the Commitments to be immaterial, and had not recorded a liability and offsetting receivable. As of September 30, 2021 and December 31, 2020 the maximum potential amount of future payments that the Bank would have been required to make under the Commitments was $13,094 and $13,029 respectively. Under the Commitments, the Bank agrees to service the loans and therefore, is responsible for any necessary

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foreclosure proceedings. Any future recoveries on any losses would not be paid by the FHLB under the Commitments. The Bank has not experienced any material losses under these guarantees.

Contingencies:

We generally sell loans to investors without recourse; therefore, the investors have assumed the risk of loss or default by the borrower. However, we are usually required by these investors to make certain standard representations and warranties relating to credit information, loan documentation, and collateral. To the extent that we do not comply with such representations, we may be required to repurchase the loans or indemnify these investors for any losses from borrower defaults. We establish reserves for potential losses related to these representations and warranties if deemed appropriate and such reserves would be recorded within accrued expenses and other liabilities. In assessing the adequacy of the reserve, we evaluate various factors including actual write-offs during the period, historical loss experience, known delinquent and other problem loans, and economic trends and conditions in the industry.

From time to time, we are a defendant in various claims, legal actions, and complaints arising in the ordinary course of business. We periodically review all outstanding pending or threatened legal proceedings and determine if such matters will have an adverse effect on our business, financial condition, results of operations or cash flows.

Trust Administration Litigation:

On May 18, 2021, the two remainder beneficiaries of the Dorothy S. Harroun Irrevocable Trust (“Trust”), Dennis Harroun and Douglas Harroun (the “Remainder Beneficiaries”), filed a claim in the Santa Fe County, New Mexico District Court, against the Bank as trustee of the Trust, in the form of a counterclaim related to a petition for guidance and approval of trust distributions filed by the Bank on March 24, 2021 in the same court (the “Guidance Case”). The Remainder Beneficiaries’ claim alleges that the Bank breached its fiduciary duty and impartiality with respect to 2020 distributions made to the Trust’s current beneficiary, Dorothy Harroun (“Dorothy”). The Remainder Beneficiaries seek restitution and surcharge against the Bank for the full amount of the 2020 distributions, which were approximately $19.7 million, plus a reasonable rate of return thereon, as well as legal fees, costs, and expenses and the removal of the Bank as trustee of the Trust. The Bank believes that the Remainder Beneficiaries’ claims are without merit and it intends to vigorously defend against all claims asserted.

On June 14, 2021, the Bank was removed as Trustee of the Dorothy S. Harroun Revocable Trust (“Revocable Trust”). The Revocable Trust held proceeds of the 2020 distributions, and, after payment of federal and state taxes related to the 2020 distributions, the Revocable Trust still had approximately $11.8 million of the 2020 distributions intact (“Funds”). On June 16, 2021, the Bank filed an interpleader action in the Santa Fe County, New Mexico District Court (“Interpleader Case”). The Interpleader Case petition requested that the Funds be paid into the registry of the Court pending final judgment in the Guidance Case. On September 30, 2021, the Court in the Interpleader Case ordered that the Funds be transferred to the Revocable Trust successor trustee, First American Bank, and that no party may make demand for distributions thereof without further Order of the Court. The Funds have been transferred to First American Bank. Dorothy and the Remainder Beneficiaries have each filed answers and counterclaims in the Interpleader Case contesting the relief sought by the Bank, and alleging that the Bank breached its fiduciary duty and impartiality as between the beneficiaries. The Bank believes that the counterclaims in the Interpleader Action are without merit and it intends to vigorously defend against all claims asserted.

Overdraft Fee Litigation:

On September 10, 2021, Karen McCollam filed a putative class action amended complaint against the Bank in the United States District Court for the District of Colorado. The amended complaint alleges that the Bank improperly charged overdraft fees where a transaction was initially authorized on sufficient funds but later settled negative due to intervening transactions. The complaint asserts a claim for breach of contract, which incorporates the implied duty of good faith and fair dealing, and a claim for violations of the Colorado Consumer Protection Act. Plaintiff seeks to represent a proposed class of all the Bank’s checking account customers who were allegedly charged overdraft fees on transactions that did not overdraw their checking account. Plaintiff seeks unspecified restitution, actual and statutory damages, costs, attorneys’ fees, pre-judgment interest, and other relief as the Court deems proper for herself and the putative class. On September 24, 2021, the Bank filed a motion to dismiss the amended complaint. The motion to dismiss has been fully pled, and is before the Court for decision. The Bank believes that the lawsuit is without merit and it intends to vigorously defend against all claims asserted.

On September 13, 2021, Samantha Besser filed an amended putative class action complaint against the Bank in the United States District Court for the District of Colorado. The amended complaint alleges that the Bank improperly charged multiple insufficient funds or overdraft fees when a merchant resubmits a rejected payment request. The complaint asserts claims for breach of contract, which incorporates the implied duty of good faith and fair dealing. Plaintiff seeks to represent a proposed class of all the Bank’s checking account customers who were charged multiple insufficient funds or overdraft fees on resubmitted payment requests. Plaintiff seeks unspecified restitution, actual and statutory damages, costs, attorneys’ fees, pre-judgment interest, and other relief as the Court deems proper for herself and the purported class. On September 27, 2021, the

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Bank filed a motion to dismiss the amended complaint. The motion to dismiss has been fully pled, and is before the Court for decision. The Bank believes that the lawsuit is without merit and it intends to vigorously defend against all claims asserted.

We establish reserves for contingencies, including legal proceedings, when potential losses become probable and can be reasonably estimated. While the ultimate resolution of any legal proceedings, including the matters described above, cannot be determined at this time, based on information presently available, and after consultation with legal counsel, management believes that the ultimate outcome in these above legal proceedings, either individually or in the aggregate, will not have a material adverse effect on our financial statements. It is possible, however, that future developments could result in an unfavorable outcome for or resolution of any of these proceedings, which may be material to our results of operations for a given fiscal period.

COVID-19:

On March 11, 2020, the World Health Organization announced that the COVID-19 outbreak was deemed a pandemic, and on March 13, 2020, the President declared the ongoing COVID-19 pandemic of sufficient magnitude to warrant an emergency declaration. The operations and business results of the Company could be materially adversely affected, including the estimate of the allowance for loan losses. The extent to which the coronavirus may continue to impact business activity or investment results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the continued severity of the coronavirus and variants, and the actions required to contain the coronavirus or treat its impact, among others.

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Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS OF FIRSTSUN

In this section, unless the context suggests otherwise, references to “we,” “us,” and “our” mean the combined business of FirstSun and its wholly-owned subsidiaries, Logia Portfolio Management, LLC and Sunflower Bank.

The following discussion and analysis of FirstSun’s consolidated financial condition and results of operations should be read in conjunction with the unaudited consolidated financial statements and accompanying footnotes included in Item 1 of this Form 10-Q as well as our audited consolidated financial statements and footnotes for the year ended December 31, 2020 included in our proxy statement/prospectus dated August 10, 2021 (the “Prospectus”) that we filed with the SEC on August 12, 2021, pursuant to Securities Act Rule 424(b)(3) in connection with our proposed merger with Pioneer Bancshares, Inc. and discussed below. Historical results of operations and the percentage relationships among any amounts included, and any trends that may appear, may not indicate trends in operations or results of operations for any future periods.

Comments regarding FirstSun’s business that are not historical facts are considered forward-looking statements that involve inherent risks and uncertainties. Actual results may differ materially from those contained in these forward-looking statements. For additional information regarding our cautionary disclosures, see the “Cautionary Note Regarding Forward-Looking Statements” beginning on page 4 of this report.

Overview

FirstSun Capital Bancorp, headquartered in Denver, Colorado, is the financial holding company for Sunflower Bank, National Association, which operates as Sunflower Bank, First National 1870 and Guardian Mortgage. We conduct a full service community banking and trust business through our wholly-owned subsidiaries—Sunflower Bank and Logia Portfolio Management, LLC.

We offer a full range of relationship-focused services to meet our clients’ personal, business and wealth management financial objectives, with a branch network in Kansas, Colorado, New Mexico, Texas and Arizona and mortgage capabilities in 43 states. Our product line includes commercial loans, commercial real estate loans, residential mortgage and other consumer loans, and a variety of commercial and consumer deposit products, including noninterest bearing accounts, interest-bearing demand products, savings accounts, money market accounts and certificates of deposit. We also offer wealth management and trust products including personal trust and agency accounts, employee benefit and retirement related trust and agency accounts, investment management and advisory agency accounts, and foundation and endowment trust and agency accounts. We also offer online banking and bill payment services, online cash management, safe deposit box rentals, debit card and ATM card services and the availability of a network of ATMs for our customers.

We operate FirstSun through two operating segments: Banking and Mortgage Operations. We also allocate certain expenses to Corporate, which is not an operating segment. The expenses included in Corporate are not deemed to be allocable to our operating segments. The operating segments have been determined based on the products and services we offer and reflect the manner in which our financial information is currently evaluated by management. Each of the operating segments is complementary to each other and because of the interrelationship of the segments, the information presented is not indicative of how the segments would perform if they operated as independent entities.

Proposed Merger with Pioneer Bancshares, Inc.

On May 11, 2021, we entered into an Agreement and Plan of Merger (the “merger agreement”) with Pioneer Bancshares, Inc. (“Pioneer”). Under the merger agreement, a wholly-owned subsidiary of FirstSun will merge with and into Pioneer, with Pioneer remaining as the surviving entity and becoming a wholly-owned subsidiary of FirstSun (the “merger”). This surviving entity, as soon as reasonably practicable following the merger and as part of a single integrated transaction, will merge with and into FirstSun (the “second step merger,” and together with the merger, the “mergers”). Immediately following the completion of the second step merger or at such later time as the parties may mutually agree, Pioneer’s wholly-owned subsidiary, Pioneer Bank, SSB, a Texas state savings bank, will merge with and into FirstSun’s wholly-owned subsidiary, Sunflower Bank, National Association, a national banking association, with Sunflower Bank as the surviving bank. If the merger is completed, each outstanding share of Pioneer common stock will be converted into the right to receive 1.0443 shares of FirstSun common stock, plus cash in lieu of fractional shares. The combined entity is expected to have total assets that exceed $7 billion. Pioneer shareholders voted to approve the merger at a special meeting of shareholders held on September 16, 2021. The completion of the merger is subject to, among other things, receipt of all necessary regulatory approvals. We currently expect the merger to close during the fourth quarter of 2021.

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Segments

Banking

Three Months Ended September 30, 2021 and 2020

For the third quarter of 2021, income before taxes from our Banking segment increased to $7.1 million, compared to income of $0.3 million for the third quarter of 2020. This increase was primarily driven by increases in our net interest income of $5.8 million to $39.3 million during the third quarter of 2021, compared to $33.5 million during the third quarter of 2020. The increase in net interest income was primarily due to growth in interest income on loans held-for-investment due to an improving loan mix, fees from loan prepayments, and overall growth in average loan balances. Segment income also increased as a result of a $1.4 million decrease in our provision for loan losses, decreasing from a $4.9 million provision in the third quarter of 2020 to a $3.5 million provision in the third quarter of 2021. The decrease in provision expense recorded in the third quarter of 2021 was primarily due to improving economic conditions, partially offset by an increase in commercial loans during the period. This increase in commercial loans was partially offset by a reduction of PPP loans for which no allowance was required. Noninterest income increased to $8.1 million in the third quarter of 2021, compared to $6.8 million in the third quarter of 2020 primarily resulting from increases in service charges on deposit accounts and trust and investment advisory fees. Noninterest expense increased by $1.8 million to $36.8 million for the third quarter of 2021 primarily due to our continued growth.

Nine Months Ended September 30, 2021 and 2020

Identifiable assets for our Banking segment grew by $0.8 billion to $5.1 billion at September 30, 2021 from $4.3 billion for the same period in 2020. The growth in identifiable assets was primarily driven by growth in cash and cash equivalents and our loan portfolio. Income (loss) before taxes increased $27.0 million to $25.9 million for the nine months ended September 30, 2021, from a loss of $1.1 million for the nine months ended September 30, 2020. The period over period increase was driven by a $13.1 million decrease in our provision for loan losses, decreasing from a $15.2 million provision in the nine months ended September 30, 2020 to a $2.1 million provision in the nine months ended September 30, 2021. This reduction in the provision was due to favorable changes to certain environmental factors as a result of improved economic conditions and the performance of our portfolio. Noninterest income increased $7.8 million to $25.2 million in the nine months ended September 30, 2021, compared to $17.4 million in the same period in 2020, primarily resulting from increases in trust and investment advisory fee income, treasury management service fees, and customer accommodation interest rate swap fees and changes in fair value. Noninterest expense increased $10.6 million to $109.7 million for the nine months ended September 30, 2021 compared to $99.1 million for the nine months ended September 30, 2020. The increase in noninterest expense was primarily due to our continued growth, including increased salary and employee benefits associated with headcount increases from an expanding sales force, as well as our expanded operations in certain markets, including Arizona and Texas.

Mortgage Operations

Three Months Ended September 30, 2021 and 2020

For the third quarter of 2021, income before taxes from our Mortgage Operations segment decreased to $5.5 million, compared to $19.2 million for the third quarter of 2020. This decrease was primarily due to a $15.6 million decline in net gain on sales and fees from loan originations, including changes in the fair value of the held-for-sale portfolio, net of hedging activity, as total loan originations during the third quarter of 2021 declined by $177.8 million, or 25.0%, to $532.7 million compared to the same period in 2020. Noninterest income from mortgage banking services decreased $15.4 million to $20.6 million during the third quarter of 2021, compared to $35.9 million during the third quarter of 2020. Further discussion on the components of income from mortgage banking services is included under the subheading “Noninterest Income.” Noninterest expense for the third quarter of 2021 was $16.9 million, compared to $18.8 million for the same period in 2020. While variable compensation related to loan originations declined, overall salaries and employee benefits expenses remained relatively flat period over period as a result of an increase in headcount. We are investing in our workforce to grow the level of loan activities for home purchase transactions as the level of overall loan refinancing transactions has declined period over period.

Nine Months Ended September 30, 2021 and 2020

Income before income taxes from our Mortgage Operations segment decreased to $21.9 million for the nine months ended September 30, 2021, compared to $48.9 million for the nine months ended September 30, 2020, due to a combination of factors including a $9.3 million decline in revenue related to mortgage servicing rights (“MSR”) capitalization and changes in fair value, net of hedging activity, and a $5.1 million increase in noninterest expense. The revenue decline related to our MSRs was primarily the result of changes in market interest rates and our corresponding hedging positions. Additionally, while total loan originations remained steady at $1.8 billion for both the nine months ended September 30, 2021 and 2020, overall gain on sale margins declined by $14.7 million to $51.7 million for the nine months ended September 30, 2021 from $66.4 million.

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Noninterest expense for the nine months ended September 30, 2021 was $53.8 million, compared to $48.7 million for the nine months ended September 30, 2020. The $5.1 million increase was primarily due to the increased salary and employee benefits expense associated with higher headcount as we continue to invest in our workforce.

COVID-19 Pandemic

The COVID-19 pandemic and variants of the virus continue to create disruptions to the global economy and financial markets and to businesses and the lives of individuals throughout the world. Our business, financial condition and results of operations generally rely upon the ability of our borrowers to repay their loans, the value of collateral underlying our secured loans, and demand for loans and other products and services we offer, which are highly dependent on the business environment in our primary markets and in the United States as a whole.

The impact of the COVID-19 pandemic and its variants is fluid and continues to evolve, adversely affecting many of our customers. The unprecedented and rapid spread of COVID-19 and its associated impacts on trade (including supply chains and export levels), travel, employee productivity, unemployment, and consumer spending has disrupted economic activity and employment, resulting in volatility in financial markets. Market interest rates, after falling to historically low levels due to the COVID-19 pandemic through the second quarter of 2020, have generally stabilized, while intermediate and longer-term Treasury rates have begun to rise. The low interest rate environment (except with respect to our Mortgage Operations) and the other effects of the COVID-19 pandemic have had, and are expected to continue to have, possibly materially, an adverse effect on our business, financial condition and results of operations. For instance, the pandemic has had negative effects on our interest income, allowance for loan losses, and certain transaction-based line items of noninterest income. The ultimate extent of the impact of the COVID-19 pandemic on our business, financial condition and results of operations is currently uncertain and will depend on various developments and other factors, including the effect of governmental and private sector initiatives, the effect of the continued rollout of vaccinations for the virus, whether such vaccinations will be effective against any resurgence of the virus, including any new strains, and the ability for customers and businesses to return to, and remain in their pre-pandemic routine.

We continue to actively monitor developments related to COVID-19 and its variants and its impact on our business, customers, employees, counterparties, vendors, and service providers.

Since the start of the COVID-19 pandemic, we have taken several actions to offer various forms of support to our customers, employees, and communities that have been impacted by the pandemic. We have worked with borrowers impacted by COVID-19 and provided modifications to include interest only deferral or principal and interest deferral. Under bank regulatory guidance and the CARES Act, these short-term deferrals are generally not considered to be troubled debt restructurings, or “TDRs,” unless the borrower was experiencing financial difficulty prior to the pandemic.

We had actively modified loans under the CARES Act as of:


	September 30, 2021			December 31, 2020
(in thousands, except loan count)	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment

Commercial	—	$	—	23	$	17,714
Commercial real estate	—	$	—	7	$	12,413
Residential real estate	9	$	2,517	49	$	21,584
Consumer	—	$	—	6	$	77
Total	9	$	2,517	85	$	51,788

A provision in the CARES Act created the Paycheck Protection Program, or “PPP,” a program administered by the Small Business Administration, or “SBA,” to provide loans to small business during the COVID-19 pandemic. As of September 30, 2021 and December 31, 2020, we had $116.5 million and $256.3 million of PPP loans outstanding and deferred processing fees outstanding of $3.2 million and $5.2 million, respectively. PPP loans are classified as Commercial loans in our consolidated financial statements. The PPP program ended on May 31, 2021, and we do not expect to fund additional PPP loans. We expect funds to be received from the SBA for the forgiven loans into 2023.

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Critical Accounting Estimates

Our consolidated financial statements are prepared based on the application of accounting policies in accordance with generally accepted accounting principles, or “GAAP,” and follow general practices within the banking industry. These policies require the reliance on estimates, assumptions and judgments, which may prove inaccurate or are subject to variations. Changes in underlying factors, estimates, assumptions or judgements could have a material impact on our future financial condition and results of operations.

Certain policies inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. We have identified the determination of the allowance for loan losses and fair value measurements to be the accounting areas that require the most subjective or complex judgments and, as such, could be most subject to revision as new or additional information becomes available or circumstances change, including overall changes in the economic climate and/or market interest rates. Therefore, we consider these policies to be critical accounting estimates and discuss them directly with the Audit Committee of our board of directors. During the three months ended September 30, 2021, there have been no significant changes to our critical accounting estimates compared with those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” and the notes to the audited consolidated financial statements appearing in the Prospectus filed with the SEC pursuant to Securities Act Rule 424(b)(3) on August 12, 2021.

Our significant accounting policies are presented in “Note 1 - Summary of Significant Accounting Policies” in our audited consolidated financial statements and footnotes for the year ended December 31, 2020 included in the Prospectus filed with the SEC pursuant to Securities Act Rule 424(b)(3) on August 12, 2021. These policies, along with the disclosures presented in the other financial statement notes and in this discussion, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. Recent accounting pronouncements and standards that have impacted or could potentially affect us are also discussed in “Note 1” of our audited consolidated financial statements.

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Results of Operations

General

Our results of operations depend significantly on net interest income, which is the difference between interest income on interest-earning assets, consisting primarily of interest income on loans and investment securities and interest expense on interest-bearing liabilities, consisting primarily of deposits and borrowings. Our results of operations are also dependent on our generation of noninterest income, consisting primarily of income from mortgage banking services, service charges on deposit accounts, trust and investment advisory fees and credit and debit card fees. Other factors contributing to our results of operations include our provisions for loan losses, income taxes, and noninterest expenses, such as salaries and employee benefits, occupancy and equipment, amortization of intangible assets and other operating costs.

Net income for the third quarter of 2021 was $8.7 million, compared to $14.8 million for the third quarter of 2020. The $6.0 million decrease in net income for the third quarter of 2021, compared to the same period in 2020, was primarily due to a $15.4 million decrease in income from mortgage banking services partially offset by a $6.9 million increase in net interest income after provision for loan losses.

Net income for the nine months ended September 30, 2021 was $34.3 million, compared to $36.3 million for the nine months ended September 30, 2020. The $2.0 million decrease in net income for the nine months ended September 30, 2021, compared to the same period in 2020, was primarily due to a $29.0 million increase in net interest income after provision for loan losses, offset by a decrease in noninterest income of $14.3 million, due primarily to a decrease in income from mortgage banking services and an increase in noninterest expenses of $17.2 million.

Net Interest Income

Net interest income, representing interest income less interest expense, is a significant contributor to our revenues and earnings. We generate interest income from interest and dividends on interest-earning assets, which are principally comprised of loans and investment securities. We incur interest expense from interest owed or paid on interest-bearing liabilities, including interest-bearing deposits, FHLB advances and other borrowings. Net interest income and margin are shaped by the characteristics of the underlying products, including volume, term and structure of each product. We measure and monitor yields on our loans and other interest-earning assets, the costs of our deposits and other funding sources, our net interest spread and our net interest margin. Net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities. Net interest margin is calculated as the annualized net interest income divided by average interest-earning assets.

Interest earned on our loan portfolio is the largest component of our interest income. Our loan portfolios are presented at the principal amount outstanding net of deferred origination fees and unamortized discounts and premiums. Interest income is recognized based on the principal balance outstanding and the stated rate of the loan. Loan origination fees and certain direct origination costs are capitalized and recognized as an adjustment of the yield on the related loan. Loans acquired through acquisition are initially recorded at fair value. Discounts or premiums created when the loans were recorded at their estimated fair values at acquisition are accreted over the remaining term of the loan as an adjustment to the related loan’s yield.

Our net interest income can be significantly influenced by a variety of factors, including overall loan demand, economic conditions, credit risk, the amount of non-earning assets including nonperforming loans and OREO, the amounts of and rates at which assets and liabilities reprice, variances in prepayment of loans and securities, exercise of call options on borrowings or securities, a general rise or decline in interest rates, changes in the slope of the yield-curve, and balance sheet growth or contraction.

Three Months Ended September 30, 2021 and 2020

Our net interest income was $40.0 million for the third quarter of 2021, an increase of $5.6 million, or 16.4%, from the same period in 2020. This increase was primarily attributable to a $3.9 million, or 10.9%, increase in interest and fee income on loans held-for-investment for the third quarter of 2021, compared to the third quarter of 2020, driven by an increase of $76.9 million in average loans held-for-investment in the third quarter of 2021, compared to the same period in 2020. Average yield for the third quarter of 2021 was 4.20% an increase of 31 basis points over the comparable period in 2020.

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Average earning assets for the third quarter of 2021 were $5.3 billion, an increase of $0.8 billion, or 17.3%, compared to the third quarter of 2020. Total average loans, including loans held-for-sale, grew $0.1 billion to $3.9 billion in the third quarter of 2021, from $3.8 billion in the third quarter of 2020. The period over period growth in interest income on loans held-for-investment is primarily due to increases in market rates, as well as growth in average loan balances. Interest income from investment securities declined slightly, primarily due to a decrease in average balances as we did not re-invest all of the cash flows resulting from the portfolio amortization over the past year. The average balance of investment securities decreased $18.1 million in the third quarter of 2021, compared to the third quarter of 2020, while the yield on average investment securities declined seven basis points to 1.49% for the third quarter of 2021, compared to 1.56% for third quarter of 2020.

Average interest bearing liabilities increased $0.4 billion, or 11.1%, in the third quarter of 2021, compared to the third quarter of 2020. Average interest bearing deposits increased $0.4 billion, or 14.6%, in the third quarter of 2021, compared to the third quarter of 2020, and was the primary driver of the growth in average interest bearing liabilities. We also saw growth in noninterest bearing deposits of $0.4 billion in the third quarter of 2021, compared to the same period in 2020. In addition to growth in our overall commercial and consumer customer base, we saw deposit growth as a result of funds our customers received from federal stimulus programs related to the COVID-19 pandemic. The average rate for all interest bearing deposits declined by 23 basis points in the third quarter of 2021, compared to the same period in 2020.

Our net interest margin was 3.01% for the third quarter of 2021, compared to 3.03% for the third quarter of 2020, a decrease of 0.02%. While our total cost of funds declined by 24 basis points period over period, we also experienced a 22 basis point decline in yield on our earning assets over the same period during 2021. Our earning asset yield was also negatively impacted by the $0.7 billion increase in interest bearing cash balances, compared to the prior year period, from the heightened level of overall liquidity in the marketplace.

Nine Months Ended September 30, 2021 and 2020

Our net interest income was $114.8 million for the nine months ended September 30, 2021, an increase of $15.6 million, or 15.8%, from the nine months ended September 30, 2020. This increase was primarily attributable to growth of $327.5 million in average total loans held-for-investment balances during 2021, driving an increase in interest income on loans of $11.7 million despite the negative impact of declining market interest rates on loan yields. Interest and fee income on PPP loans contributed $4.4 million of the overall increase in interest income on loans for the period. Interest income on investment securities decreased by $2.6 million for the nine months ended of September 30, 2021, compared to the nine months ended September 30, 2020. Interest expense from interest bearing deposits declined by $6.2 million driven by a 32 basis point reduction in the average rate on our interest bearing deposits.

Average earning assets for the nine months ended September 30, 2021 were $5.1 billion, an increase of $0.8 billion, or 19.0%, compared to the nine months ended September 30, 2020. Total average loans, including loans held-for-sale, grew to $3.9 billion for the nine months ended September 30, 2021, an increase of $0.3 billion, compared to the nine months ended September 30, 2020. The growth in interest income on loans held-for-investment is due to growth in loan balances and a six basis point increase in the yield on loans in the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020. Interest income from investment securities declined period over period, due to a combination of a 45 basis point decrease in yield due to decreasing market interest rates, as well as a $59.8 million decrease in average balances, period over period.

Average interest bearing liabilities increased $0.4 billion, or 13.2%, for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020. Average interest bearing deposits increased $0.4 billion, or 14.4%, in the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020 and was the primary driver of the growth in average interest bearing liabilities. We also saw growth in noninterest bearing deposits of $0.4 billion for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020. In addition to growth in our overall commercial and consumer customer base, we saw deposit growth in the nine months ended September 30, 2021 as a result of funds our customers received from federal stimulus programs related to the COVID-19 pandemic.

Our net interest margin was 3.00% for the nine months ended September 30, 2021, compared to 3.08% for the nine months ended September 30, 2020, a decrease of eight basis points. While our total cost of funds declined by 30 basis points period over period, we also experienced a 31 basis point decline in yield from earning assets over the same period during 2021. Our earning asset yield was also negatively impacted by the $0.5 billion increase in interest bearing cash balances, compared to the prior year period, from the heightened level of overall liquidity in the marketplace.

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The following tables set forth information related to our average balance sheet, average yields on assets, and average costs of liabilities for the periods presented. We derived these yields by dividing income or expense by the average balance of the corresponding assets or liabilities. We derived average balances from the daily balances throughout the periods indicated.

Three Months Ended September 30, 2021 and 2020


	For the three months ended September 30, 2021							For the three months ended September 30, 2020
(In thousands)	Average Balance		Interest			Average Yield/Rate		Average Balance		Interest			Average Yield/Rate
Interest Earning Assets
Loans held-for-sale	$	122,007	$	986		3.23	%	$	125,858	$	934		2.98	%
Loans held-for-investment1	3,779,517		39,710			4.20	%	3,702,653		35,817			3.89	%
Investment securities	522,870		1,954			1.49	%	540,954		2,100			1.56	%
Interest-bearing cash and other assets	895,288		611			0.27	%	163,775		309			0.76	%
Total earning assets	5,319,682		43,261			3.25	%	4,533,240		39,160			3.47	%
Other assets	287,323							274,432
Total assets	$	5,607,005						$	4,807,672

Interest-bearing liabilities
Demand and NOW deposits	$	241,488	$	139		0.23	%	$	227,118	$	280		0.50	%
Savings deposits	453,687		101			0.09	%	377,444		176			0.19	%
Money market deposits	2,264,682		1,054			0.19	%	1,841,639		1,459			0.32	%
Certificates of deposits	337,906		684			0.81	%	431,012		1,433			1.34	%
Total deposits	3,297,763		1,978			0.24	%	2,877,213		3,348			0.47	%
Repurchase agreements	120,009		13			0.04	%	138,367		23			0.07	%
Total deposits and repurchase agreements	3,417,772		1,991			0.23	%	3,015,580		3,371			0.45	%
FHLB borrowings	40,000		151			1.51	%	93,571		326			1.40	%
Other long-term borrowings	69,028		1,154			6.69	%	65,195		1,125			6.94	%
Total interest-bearing liabilities	3,526,800		3,296			0.37	%	3,174,346		4,822			0.61	%
Noninterest-bearing deposits	1,483,010							1,071,282
Other liabilities	74,286							86,687
Stockholders’ equity	522,909							475,357
Total liabilities and stockholders’ equity	$	5,607,005						$	4,807,672

Net interest income			$	39,965						$	34,338
Net interest spread			2.88		%					2.86		%
Net interest margin			3.01		%					3.03		%
Net interest margin (on an FTE basis)			3.10		%					3.15		%

1 Includes nonaccrual loans

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Nine Months Ended September 30, 2021 and 2020


	For the nine months ended September 30, 2021							For the nine months ended September 30, 2020
(In thousands)	Average Balance		Interest			Average Yield/Rate		Average Balance		Interest			Average Yield/Rate
Interest Earning Assets
Loans held-for-sale	$	135,202	$	3,257		3.21	%	$	114,919	$	2,778		3.22	%
Loans held-for-investment2	3,761,029		115,423			4.09	%	3,433,533		103,699			4.03	%
Investment securities	511,757		5,646			1.47	%	571,605		8,238			1.92	%
Interest-bearing cash and other assets	693,833		1,450			0.28	%	166,663		1,095			0.88	%
Total earning assets	5,101,821		125,776			3.29	%	4,286,720		115,810			3.60	%
Other assets	287,500							278,318
Total assets	$	5,389,321						$	4,565,038

Interest-bearing liabilities
Demand and NOW deposits	$	271,955	$	636		0.31	%	$	203,918	$	802		0.52	%
Savings deposits	454,371		363			0.11	%	356,540		563			0.21	%
Money market deposits	2,183,473		3,305			0.20	%	1,763,061		5,338			0.40	%
Certificates of deposits	350,217		2,427			0.92	%	527,279		6,178			1.56	%
Total deposits	3,260,016		6,731			0.28	%	2,850,798		12,881			0.60	%
Repurchase agreements	131,444		49			0.05	%	110,411		139			0.17	%
Total deposits and repurchase agreements	3,391,460		6,780			0.27	%	2,961,209		13,020			0.59	%
FHLB borrowings	43,379		758			2.33	%	89,418		1,353			2.02	%
Other long-term borrowings	68,787		3,456			6.70	%	45,282		2,281			6.72	%
Total interest-bearing liabilities	3,503,626		10,994			0.42	%	3,095,909		16,654			0.72	%
Noninterest-bearing deposits	1,295,984							930,438
Other liabilities	77,878							79,959
Stockholders’ equity	511,833							458,732
Total liabilities and stockholders’ equity	$	5,389,321						$	4,565,038

Net interest income			$	114,782						$	99,156
Net interest spread			2.87		%					2.88		%
Net interest margin			3.00		%					3.08		%
Net interest margin (on an FTE basis)			3.11		%					3.21		%

2 Includes nonaccrual loans

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Rate-Volume Analysis

The tables below present the effect of volume and rate changes on interest income and expense. Changes in volume are changes in the average balance multiplied by the previous period’s average rate. Changes in rate are changes in the average rate multiplied by the average balance from the previous period. The net changes attributable to the combined impact of both rate and volume have been allocated proportionately to the changes due to volume and the changes due to rate.


	For the three months ended September 30,
	2021 versus 2020 increase (decrease) due to change in:
(In thousands)	Rate		Volume		Total
Interest Earning Assets
Loans held-for-sale	$	81	$	(29)	$	52
Loans held-for-investment	3,145		748		3,893
Investment securities	(75)		(71)		(146)
Interest-bearing cash	(1,085)		1,387		302
Total earning assets	2,066		2,035		4,101

Interest-bearing liabilities
Demand and NOW deposits	(159)		18		(141)
Savings deposits	(111)		36		(75)
Money market deposits	(741)		337		(404)
Certificates of deposits	(438)		(311)		(749)
Total deposits	(1,449)		80		(1,369)
Repurchase agreements	(7)		(3)		(10)
Total deposits and repurchase agreements	(1,456)		77		(1,379)
FHLB borrowings	13		(188)		(175)
Other long-term borrowings	(38)		67		29
Total interest-bearing liabilities	(1,481)		(44)		(1,525)

Net interest income	$	3,547	$	2,079	$	5,626

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	For the nine months ended September 30,
	2021 Versus 2020 Increase (Decrease) Due to:
(In thousands)	Rate		Volume		Total
Interest Earning Assets
Loans held-for-sale	$	(174)	$	654	$	480
Loans held-for-investment	(1,465)		13,188		11,723
Investment securities	(1,441)		(1,149)		(2,590)
Interest-bearing cash	(4,263)		4,618		355
Total earning assets	(7,343)		17,311		9,968

Interest-bearing liabilities
Demand and NOW deposits	(523)		357		(166)
Savings deposits	(405)		206		(199)
Money market deposits	(3,731)		1,697		(2,034)
Certificates of deposits	(985)		(2,766)		(3,751)
Total deposits	(5,644)		(506)		(6,150)
Repurchase agreements	(126)		35		(91)
Total deposits and repurchase agreements	(5,770)		(471)		(6,241)
FHLB borrowings	334		(929)		(595)
Other long-term borrowings	(404)		1,578		1,174
Total interest-bearing liabilities	(5,840)		178		(5,662)

Net interest income	$	(1,503)	$	17,133	$	15,630

Provision for Loan Losses

We established an allowance for loan losses through a provision for loan losses charged as an expense in our consolidated statements of income. The provision for loan losses is the amount of expense that, based on our judgment, is required to maintain the allowance for loan losses at an adequate level to absorb probable losses incurred in the loan portfolio at the balance sheet date and that, in management’s judgment, is appropriate under GAAP. Our determination of the amount of the allowance for loan losses and corresponding provision for loan losses considers ongoing evaluations of the credit quality and level of credit risk inherent in our loan portfolio, levels of nonperforming loans and charge-offs, statistical trends and economic and other relevant factors. The allowance for loan losses is increased by the provision for loan losses and is decreased by charge-offs, net of recoveries on prior loan charge-offs.

We had a provision for loan losses of $3.5 million for the third quarter of 2021, compared to $4.8 million for the third quarter of 2020. The higher provision for loan losses in the third quarter of 2020 was primarily due to changes in certain environmental factors influencing our overall allowance for loan losses that resulted from uncertainty surrounding the COVID-19 pandemic, as well as an increase in loan balances. The lower provision recorded during the 2021 period was primarily due to improving economic conditions, partially offset by an increase in commercial loans. During the third quarter of 2021 our PPP loans, for which no provision for loan losses was required, were primarily replaced by commercial loans for which a provision for loan losses was required.

We had a provision for loan losses of $1.8 million for the nine months ended September 30, 2021, compared to a provision for loan losses of $15.1 million for the comparable period in 2020. The provision for loan losses during the first nine months of 2020 was primarily due to changes in certain environmental factors that resulted from uncertainty surrounding the COVID-19 pandemic, as well as an increase in loan balances. The provision recorded during the 2021 period was primarily due to favorable changes to certain environmental factors as a result of improved economic conditions and to a lesser extent due to a $95.4 million increase in loan balances, excluding PPP loan balances during the nine month period ended September 30, 2021.

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For a further discussion of the allowance for loan losses, refer to the “Allowance for Loan Losses” section of this financial review.

Noninterest Income

The following table presents noninterest income for the three and nine months ended September 30, 2021 and 2020.


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2021		2020		2021		2020
Service charges on deposit accounts	$	3,471	$	2,428	$	8,659	$	7,042
Credit and debit card fees	2,472		2,107		7,140		5,865
Trust and investment advisory fees	1,974		1,282		5,871		3,222
Income from mortgage banking services, net	20,151		35,535		68,144		89,986
Other	616		1,367		5,034		2,999
Total noninterest income	$	28,684	$	42,719	$	94,848	$	109,114

For the three months ended September 30, 2021 and 2020

Our noninterest income decreased $14.0 million to $28.7 million in the third quarter of 2021, from $42.7 million in the third quarter of 2020. The decrease in noninterest income for the third quarter of 2021, compared to the same period of 2020, was primarily due to a $15.6 million decline in net gain on sales and fees from mortgage loan originations, including changes in fair value in the held-for-sale portfolio, net of hedging activity, as total mortgage loan originations during the third quarter of 2021 declined by $177.8 million, or 25.0% to $532.7 million compared to the same period in 2020.

Service charges on deposit accounts includes overdraft and non-sufficient funds charges, treasury management services provided to our business customers, and other maintenance fees on deposit accounts. For the third quarter of 2021, income from service charges on deposit accounts increased $1.0 million due primarily to increased treasury management service fee income compared with the same quarter in 2020. Treasury management services fee income increased by $0.6 million to $1.6 million for the third quarter of 2021, compared with the third quarter of 2020, and deposit service charges increased by $0.5 million to $2.0 million for the third quarter of 2021 compared with the third quarter of 2020.

Credit and debit card fees represent interchange income from credit and debit card activity and referral fees earned from processing fees on card transactions at our business customers. Interchange income increased $0.4 million for the third quarter of 2021 compared to the same period in 2020, due primarily to increased card transaction volumes.

Trust and investment advisory fees represent fees we receive in connection with our investment advisory and custodial management services of investment accounts. For the third quarter of 2021, trust and investment advisory fees increased $0.7 million, from the same period in 2020, primarily due to our September 2020 acquisition of certain customer relationships of a trust and wealth advisory business based in Arizona.

Income from mortgage banking services is principally derived from the origination and sale of mortgage loans together with servicing mortgage loans for others. For the third quarter of 2021, income from mortgage banking services decreased $15.4 million compared with the third quarter of 2020, due primarily to a $15.6 million decline in net gain on sales and fees from loan originations, including changes in fair value in the loans held-for-sale portfolio, net of hedging activity. Our mortgage servicing portfolio grew from $3.8 billion in unpaid principal balances at September 30, 2020 to $4.6 billion at September 30, 2021. We retain servicing rights on the majority of the mortgage loans that we sell, which resulted in a $0.7 million increase in mortgage servicing income for the third quarter of 2021, compared to the same quarter in 2020. In addition to the fees received to service mortgage loans for others, we recognize fair value adjustments to our MSR asset, which includes changes in assumptions to the valuation model and pay-offs and pay-downs of the MSR portfolio. We also maintain a hedging strategy to manage a portion of the risk associated with changes in the fair value of our MSR portfolio. Changes in fair value of the derivative instruments used to economically hedge the MSRs are also included as a component of income from mortgage banking services.

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The components of mortgage banking income for the three months ended September 30, 2021 and 2020 were as follows:


	Three Months Ended September 30,
(In thousands)	2021		2020
Net sale gains and fees from mortgage loan originations including loans held-for-sale changes in fair value and hedging	$	14,938	$	30,506

Mortgage servicing income	3,219		2,492
MSR capitalization and changes in fair value, net of derivative activity	1,994		2,537


Income from mortgage banking services, net	$	20,151	$	35,535

Other noninterest income decreased $0.8 million for the third quarter of 2021 compared to the same period in 2020, primarily due to a $0.1 million gain on sale of other real estate in the third quarter of 2021 compared with a gain of $0.4 million on other real estate sold in the third quarter of 2020.

For the nine months ended September 30, 2021 and 2020

Our noninterest income decreased $14.3 million to $94.8 million for the nine months ended September 30, 2021 from $109.1 million for the nine months ended September 30, 2020.

For the nine months ended September 30, 2021, service charges on deposit accounts increased $1.6 million, compared to the same period in 2020, primarily due to increased services and fees from treasury management programs which increased by $1.5 million, compared to the prior year period.

Credit and debit card fees increased $1.3 million for the nine months ended September 30, 2021 compared to the same period in 2020, from increased card transaction volumes.

Trust and investment advisory fees increased by $2.6 million for the nine months ended September 30, 2021 compared with the same period in 2020. The increase is primarily due to our September 2020 acquisition of certain customer relationships of a trust and wealth advisory business based in Arizona.

For the nine months ended September 30, 2021, income from mortgage banking services decreased $21.8 million compared with the same period in 2020 primarily due to a decline in revenue related to net gain on sales and fees from loan originations, including fair value changes in the held-for-sale portfolio and hedging activity, which decreased $14.7 million for the nine months ended September 30, 2021 compared with the same period in 2020. Loan originations remained relatively flat at $1.8 billion for the nine months ended September 30, 2021 and 2020, however, gain on sale margins declined for the period ended September 30, 2021 as compared to the same period in 2020. We retain servicing rights on the majority of mortgage loans that we sell, driving the increase in servicing income by $2.1 million from $7.1 million for the nine months ended September 30, 2020 to $9.2 million for the nine months ended September 30, 2021. MSR capitalization and changes in fair value, net of derivative activity, declined $9.3 million in the nine months ended September 30, 2021, compared with the same period in 2020. The revenue decline related to our MSRs was primarily the result of changes in market interest rates, mortgage spreads and our corresponding hedge positions. We recognize fair value adjustments to our MSR asset, which includes changes in assumptions to the valuation model and pay-offs and pay-downs of the MSR portfolio. We also maintain a hedging strategy to manage a portion of the risk associated with changes in the fair value of our MSR portfolio. Changes in fair value of the derivative instruments used to economically hedge the MSRs are also included as a component of income from mortgage banking services.

The components of mortgage banking income for the nine months ended September 30, 2021 and 2020 were as follows:


	Nine Months Ended September 30,
(In thousands)	2021		2020
Net sale gains and fees from mortgage loan originations including loans held-for-sale changes in fair value and hedging	$	51,723	$	66,414

Mortgage servicing income	9,170		7,050
MSR capitalization and changes in fair value, net of derivative activity	7,251		16,522


Income from mortgage banking services, net	$	68,144	$	89,986

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Other noninterest income increased $2.0 million for the nine months ended September 30, 2021 compared with the same period in 2020 primarily due to certain loan-related fee income streams such as loan syndication fee income and customer accommodation interest rate swap fees and changes in fair value as well as unused credit line fees. An increase in gains on other real estate sales of $0.3 million also contributed to the increased other noninterest income.

Noninterest Expense

The following table presents noninterest expense for the three and nine months ended September 30, 2021 and 2020.


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2021		2020		2021		2020
Salary and employee benefits	$	36,061	$	37,949	$	113,129	$	101,998
Occupancy and equipment	6,643		6,365		19,867		19,251
Amortization of intangible assets	354		371		1,062		1,093
Merger related expenses	705		—		1,984		—
Other	10,807		9,688		30,332		26,796
Total noninterest expenses	$	54,570	$	54,373	$	166,374	$	149,138

For the three months ended September 30, 2021 and 2020

Our noninterest expense increased $0.2 million to $54.6 million for the third quarter of 2021, from $54.4 million for the third quarter of 2020, primarily due to decreases of $1.9 million in salary and employee benefits, partially offset by $0.7 million in merger expenses related to the pending transaction with Pioneer.

Salary and employee benefits expense is the largest component of our noninterest expense and includes employee payroll expense, incentive compensation, health benefits and payroll taxes. Salary and employee benefits decreased $1.9 million for the third quarter of 2021, compared to the prior year period, due primarily to a decrease of $1.6 million in salary and benefits related to the mortgage operations segment compared with the third quarter of 2020 due to decreased origination volume.

We incurred merger-related expenses of $0.7 million for the third quarter of 2021, related to our proposed merger with Pioneer. We had no merger-related expenses for the same period in 2020.

Other expenses increased $1.1 million during the third quarter of 2021, compared with the third quarter of 2020 with advertising and marketing expense contributing $0.5 million to the increase due to our continued growth and travel and entertainment expense contributing another $0.4 million to the increase as activity increased from the reduced levels in 2020 caused by the COVID-19 pandemic.

For the nine months ended September 30, 2021 and 2020

Our noninterest expense increased $17.2 million to $166.4 million for the nine months ended September 30, 2021, from $149.1 million for the nine months ended September 30, 2020, primarily due to increases of $11.1 million in salary and employee benefits expense and $3.5 million in other expenses in the nine months ended September 30, 2021.

The increase in our salary and employee benefits expense for the nine months ended September 30, 2021, compared to the same period in 2020, was driven by the increase in commissions paid to our mortgage loan officers related to increased mortgage origination activity earlier in the year as well as an increase in headcount associated with expanding our presence in certain markets, including in Texas and Arizona.

We incurred merger-related expenses of $2.0 million for the nine months ended September 30, 2021, related to our proposed merger with Pioneer. We had no merger-related expenses for the same period in 2020.

Other noninterest expenses increased $3.5 million for the nine months ended September 30, 2021, compared to the same period in 2020. This increase was primarily caused by a $1.5 million increase in data processing expenses related to an increase in volume and enhanced products and services for our customers and a $0.9 million increase in FDIC insurance costs as the Small Bank FDIC Assessment Credit was fully utilized in 2020.

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Efficiency ratio

The efficiency ratio is one measure of profitability in the banking industry. This ratio measures the cost of generating one dollar of revenue. That is, the ratio is designed to reflect the percentage of one dollar which must be expended to generate that dollar of revenue. We calculate this ratio by dividing noninterest expense by the sum of net interest income and noninterest income.


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2021		2020		2021		2020

Efficiency ratio	79.49	%	70.56	%	79.37	%	71.61	%

Return on equity and assets

The following table sets forth our ROAA, ROAE, dividend payout and average stockholders’ equity to average assets ratio for the periods ended:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020

Return on average total assets (ROAA)	0.62	%	1.23	%	0.85	%	1.06	%
Return on average stockholders’ equity (ROAE)	6.68	%	12.42	%	8.95	%	10.56	%
Dividend payout ratio	—	%	—	%	—	%	—	%
Average stockholders’ equity to average assets	9.33	%	9.89	%	9.50	%	10.05	%

Income Taxes

For the three months ended September 30, 2021 and 2020

We had income tax expense for the third quarter of 2021 of $1.9 million, compared to $3.1 million for the prior year period. The decrease in income tax expense was primarily due to our decrease in income quarter over quarter. Our effective tax rate was 17.5% for the third quarter of 2021, compared to 17.5% for the prior year period.

For the nine months ended September 30, 2021 and 2020

We had income tax expense for the nine months ended September 30, 2021 of $7.2 million, compared to $7.7 million for the prior year period. The decrease in income tax expense was primarily due to our decreased income during 2021. Our effective tax rate was 17.2% for the nine months ended September 30, 2021, compared to 17.5% for the prior year period.

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Financial Condition

Balance Sheet

Our total assets were $5.7 billion at September 30, 2021, compared to $5.0 billion at December 31, 2020. Our total loans held-for-investment, net of deferred fees, costs, premiums and discounts were $3.8 billion at September 30, 2021, a decrease of $42.4 million from December 31, 2020.

Investment Securities

Our securities portfolio is used to make various term investments, maintain a source of liquidity and serve as collateral for certain types of deposits and borrowings. We manage our investment portfolio according to written investment policies approved by our board of directors. Investment in our securities portfolio may change over time based on our funding needs and interest rate risk management objectives. Our liquidity levels take into account anticipated future cash flows and other available sources of funds, and are maintained at levels that we believe are appropriate to provide the necessary flexibility to meet our anticipated funding requirements.

Our investment securities portfolio consists of securities classified as available-for-sale and held-to-maturity. There were no trading securities in our investment portfolio as of September 30, 2021 and December 31, 2020. All available-for sale securities are carried at fair value and may be used for liquidity purposes should management consider it to be in our best interest.

Our securities available-for-sale increased by $62.8 million to $531.4 million at September 30, 2021. During 2021, the securities held-to-maturity paid down resulting in a decrease of $12.4 million to $19.8 million.

The following table is a summary of our investment portfolio as of:


	September 30, 2021				December 31, 2020
(In thousands)	Carrying Amount		% of Portfolio		Carrying Amount		% of Portfolio
Available-for-sale:
U.S. treasury	$	20,695	3.9	%	$	—	—	%
U.S. agency	6,389		1.2	%	8,996		1.9	%
Obligations of states and political subdivisions	3,997		0.8	%	3,435		0.7	%
Mortgage backed - residential	134,281		25.3	%	119,562		25.5	%
Collateralized mortgage obligations	222,161		41.8	%	203,196		43.4	%
Mortgage backed - commercial	143,872		27.1	%	133,397		28.5	%

Total available-for-sale	$	531,395	100	%	$	468,586	100.0	%

Held-to-maturity:

U.S. agency	—		—	%	5,099		15.8	%
Obligations of states and political subdivisions	720		3.6	%	730		2.3	%
Mortgage backed - residential	11,686		59.0	%	16,050		49.9	%
Collateralized mortgage obligations	7,405		37.4	%	10,309		32.0	%


Total held-to-maturity	$	19,811	100	%	$	32,188	100.0	%

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The following tables show the weighted average yield to average life of each category of investment securities as of:


(In thousands)	One year or less				One to five years				Five to ten years				After ten years
September 30, 2021	Carrying Amount		Average Yield		Carrying Amount		Average Yield		Carrying Amount		Average Yield		Carrying Amount		Average Yield
Available-for-sale:
U.S. treasury	$	—	—	%	$	—	—	%	$	20,695	1.28	%	$	—	—	%
U.S. agency	—		—	%	3,329		1.75	%	2,457		1.25	%	603		2.06	%
Obligations of states and political subdivisions	—		—	%	—		—	%	3,997		2.01	%	—		—	%
Mortgage backed - residential	595		1.97	%	79,007		1.75	%	30,628		1.64	%	24,051		1.91	%
Collateralized mortgage obligations	12,498		1.32	%	131,706		1.06	%	67,893		1.60	%	10,064		1.61	%
Mortgage backed - commercial	1,769		2.35	%	50,519		1.72	%	76,552		1.97	%	15,032		2.86	%

Total available-for-sale	$	14,862	1.47	%	$	264,561	1.40	%	$	202,222	1.72	%	$	49,750	2.14	%

Held-to-maturity:


Obligations of states and political subdivisions	—		—	%	720		1.55	%	—		—	%	—		—	%
Mortgage backed - residential	758		—	%	8,696		2.34	%	—		—	%	2,232		3.25	%
Collateralized mortgage obligations	933		(0.55)	%	6,472		2.17	%	—		—	%	—		—	%


Total held-to-maturity	$	1,691	(0.30)	%	$	15,888	2.24	%	$	—	—	%	$	2,232	3.25	%


(In thousands)	One year or less				One to five years				Five to ten years				After ten years
December 31, 2020	Carrying Amount		Average Yield		Carrying Amount		Average Yield		Carrying Amount		Average Yield		Carrying Amount		Average Yield
Available-for-sale:

U.S. agency	—		—	%	4,334		1.69	%	3,576		1.22	%	1,085		2.04	%
Obligations of states and political subdivisions	—		—	%	—		—	%	3,435		2.10	%	—		—	%
Mortgage backed - residential	1,196		3.09	%	83,690		1.92	%	3,060		3.09	%	31,618		1.91	%
Collateralized mortgage obligations	24,013		(0.45)	%	143,932		1.26	%	—		—	%	35,250		0.73	%
Mortgage backed - commercial	—		—	%	54,463		1.79	%	63,531		2.18	%	15,403		2.85	%

Total available-for-sale	$	25,209	(0.28)	%	$	286,419	1.56	%	$	73,602	2.17	%	$	83,356	1.59	%

Held-to-maturity:

U.S. agency	$	5,099	2.45	%	$	—	—	%	$	—	—	%	$	—	—	%
Obligations of states and political subdivisions	—		—	%	—		—	%	730		1.55	%	—		—	%
Mortgage backed - residential	27		1.76	%	8,483		2.22	%	2,929		2.43	%	4,611		3.22	%
Collateralized mortgage obligations	10,309		1.57	%	—		—	%	—		—	%	—		—	%


Total held-to-maturity	$	15,435	1.86	%	$	8,483	2.22	%	$	3,659	2.25	%	$	4,611	3.22	%

For all periods, we had no securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.

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Loans

Our loan portfolio represents a broad range of borrowers primarily in our markets in Kansas, Colorado, New Mexico, Texas, and Arizona, comprised of commercial, commercial real estate, residential real estate and consumer financing loans.

Total loans, net of deferred origination fees, as of both September 30, 2021 and December 31, 2020 were $3.8 billion. The commercial loan portfolio includes PPP loans outstanding of $113.4 million and $251.1 million at September 30, 2021 and December 31, 2020, respectively.

The following table sets forth the composition of our loan portfolio, as of the periods presented:


	September 30, 2021				December 31, 2020
(In thousands)	Amount		% of total loans		Amount		% of total loans
Commercial	$	2,222,261	58.4	%	$	2,173,615	56.5	%
Commercial real estate	1,137,820		29.9	%	1,154,576		30.0	%
Residential real estate	425,927		11.2	%	503,697		13.1	%
Consumer	17,973		0.5	%	14,469		0.4	%
Total loans	$	3,803,981	100	%	$	3,846,357	100	%

Our loan portfolio types are commercial, commercial real estate, residential real estate, and consumer loans. We have a diversified portfolio across a variety of industries, and the portfolio is generally centered in the states in which we have branch offices.

Commercial loans include commercial and industrial loans to commercial and agricultural customers for use in normal business operations to finance working capital needs, equipment and inventory purchases, and other expansion projects. Commercial and industrial loans also include our specialty lending verticals such as public finance offerings to our charter school and municipal based customers, asset based lending and structured finance products as well as our healthcare, SBA and other small business lending products. These loans are made primarily in our market areas and are underwritten on the basis of the borrower’s ability to service the debt from revenue, and are generally extended under our normal credit standards, controls and monitoring systems.

Commercial real estate loans include owner occupied and non-owner occupied commercial real estate mortgage loans to operating commercial and agricultural businesses, and include both loans for long-term financing of land and buildings and loans made for the initial development or construction of a commercial real estate project.

Residential real estate loans represent loans to consumers collateralized by a mortgage on a residence and include purchase money, refinancing, secondary mortgages, and home equity loans and lines of credit.

Consumer loans include direct consumer installment loans, credit card accounts, overdrafts and other revolving loans.

The CARES Act created the PPP to provide certain small businesses with liquidity to support their operations during the COVID-19 pandemic. Under the PPP, eligible small businesses could apply to an SBA-approved lender for a loan that does not require collateral or personal guarantees. Entities were required to meet certain eligibility requirements to receive PPP loans, and they must maintain specified levels of payroll and employment to have the loans forgiven. The conditions are subject to audit by the U.S. government, but entities that borrowed less than $2.0 million (together with any affiliates) will be deemed to have made the required certification concerning the necessity of the loan in good faith. However, the SBA does reserve the right to audit any PPP borrower. While the PPP program ended on May 31, 2021, we are now focused on assisting our customers through the loan forgiveness process.

PPP loans issued prior to June 5, 2020 mature in two years unless otherwise modified and loans issued after June 5, 2020 mature in five years. However, PPP loans are eligible for forgiveness (in full or in part, including any accrued interest) under certain conditions. All borrowers are required to retain the supporting documents for six years. For loans (or parts of loans) that are forgiven, the lender will collect the forgiven amount from the U.S. government. The average amount of each of our originated PPP loans was approximately $0.2 million at each of September 30, 2021 and December 31, 2020.

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The PPP loans have a 1% fixed interest rate and produced an annualized yield for the three and nine months ended September 30, 2021 of 5.03% and 4.83%, respectively, due to the amortization of net deferred loan fees and the accelerated recognition of loan fees in conjunction with loan forgiveness occurring prior to a scheduled maturity. At September 30, 2021, the remaining amount of unamortized net deferred loan fees on our PPP loans was $3.2 million. Our PPP loans are included in the commercial loans category.

Maturities and Sensitivity of Loans to Changes in Interest Rates

The information in the following tables is based on the contractual maturities of individual loans, including loans that may be subject to renewal at their contractual maturity. Renewal of these loans is subject to review and credit approval, as well as modification of terms upon maturity. Actual repayments of loans may differ from the maturities reflected below because borrowers have the right to prepay obligations with or without prepayment penalties. The following tables summarize the loan maturity distribution by type and related interest rate characteristics as of the periods presented:


(In thousands)	One year or less		After one through five years		After five through 15 years		After 15 years		Total
As of September 30, 2021
Commercial	$	193,889	$	1,078,670	$	728,141	$	221,561	$	2,222,261
Commercial real estate	83,759		552,588		489,901		11,572		1,137,820
Residential real estate	10,692		53,377		77,200		284,658		425,927
Consumer	5,811		11,677		485		—		17,973
Total loans	$	294,151	$	1,696,312	$	1,295,727	$	517,791	$	3,803,981

			After one through five years		After five through 15 years		After 15 years		Total
Loans maturing after one year with:
Fixed interest rates			$	819,915	$	873,904	$	268,315	$	1,962,134
Floating or adjustable interest rates			$	876,397	$	421,822	$	249,477	$	1,547,696


(In thousands)	One year or less		After one through five years		After five through 15 years		After 15 years		Total
As of December 31, 2020
Commercial	$	134,145	$	1,004,033	$	776,007	$	259,430	$	2,173,615
Commercial real estate	113,721		478,989		552,764		9,103		1,154,577
Residential real estate	16,336		40,386		89,400		357,574		503,696
Consumer	6,057		7,980		432		—		14,469
Total loans	$	270,259	$	1,531,388	$	1,418,603	$	626,107	$	3,846,357

			After one through five years		After five through 15 years		After 15 years		Total
Loans maturing after one year with:
Fixed interest rates			$	1,095,180	$	1,021,107	$	314,344	$	2,430,631
Floating or adjustable interest rates			$	436,208	$	397,496	$	311,763	$	1,145,467

Allowance for Loan Losses

We maintain the allowance for loan losses at a level we believe is sufficient to absorb probable incurred losses in our loan portfolio given the conditions at the time. Events that are not within our control, such as changes in economic factors, could change subsequent to the reporting date and could cause increases or decreases to the allowance. The amount of the allowance is affected by loan charge-offs, which decrease the allowance; recoveries on loans previously charged off, which increase the allowance; and the provision for loan losses charged to earnings, which increases the allowance.

In determining the provision for loan losses, management monitors fluctuations in the allowance resulting from actual charge-offs and recoveries and reviews the size and composition of the loan portfolio in light of current and anticipated economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as events change.

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The following table presents, by loan type, the changes in the allowance for loan losses for the periods presented:


	For the three months ended September 30,						For the nine months ended September 30,						December 31,
(In thousands)	2021			2020			2021			2020			2020
Balance, beginning of period	$	42,978		$	37,896		$	47,766		$	28,546		$	28,546

Loan charge-offs:
Commercial	—			(203)			(3,102)			(997)			(4,064)
Commercial real estate	—			(1)			—			(581)			(581)
Residential real estate	—			—			(2)			(39)			(39)
Consumer	(66)			(32)			(138)			(168)			(216)
Total loan charge-offs	(66)			(236)			(3,242)			(1,785)			(4,900)

Recoveries of loans previously charged-off:
Commercial	1,440			225			1,526			514			585
Commercial real estate	—			—			9			272			272
Residential real estate	3			3			23			20			115
Consumer	13			13			36			34			48
Total loan recoveries	1,456			241			1,594			840			1,020

Net recoveries (charge-offs)	1,390			5			(1,648)			(945)			(3,880)

Provision for loan losses	3,500			4,800			1,750			15,100			23,100
Balance, end of period	$	47,868		$	42,701		$	47,868		$	42,701		$	47,766

Allowance for loan losses to loans receivable	1.26		%	1.12		%	1.26		%	1.12		%	1.24		%
Ratio of net charge-offs to average loans outstanding	(0.15)		%	—		%	0.06		%	0.04		%	0.11		%

Allocation of Allowance for Loan Losses

The following table presents the allocation of the allowance for loan losses by category and the percentage of the allocation of the allowance for loan losses by category to total loans listed as of the dates indicated:


	September 30, 2021				December 31, 2020
(In thousands)	Allowance Amount		% of Portfolio		Allowance Amount		% of Portfolio
Commercial	$	32,643	0.86	%	$	32,009	0.83	%
Commercial real estate	13,709		0.36	%	13,863		0.36	%
Residential real estate	1,277		0.03	%	1,606		0.04	%
Consumer	239		0.01	%	288		0.01	%
Total	$	47,868	1.26	%	$	47,766	1.24	%

Nonperforming Assets

We have established policies and procedures to guide us in originating, monitoring and maintaining the credit quality of our loan portfolio. These policies and procedures are required to be followed by our bankers and underwriters and exceptions to these policies require elevated levels of approval and are reported to our board of directors.

Nonperforming assets include all loans categorized as nonaccrual, other real estate owned and other repossessed assets. The accrual of interest on loans is discontinued, or the loan is placed on nonaccrual, when the full collection of principal and interest is in doubt. We do not generally accrue interest on loans that are 90 days or more past due. When a loan is placed on nonaccrual, previously accrued but unpaid interest is reversed and charged against interest income and future accruals of interest are discontinued. Payments by borrowers for loans on nonaccrual are applied to loan principal. Loans are returned to accrual status when, in our judgment, the borrower’s ability to satisfy principal and interest obligations under the loan agreement has improved sufficiently to reasonably assure recovery of principal and the borrower has demonstrated a sustained period of repayment performance. In general, we require a minimum of six consecutive months of timely payments in accordance with the contractual terms before returning a loan to accrual status.

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A loan is identified as a troubled debt restructuring, or TDR, when we, for economic or legal reasons related to the borrower’s financial difficulties, grant a concession to the borrower. The concessions may be granted in various forms including interest rate reductions, principal forgiveness, extension of maturity date, waiver or deferral of payments and other actions intended to minimize potential losses. A loan that has been restructured in a TDR may not be disclosed as a TDR in years subsequent to the restructuring if certain conditions are met. Generally, a nonaccrual loan that is restructured remains on nonaccrual status for a period of no less than six months to demonstrate that the borrower can meet the restructured terms. However, the borrower’s performance prior to the restructuring or other significant events at the time of restructuring may be considered in assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual status after a shorter performance period. If the borrower’s performance under the new terms is not reasonably assured, the loan remains classified as a nonaccrual loan.

The CARES Act, as extended by certain provisions of the Consolidated Appropriations Act, 2021, permits banks to suspend requirements under GAAP for loan modifications to borrowers affected by COVID-19 that may otherwise be characterized as a TDR and suspend any determination related thereto if (i) the borrower was not more than 30 days past due as of December 31, 2019, (ii) the modifications are related to COVID-19, and (iii) the modification occurs between March 1, 2020 and the earlier of 60 days after the date of termination of the national emergency or January 1, 2022. Federal bank regulatory authorities also issued guidance to encourage banks to make loan modifications for borrowers affected by COVID-19.

As of September 30, 2021, we had active payment deferrals totaling $21.3 million compared to $65.8 million at December 31, 2020. As of September 30, 2021 and December 31, 2020, $2.5 million and $51.8 million, respectively, of restructured loans were exempt from the accounting guidance for TDRs as a result of loans which are included in the COVID-19 related loan payment deferral total.

The following table sets forth our nonperforming assets as of each period presented:


(In thousands)	September 30, 2021			December 31, 2020
Nonaccrual loans:
Commercial	$	18,639		$	22,779
Commercial real estate	5,205			2,934
Residential real estate	6,456			9,498
Consumer	3			38
Total nonaccrual loans	30,303			35,249
Accrual loans greater than 90 days past due	—			777
Total nonperforming loans	30,303			36,026
Other real estate owned and foreclosed assets, net	5,747			3,354
Total nonperforming assets	$	36,050		$	39,380

Nonperforming assets to total assets	0.63		%	0.79		%
Nonperforming loans to total loans	0.80		%	0.94		%
Allowance for loan losses to nonaccrual loans	157.96		%	135.51		%

Total nonperforming assets were $36.1 million as of September 30, 2021, compared to $39.4 million at December 31, 2020.

Potential problem loans are impaired loans which management has serious doubts as to the ability of the borrowers to comply with the present loan repayment terms. Management has not identified any potential problem loans not included in the nonperforming assets table above.

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Deposits

Deposits represent our primary source of funds. We are focused on growing our core deposits through relationship-based banking with our business and consumer clients. Total deposits increased to $4.9 billion at September 30, 2021, compared to $4.2 billion at December 31, 2020. Deposit growth over this period occurred across all of the states in our footprint including Kansas, New Mexico and Colorado, as well as in our newer markets in Arizona and Texas. In addition, government stimulus efforts in response to the COVID-19 pandemic have contributed to a portion of our deposit growth for both commercial and consumer clients. Noninterest-bearing demand deposits increased on average by $0.3 billion from December 31, 2020 to September 30, 2021, primarily driven by our growth in our commercial deposit base. Our certificates of deposit have decreased on average by $0.2 billion from December 31, 2020 to September 30, 2021 primarily due to the low interest rate environment.

The following table sets forth the average balance amounts and the average rates paid on deposits held by us for the periods presented:


	For the three months ended				For the nine months ended				For the year ended
	September 30, 2021				September 30, 2021				December 31, 2020
(Dollars in thousands)	Average Balance		Average Rate Paid		Average Balance		Average Rate Paid		Average Balance		Average Rate Paid

Noninterest-bearing demand deposit accounts	$	1,483,010	—	%	$	1,295,984	—	%	$	978,092	—	%
Interest-bearing deposit accounts:
Interest-bearing demand accounts	188,897		0.19	%	193,756		0.21	%	127,408		0.33	%
Savings accounts and money market accounts	2,718,369		0.17	%	2,637,844		0.19	%	2,182,648		0.34	%
NOW accounts	52,591		0.38	%	78,199		0.57	%	78,149		0.77	%
Certificate of deposit accounts	337,906		0.81	%	350,217		0.92	%	488,575		1.49	%
Total interest-bearing deposit accounts	3,297,763		0.24	%	3,260,016		0.28	%	2,876,780		0.54	%
Total deposits	$	4,780,773	0.17	%	$	4,556,000	0.20	%	$	3,854,872	0.41	%

The following table sets forth the average balance amounts and the average rates paid on deposits by customer type held by us for the periods presented:


	For the three months ended				For the nine months ended				For the year ended
	September 30, 2021				September 30, 2021				December 31, 2020
(Dollars in thousands)	Average Balance		Average Rate Paid		Average Balance		Average Rate Paid		Average Balance		Average Rate Paid

Consumer	$	2,450,670	0.23	%	$	2,367,951	0.27	%	$	2,083,701	0.52	%
Business Customers	2,330,103		0.10	%	2,188,049		0.11	%	1,771,171		0.27	%
Total deposits	$	4,780,773	0.17	%	$	4,556,000	0.20	%	$	3,854,872	0.41	%

Maturities of certificates of deposit of $100,000 or more outstanding at September 30, 2021 and December 31, 2020 are summarized as follows:


(In thousands)	September 30, 2021		December 31, 2020

Three months or less	$	35,315	$	31,696
Over three months through twelve months	92,077		103,717
Over twelve months through three years	41,663		55,696
Over three years	8,113		10,359
Total	$	177,168	$	201,468

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Short-Term Borrowings and Other Interest-Bearing Liabilities

Other than deposits, we also utilize Federal Home Loan Bank (FHLB) advances as a supplementary funding source to finance our operations. FHLB advances on our line-of-credit (LOC) are considered short-term borrowings and are presented in the table below, while our FHLB fixed rate term advances are considered long-term borrowings. At September 30, 2021 and December 31, 2020, our FHLB fixed rate term advances amounted to $40.0 million and $50.4 million, respectively. Our advances from the FHLB are collateralized by residential, multi-family, and commercial real estate loans. At September 30, 2021 and December 31, 2020, we had maximum borrowing capacity from the FHLB of $675.6 million and $702.5 million, respectively, subject to the availability of collateral.

We also enter into agreements with certain customers to sell securities under agreements to repurchase the security the following day. These agreements are made to provide customers with comprehensive treasury management programs a short-term return on their excess funds.

The following tables outline our various sources of short-term borrowed funds during the nine months ended September 30, 2021 and the year ended December 31, 2020, and the amounts outstanding at the end of each period, the maximum month end amount for each component during the periods, the average amounts for each period, and the average interest rate that we paid for each borrowing source. The maximum month-end balance represents the high indebtedness for each component of borrowed funds at any month end during each of the periods shown.


	Ending Balance		Period End Rate		Maximum Month End Balance		Period Average
							Balance		Rate
As of and for the nine months ended September 30, 2021
Advances from FHLB LOC	$	—	—	%	$	—	$	220	0.35	%
Securities sold under agreements to repurchase	117,001		0.04	%	160,865		131,444		0.05	%
Total	$	117,001			$	160,865	$	131,663

As of and for the year ended December 31, 2020
Advances from FHLB LOC	$	20,000	0.35	%	$	150,000	$	30,489	0.69	%
Securities sold under agreements to repurchase	115,372		0.05	%	149,844		118,706		0.15	%
Total	$	135,372			$	299,844	$	149,195

Other Borrowings

In addition to our FHLB advances and our securities sold under agreements to repurchase, we also have convertible notes payable and subordinated debt, including trust preferred securities and other borrowings amounting to $69.2 million at September 30, 2021 and $68.4 million at December 31, 2020.

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Liquidity

Liquidity refers to our ability to maintain cash flow that is adequate to fund operations, support asset growth, maintain reserve requirements and meet present and future obligations of deposit withdrawals, lending obligations and other contractual obligations. Our liquidity management policy and our asset and liability management policy, or ALM policy, provides the framework that we use to seek to maintain adequate liquidity and sources of available liquidity at levels that will enable us to meet all reasonably foreseeable short-term, long-term and strategic liquidity demands. Our Asset and Liability Management Committee, or ALCO, is responsible for oversight of our liquidity risk management activities in accordance with the provisions of our ALM Policy and applicable bank regulatory capital and liquidity laws and regulations. Our liquidity risk management process includes (i) ongoing analysis and monitoring of our funding requirements under various economic and interest rate scenarios, (ii) review and monitoring of lenders, depositors, brokers and other liability holders to ensure appropriate diversification of funding sources and (iii) liquidity contingency planning to address liquidity needs in the event of unforeseen market disruption, including appropriate allocation of funds to a liquid portfolio of marketable securities and investments. We continuously monitor our liquidity position in order for our assets and liabilities to be managed in a manner that we believe will meet our immediate and long-term funding requirements. We seek to manage our liquidity position to meet the daily cash flow needs of customers, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of our stockholders. We also monitor our liquidity requirements in light of interest rate trends, changes in the economy, and the scheduled maturity and interest rate sensitivity of our securities and loan portfolios and deposits. Liquidity management is made more complicated because different balance sheet components are subject to varying degrees of management control. For example, the timing of maturities of our investment portfolio is fairly predictable and subject to a high degree of control when we make investment decisions. Net deposit inflows and outflows, however, are far less predictable and are not subject to the same degree of certainty.

Our liquidity position is supported by management of our liquid assets and liabilities and access to alternative sources of funds. Our short-term and long-term liquidity requirements are primarily to fund on-going operations, including payment of interest on deposits and debt, extensions of credit to borrowers and capital expenditures. These liquidity requirements are met primarily through our deposits, FHLB advances and the principal and interest payments we receive on loans and investment securities. Cash, interest-bearing deposits in third party banks, securities available for sale and maturing or prepaying balances in our investment and loan portfolios are our most liquid assets. Other sources of liquidity that are available to us include the sale of loans we hold for investment, the ability to acquire additional national market non-core deposits, borrowings through the Federal Reserve’s discount window and the issuance of debt or equity securities. We believe that the sources of available liquidity are adequate to meet our current and reasonably foreseeable future liquidity needs.

At September 30, 2021, our liquid assets, which consist of cash and amounts due from banks and interest-bearing deposits in other financial institutions, amounted to $905.7 million, or 15.9% of total assets, compared to $144.9 million, or 2.9% of total assets, at December 31, 2020. The increase in our liquid assets was primarily due to an increase in cash held at the Federal Reserve. Our available-for-sale securities at September 30, 2021 were $531.4 million, or 9.4% of total assets, compared to $468.6 million, or 9.4% of total assets, at December 31, 2020. Investment securities with an aggregate carrying value of $467.0 million and $437.2 million at September 30, 2021 and December 31, 2020, respectively, were pledged to secure public deposits and repurchase agreements. The increase in our pledged securities was due to increases in public funds and repurchase agreements.

The liability portion of our balance sheet serves as a primary source of liquidity. We plan to meet our future cash needs primarily through the generation of deposits. Customer deposits have historically provided a sizeable source of relatively stable and low-cost funds. At September 30, 2021, customer deposits, excluding brokered deposits and certificates of deposit greater than $250,000, were 119.9% of net loans, compared with 101.0% at December 31, 2020. We are also a member of the FHLB, from which we can borrow for leverage or liquidity purposes. The FHLB requires that securities and qualifying loans be pledged to secure any advances. At September 30, 2021, we had $40.0 million in advances from the FHLB and a remaining credit availability of $556.5 million. In addition, we maintain a $9.4 million line with the Federal Reserve Bank’s discount window that is secured by certain loans from our loan portfolio.

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Capital Resources

Stockholders’ equity at September 30, 2021 was $519.9 million, compared to $485.8 million at December 31, 2020, an increase of $34.1 million, or 7.0%. The increase was primarily driven by net income in 2021.

We are subject to various regulatory capital requirements administered by federal banking regulators. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by federal banking regulators that, if undertaken, could have a direct material effect on our financial statements.

Regulatory capital rules adopted in July 2013 and fully-phased in as of January 1, 2019, which we refer to as the Basel III rules, impose minimum capital requirements for bank holding companies and banks. The Basel III rules apply to all national and state banks and savings associations regardless of size and bank holding companies and savings and loan holding companies with consolidated assets of more than $3 billion. In order to avoid restrictions on capital distributions or discretionary bonus payments to executives, a covered banking organization must maintain the fully-phased in “capital conservation buffer” of 2.5% on top of its minimum risk-based capital requirements. This buffer must consist solely of common equity Tier 1 risk-based capital, but the buffer applies to all three measurements (common equity Tier 1 risk-based capital, Tier 1 capital and total capital). At September 30, 2021, FirstSun and Sunflower Bank exceeded the regulatory minimums and met the regulatory definitions of well-capitalized.

The following table shows the regulatory capital ratios for FirstSun at the dates indicated:


	Actual				For Capital Adequacy Purposes3				To be Well- Capitalized under Prompt Corrective Action Provisions4
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount	Ratio
As of September 30, 2021
Total risk-based capital to risk-weighted assets:	$	552,124	12.55	%	$	351,871	8.00	%	N/A	N/A
Tier 1 risk-based capital to risk-weighted assets:	$	453,740	10.32	%	$	263,904	6.00	%	N/A	N/A
Common Equity Tier 1 (CET 1) to risk-weighted assets:	$	453,740	10.32	%	$	197,928	4.50	%	N/A	N/A
Tier 1 leverage capital to average assets:	$	453,740	8.19	%	$	221,526	4.00	%	N/A	N/A

As of December 31, 2020
Total risk-based capital to risk-weighted assets:	$	513,949	12.19	%	$	337,327	8.00	%	N/A	N/A
Tier 1 risk-based capital to risk-weighted assets:	$	416,029	9.87	%	$	252,995	6.00	%	N/A	N/A
Common Equity Tier 1 (CET 1) to risk-weighted assets:	$	416,029	9.87	%	$	189,746	4.50	%	N/A	N/A
Tier 1 leverage capital to average assets:	$	416,029	8.53	%	$	195,074	4.00	%	N/A	N/A

3 Amounts are shown exclusive of the 2.5% capital conservation buffer applicable to total risked-based capital to risk-weighted assets, Tier 1 risked-based capital to risk weighted assets and CET1 to risk weighted assets.

4 Prompt corrective action provisions are only applicable at the bank level.

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The following table shows the regulatory capital ratios for Sunflower Bank at the dates indicated:


	Actual				For Capital Adequacy Purposes5				To be Well- Capitalized under Prompt Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of September 30, 2021
Total risk-based capital to risk-weighted assets:	$	559,556	12.76	%	$	350,802	8.00	%	$	438,502	10.00	%
Tier 1 risk-based capital to risk-weighted assets:	$	511,100	11.66	%	$	263,101	6.00	%	$	350,802	8.00	%
Common Equity Tier 1 (CET 1) to risk-weighted assets:	$	511,100	11.66	%	$	197,326	4.50	%	$	285,026	6.50	%
Tier 1 leverage capital to average assets:	$	511,100	9.23	%	$	221,444	4.00	%	$	276,805	5.00	%

As of December 31, 2020
Total risk-based capital to risk-weighted assets:	$	517,077	12.30	%	$	336,276	8.00	%	$	420,345	10.00	%
Tier 1 risk-based capital to risk-weighted assets:	$	468,823	11.15	%	$	252,207	6.00	%	$	336,276	8.00	%
Common Equity Tier 1 (CET 1) to risk-weighted assets:	$	468,823	11.15	%	$	189,155	4.50	%	$	273,224	6.50	%
Tier 1 leverage capital to average assets:	$	468,823	9.62	%	$	195,008	4.00	%	$	243,760	5.00	%

Off-Balance Sheet items

We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit, commercial letters of credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial condition. The contractual or notional amounts of those instruments reflect the extent of involvement we have in particular classes of financial instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by us upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral is primarily obtained in the form of commercial and residential real estate (including income producing commercial properties).

Standby letters of credit are conditional commitments issued by us to guarantee to a third-party the performance of a customer. Those guarantees are primarily issued to support public and private borrowing arrangements, bond financing and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

Commitments to make loans are generally made for periods of 90 days or less.

Our exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. We use the same credit policies in making commitments and conditional obligations as for funded instruments. We do not anticipate any material losses as a result of the commitments and standby letters of credit.

5 Amounts are shown exclusive of the 2.5% capital conservation buffer applicable to total risked-based capital to risk-weighted assets, Tier 1 risked-based capital to risk weighted assets and CET1 to risk weighted assets

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The following table summarizes commitments as of the dates presented:


	September 30, 2021				December 31, 2020
(In thousands)	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate

Undistributed portion of committed loans	$	100,709	$	121,523	$	80,445	$	106,020
Unused lines of credit	15,746		535,880		15,003		496,122
Standby letters of credit	3,256		4,551		13,078		3,879
Total	$	119,711	$	661,954	$	108,526	$	606,021

Contractual Obligations

We have entered into contractual obligations in the normal course of business that involve elements of credit risk, interest rate risk and liquidity risk.

The following table summarizes our contractual obligations as of September 30, 2021 and December 31, 2020:


(In thousands)	Total		Less than 1 Year		1 - 3 Years		3 - 5 Years		More than 5 Years
September 30, 2021
Long-term debt:
FHLB term advances	$	40,000	$	10,000	$	—	$	20,000	$	10,000
Convertible notes payable	22,090		742		21,348		—		—
Subordinated debt	57,913		347		824		736		56,006
Total long-term debt	120,003		11,089		22,172		20,736		66,006

Operating leases	39,151		6,672		13,513		10,790		8,176
Certificates of deposit	328,864		220,247		83,781		20,017		4,819
Total	$	488,018	$	238,008	$	119,466	$	51,543	$	79,001

December 31, 2020
Long-term debt:
FHLB term advances	$	50,411	$	133	$	20,267	$	20,011	$	10,000
Convertible notes payable	22,650		745		1,232		20,673		—
Subordinated debt	59,060		442		912		1,025		56,681
Total long-term debt	132,121		1,320		22,411		41,709		66,681

Operating leases	40,033		6,171		12,960		11,547		9,355
Certificates of deposit	365,959		236,583		102,382		20,832		6,162
Total	$	538,113	$	244,074	$	137,753	$	74,088	$	82,198

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of reduced earnings and/or declines in the net market value of the balance sheet due to changes in market rates. Our primary market risk is interest rate risk which impacts our net interest income, fee income related to interest sensitive activities such as mortgage origination and servicing income and loan and deposit demand.

We are subject to interest rate risk due to:

•the maturity or repricing of assets and liabilities at different times or for different amounts;

•differences in short-term and long-term market interest rate changes; and

•the remaining maturity of various assets or liabilities may shorten or lengthen as interest rates change.

Our Asset Liability Committee, or ALCO, which is composed of our executive officers and certain other members of management, monitors interest rate risk on an ongoing basis in accordance with policies approved by our board of directors. The ALCO reviews interest rate positions and considers the impact projected interest rate scenarios have on earnings, liquidity, business strategies and other factors. However, management has the latitude to change interest rate positions within certain limits if, in management’s judgment, the change will enhance profitability or minimize risk.

To assess and manage interest rate risk, sensitivity analysis is used to determine the impact on earnings and the net market value of the balance sheet across various interest rate scenarios, balance sheet trends, and strategies.

Management uses a simulation model to analyze the sensitivity of net interest income to changes in interest rates across various interest rate scenarios, which seeks to demonstrate the level of interest rate risk inherent in the existing balance sheet. The analysis holds the current balance sheet values constant and does not take into account management intervention. In addition, we assume certain correlation rates, often referred to as a “deposit beta,” for interest-bearing deposits, wherein the rates paid to customers change relative to changes in benchmark interest rates. The effect on net interest income over a 12-month time horizon due to hypothetical changes in market interest rates is presented in the table below. In this interest rate shock simulation, as of the periods presented, interest rates have been adjusted by instantaneous parallel changes rather than in a ramp simulation, which applies interest rate changes over time. All rates, short-term and long-term, are changed by the same amount (e.g. plus or minus 100 basis points) resulting in the shape of the yield curve remaining unchanged.


	% Change in Net Interest Income				% Change in Economic Value of Equity
Changes in Interest Rate (Basis Points)	As of September 30, 2021		As of December 31, 2020		As of September 30, 2021		As of December 31, 2020

+300	30.5	%	13.1	%	1.8	%	(7.4)	%
+200	20.3	%	8.9	%	2.0	%	(4.9)	%
+100	10.2	%	4.6	%	1.1	%	(2.4)	%
Base	—	%	—	%	—	%	—	%
-100	(1.0)	%	(3.1)	%	(0.8)	%	(2.2)	%

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance regarding our control objective that information required to be disclosed in the reports we file and submit under the Exchange Act is (i) recorded, processed, summarized and reported as and when required and (ii) accumulated and communicated to our management, including our Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

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Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during the three months ended September 30, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II - Other Information

Item 1. Legal Proceedings

FirstSun and its subsidiaries are from time to time subject to claims and litigation arising in the ordinary course of business. For further information regarding legal proceedings, see Note 15. Commitments and Contingencies in our unaudited consolidated financial statements. One or more unfavorable outcomes in any claim or litigation against us could have a material adverse effect for the period in which they are resolved. In addition, regardless of their merits or their ultimate outcomes, such matters are costly, divert management’s attention and may materially adversely affect our reputation, even if resolved in our favor.

Item 1A. Risk Factors

There have been no material changes to the risk factors set forth in the section titled “Risk Factors” included in the Prospectus filed with the SEC in accordance with Securities Act Rule 424(b)(3) on August 12, 2021, in connection with our proposed merger with Pioneer. Our business involves significant risks. You should carefully consider the risks and uncertainties described in the Prospectus, together with all of the other information in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and footnotes as disclosed in the Prospectus. The risks and uncertainties described in the Prospectus are not the only ones we face. Additional risk and uncertainties that we are unaware of or that we deem immaterial may also become important factors that adversely affect our business. The realization of any of these risks and uncertainties could have a material adverse effect on our reputation, business, financial condition, results of operations, growth and future prospects as well as our ability to accomplish our strategic objectives.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no unregistered sales of equity securities or issuer purchases of equity securities during the third quarter of 2021.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not Applicable

Item 5. Other Information

None

Item 6. Exhibits


Exhibit No.						Description
3.1						Amended and Restated Certificate of Incorporation of FirstSun Capital Bancorp, as amended (incorporated by reference to Exhibit 3.1 to the proxy statement/prospectus contained in the Registration Statement on Form S-4 (File No. 333-258176) filed with the SEC on July 26, 2021).

3.2						Certificate of Amendment dated November 3, 2021 to the Amended and Restated Certificate of Incorporation of FirstSun Capital Bancorp.

3.3						Bylaws of FirstSun Capital Bancorp as amended and restated through October 29, 2021 .

4.1						Form of common stock certificate of FirstSun Capital Bancorp (incorporated by reference to Exhibit 4.1 to the proxy statement/prospectus contained in the Registration Statement on Form S-4 (File No. 333-258176) filed with the SEC on July 26, 2021).

4.2						FirstSun Capital Bancorp is a party to long-term debt instruments with respect to subordinated notes and convertible debt under which the amount of securities authorized does not exceed 10% of the total assets of FirstSun Capital Bancorp and its subsidiaries on a consolidated basis. Pursuant to paragraph (b)(4)(iii)(A) of Item 601 of Regulation S-K, FirstSun Capital Bancorp agrees to furnish a copy of such instruments to the Securities and Exchange Commission upon request.

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4.3						Form of Stockholders’ Agreement dated as of June 19, 2017, by and among FirstSun Capital Bancorp and the parties signatories thereto (incorporated by reference to Exhibit 4.3 to the proxy statement/prospectus contained in the Registration Statement on Form S-4 (File No. 333-258176) filed with the SEC on July 26, 2021).*

4.4						Form of Amendment No. 1 to the Stockholders’ Agreement dated March 14, 2018 by and among FirstSun and the parties signatories thereto (incorporated by reference to Exhibit 4.4 to the proxy statement/prospectus contained in the Registration Statement on Form S-4 (File No. 333-258176) filed with the SEC on July 26, 2021).

4.5						Form of Amendment No. 2 to the Stockholders’ Agreement by and among FirstSun and the parties signatories thereto (incorporated by reference to Exhibit B to Annex A to the proxy statement/prospectus contained in Amendment No. 1 to the Registration Statement on Form S-4 (File No. 333-258176) filed with the SEC on August 6, 2021).*

4.6						Form of Registration Rights Agreement dated as of June 19, 2017 by and among FirstSun and the parties signatories thereto (incorporated by reference to Exhibit 4.6 to the proxy statement/prospectus contained in the Registration Statement on Form S-4 (File No. 333-258176) filed with the SEC on July 26, 2021).*

4.7						Form of Amendment No. 1 to Registration Rights Agreement by and among FirstSun and the parties signatories thereto (incorporated by reference to Exhibit C to Annex A to the proxy statement/prospectus contained in Amendment No. 1 to the Registration Statement on Form S-4 (File No. 333-258176) filed with the SEC on August 6, 2021).*

10.1						FirstSun Capital Bancorp 2021 Equity Incentive Plan.

31.1						Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1						Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101						The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 were formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statement of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows.

104						Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).

* Annexes, schedules, and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. FirstSun agrees to furnish supplementally a copy of any omitted attachment to the Securities and Exchange Commission on a confidential basis upon request.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		FIRSTSUN CAPITAL BANCORP
		(Registrant)
		/s/ Mollie H. Carter


Date:	November 5, 2021
		Mollie H. Carter
		Chief Executive Officer and President
		(Principal Executive Officer)
		/s/ Robert A. Cafera, Jr.


Date:	November 5, 2021
		Robert A. Cafera, Jr.
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)
		/s/ Joel Murray


Date:	November 5, 2021
		Joel Murray
		Senior Vice President and Chief Accounting Officer
		(Principal Accounting Officer)

Exhibit 3.2

CERTIFICATE OF AMENDMENT OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF FIRSTSUN CAPITAL BANCORP

FirstSun Capital Bancorp (the “Corporation”), a corporation organized and existing under the General Corporation Law of the State of Delaware, hereby certifies as follows:

1.This Certificate of Amendment (the “Certificate of Amendment”) amends the provisions of the Corporation’s Amended and Restated Certificate of Incorporation filed with the Secretary of State on June 16, 2017 (the “Certificate of Incorporation”).

2.The last sentence of Article VI, Section 6.02 of the Certificate of Incorporation is hereby amended and restated in its entirety as follows:

“A quorum of the Board shall consist of a majority of the Board and, except as otherwise expressly required by law, by the Stockholders’ Agreement, by the Bylaws or by this Certificate, the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board.”

3.This amendment was duly adopted in accordance with the provisions of Sections 228 and 242 of the General Corporation Law of the State of Delaware.

4.All other provisions of the Certificate of Incorporation shall remain in full force and effect.

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by Mollie H. Carter, its Chief Executive Officer, this 3rd day of November, 2021.


By:			/s/ Mollie H. Carter
			Mollie H. Carter Chief Executive Officer

Exhibit 3.3

BYLAWS

OF

FIRSTSUN CAPITAL BANCORP

A Delaware Corporation

As amended and restated through October 29, 2021

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Page


ARTICLE 1 DEFINITIONS			1

ARTICLE 2 STOCKHOLDERS			2

Section 2.01 Meetings.			2
Section 2.02 Action by Written Consent			5
Section 2.03 Advance Notice of Stockholder Nominations and Proposals.			5

ARTICLE 3 BOARD OF DIRECTORS			10

Section 3.01 General Powers			10
Section 3.02 Board Structure.			10
Section 3.03 Meetings.			11
Section 3.04 Informal Action			15

ARTICLE 4 OFFICERS; CHAIRMAN			16

Section 4.01 Officers			16
Section 4.02 Appointment and Term			16
Section 4.03 Removal			16
Section 4.04 Resignation			16
Section 4.05 Vacancies			16
Section 4.06 Duties.			16
Section 4.07 Compensation			17
Section 4.08 Expense Reimbursement			17

ARTICLE 5 COMMITTEES			17

ARTICLE 6 INDEMNIFICATION			18

Section 6.01 Indemnitees			18
Section 6.02 Indemnification			18
Section 6.03 Advanced Payment			18
Section 6.04 Indemnification of Employees and Agents			18
Section 6.05 Non-Exclusivity of Rights			18
Section 6.06 Insurance			18
Section 6.07 Stockholder Liability			18
Section 6.08 Interested Transactions			19
Section 6.09 No Additional Rights; Continuation of Rights			19


ARTICLE 7 SHARE CERTIFICATES			19

Section 7.01 Certificates for Shares; Uncertificated Shares			19
Section 7.02 Lost, Stolen, or Destroyed Certificates			20
Section 7.03 Registered Stockholders			20

ARTICLE 8 MISCELLANEOUS			20

Section 8.01 Interpretation			20
Section 8.02 Amendment			21
Section 8.03 Voting of Securities Owned by the Corporation			21
Section 8.04 Principal and Business Offices			21
Section 8.05 Fiscal Year			21
Section 8.06 Corporate Seal			21
Section 8.07 Books and Records			21
Section 8.08 Severability			21
Section 8.09 Conflicts			22

BYLAWS OF
FIRSTSUN CAPITAL BANCORP

ARTICLE 1
DEFINITIONS

Unless otherwise expressly provided in these Bylaws, the following terms have the following meanings:

“Board” means the Board of Directors of the Corporation.

“Bylaws” means these Bylaws of the Corporation, as amended from time to time.

“Certificate” means the Certificate of Incorporation of the Corporation filed with the Delaware Secretary of State to be effective July 21, 2016, as amended from time to time.

“Claim” means and includes (whether sounding in tort, contract (whether oral or in writing), statutory, or common law, equity, or otherwise) any and all known and unknown claims, losses, charges, complaints with regard to actions or perceived actions, payments, reimbursements, contributions, set-offs, indemnities, controversies, fines, penalties, censure, disputes, actions, causes, demands, rights, damages, punitive damages, costs, expenses (including attorneys’ fees and other related litigation expenses), debts, obligations, liabilities, indebtedness, liens, mortgages, or encumbrances of any kind. The definition of Claim is intended to be as broad as the law will allow.

“Corporation” means FirstSun Capital Bancorp, a Delaware corporation.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“General Corporation Law” means General Corporation Law of the State of Delaware and any successor statute, as amended from time to time.

“Indemnitee” has the meaning given to it in Section 6.01.

“Person” means any partnership, joint venture, limited partnership, limited liability partnership, limited liability limited partnership, corporation, limited liability company, professional corporation, professional association, trust, estate, custodian, trustee, executor, administrator, nominee, representative, unincorporated organization, sole proprietorship, employee benefit plan, tribunal, governmental entity, department, agency, quasi-governmental entity, any other business or governmental organization or any natural person (regardless of citizenship or residency).

“Proceeding” means any threatened, pending, or completed action, suit or proceeding of any nature, whether civil, criminal, administrative, arbitrative, regulatory, investigative or otherwise, or any appeal in such an action, suit or proceeding or any hearing, examination, review, inquiry or investigation that could lead to such an action, suit, or proceeding.

“Proposing Stockholder” has the meaning given in Section 2.03(a).

“Public Disclosure” shall mean a disclosure made in a press release reported by a national news service or in a document filed by the Corporation with the SEC pursuant to Section 13, 14, or 15(d) of the Exchange Act.

“Public Offering” means an underwritten public offering of Securities pursuant to an effective registration statement under the Securities Act, other than pursuant to a registration statement on Form S-4 or Form S-8 or any similar or successor form.

“SEC” means the United States Securities and Exchange Commission.

“Securities” means the common stock, preferred stock and any other equity securities of the Corporation, or any options, warrants or other rights to acquire shares of the Corporation’s common stock, preferred stock or other equity securities of the Corporation and any other securities convertible into or exercisable or exchangeable for (or entitling the holder thereof to subscribe for) any shares of capital stock or equity securities of the Corporation.

“Securities Act” means the Securities Act of 1933, as amended.

“Stockholders’ Agreement” means the Stockholders’ Agreement dated June 19, 2017, as amended from time to time, by and among the Corporation and the stockholders named therein; provided, that, when the Stockholders’ Agreement is terminated, there shall be no Stockholders’ Agreement for purposes of these Bylaws, and thereafter all references to the Stockholders’ Agreement in these Bylaws shall be ignored.

“Subsidiary” means, with respect to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person.

ARTICLE 2
STOCKHOLDERS

Section 2.01Meetings.

(a)Annual Meeting. The annual meeting of stockholders shall be held each calendar year at the date, time and place, within or without the State of Delaware, determined by the Board; provided that the first annual meeting held after the date of these Bylaws shall take place in 2018. The purpose of the annual meeting will be the election of directors in accordance with Sections 2.01 and 2.02 of the Stockholders’ Agreement and the transaction of such business as may come properly before the stockholders.

(b)Special Meetings. Special meetings of stockholders may be called at any time by the Chairman or the Chief Executive Officer and shall be called by the Secretary upon the written request of a majority of the Board or upon the written request of stockholders entitled to cast thirty percent (30%) of the votes at the meeting. Such written request shall state the purpose or purposes of the meeting and shall be delivered to the Chief Executive Officer. No other

Persons may call a special meeting. Special meetings shall be held at the date, time and place, within or without the State of Delaware, as determined by the Chairman, the Chief Executive Officer, or the Secretary upon the written request of a majority of the Board or the stockholders entitled to cast a majority of the votes at the meeting, as applicable. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice of meeting.

(c)Notice.

(i)General. Notice of all stockholder meetings shall be delivered to each stockholder not less than ten (10) days nor more than sixty (60) days before the meeting date.

(ii)Contents. The notice must state the date, time and place of the meeting and, in the case of a special meeting, must describe generally the purpose or purposes for the special meeting.

(iii)Delivery. For purposes of this Section 2.01(c), delivery of notice means and includes: (A) hand delivery of written notice to the stockholder; (B) written notice deposited in the United States mail, postage prepaid, and addressed to the stockholder at the address last furnished to the Corporation; or (C) facsimile or e-mail transmission of the notice to the stockholder at the facsimile number or e-mail address last furnished to the Corporation.

(iv)Adjourned Meetings. Notice need not be given of an adjourned meeting if the time and place of the adjourned meeting is announced at the meeting at which the adjournment is taken; provided, that if the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a new notice shall be given to each stockholder entitled to vote at the adjourned meeting. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting.

(d)Waiver. Any stockholder may waive notice of any meeting in writing either before or after a meeting. Additionally, a stockholder’s attendance at any meeting constitutes a waiver of notice of that meeting except when the stockholder is attending to expressly object to the transaction of business at that meeting because, in the reasonable and good faith view of the stockholder, the meeting was not lawfully called.

(e)List of Stockholders. A complete list of the stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder, shall be prepared by the Secretary at least ten (10) days before every meeting of stockholders and shall be open to the examination of any stockholder for any purpose germane to the meeting for a period of at least ten (10) days before the meeting during ordinary business hours at the principal place of business of the Corporation. A list of stockholders entitled to vote at the meeting shall be produced and kept at the place of the meeting during the whole time of the meeting and may be examined by any stockholder who is present.

(f)Organization. The Chairman (or in the absence of the Chairman, the Chief Executive Officer, or in the absence of the Chief Executive Officer, any Person designated by the Board) shall preside at meetings of stockholders as chairman of the meeting. The Secretary shall act as secretary, but in the absence of the Secretary, the chairman of the meeting may appoint a secretary. The chairman of the meeting shall have the right and authority to prescribe rules governing the procedure and conduct of the meeting, including (i) the setting of the business for the meeting and the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for attending or participating in the meeting; (iii) rules and procedures for maintaining order at the meeting and the safety of those present; (iv) limitations on attendance at or participation in the meeting to the stockholders of record of the Corporation, their duly authorized and constituted proxies or such other Persons as the chairman of the meeting shall permit; (v) restrictions on entry to the meeting after the time fixed for the commencement thereof; (vi) not requiring motions or seconding of motions; and (vii) limitations and restrictions as to the content of and the time allotted, if any, to questions or comments by participants. Meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure.

(g)Quorum. Except as otherwise provided by law, the Certificate or these Bylaws, at each meeting of stockholders the presence in person or by proxy of the majority in voting power of the outstanding shares of stock entitled to vote at that meeting shall be necessary and sufficient to constitute a quorum. The stockholders present at a duly organized meeting may continue to transact business notwithstanding the withdrawal of some stockholders prior to adjournment, but in no event shall a quorum consist of holders of less than one-third (1/3) of the outstanding shares of stock entitled to vote and thus represented at such meeting. In the event of a lack of quorum, the chairman of the meeting or a majority in interest of the stockholders present in person or represented by proxy may adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum shall be obtained. At any such adjourned meeting at which there is a quorum, any business may be transacted that might have been transacted at the meeting originally called.

(h)Voting. Subject to the rights, if any, of any preferred stock issued in accordance with the Certificate, each stockholder shall be entitled to one vote, in person or by proxy (either written or as otherwise permitted by the General Corporation Law), for each share of Common Stock held of record by such stockholder. Except as otherwise required by the General Corporation Law, as specifically provided for in the Certificate, the Stockholders’ Agreement or these Bylaws, in any question or matter brought before any meeting of stockholders in which a quorum is present, the affirmative vote of the holders of shares of Common Stock, represented in person or by proxy, representing a majority of the votes actually cast on any such question or matter shall be the act of the stockholders. Jointly owned shares having voting power may be voted by any joint owner unless the Corporation receives written notice from any one of them denying the authority of that Person to vote those shares.

(i)Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another Person or Persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it

is coupled with an interest sufficient in law to support an irrevocable power. A proxy may remain irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally.

(j)Inspectors of Election. In advance of any meeting of stockholders, the Board or the chairman of the meeting shall appoint one or more inspectors to act at the meeting and make a written report thereof. The chairman of the meeting may designate one or more Persons as alternate inspectors to replace any inspector who fails or is unable to act. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his ability. The inspectors shall ascertain the number of shares outstanding and the voting power of each, determine the shares represented at the meeting and the validity of proxies and ballots, count all votes and ballots, determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors, and certify the inspectors’ determination of the number of shares represented at the meeting and the count of all votes and ballots. The inspectors may appoint or retain other Persons to assist the inspectors in the performance of the duties of the inspectors. Any report or certificate made by the inspectors shall be prima facie evidence of the facts stated therein.

(k)Remote Communications. Stockholders may participate in and hold a meeting by means of conference telephone or similar communication equipment or another suitable electronic communications system (including, without limitation, video conferencing or the Internet), if the telephone or other equipment or system permits each person to participate in the meeting.

Section 2.02Action by Written Consent. Unless expressly prohibited by law, the Certificate, or these Bylaws, the stockholders may take any action without a meeting and without prior notice if a written consent (including facsimile or electronic transmissions) describing the action taken is signed or transmitted by stockholders holding at least the minimum number of votes needed under these Bylaws (and, if applicable, the Stockholders’ Agreement) to approve such action. No signature is required for any e-mail transmission as long as the e-mail is received from a recognized e-mail address of the stockholder sending the e-mail. Prompt notice of the taking of the action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing or by facsimile or electronic transmission. Any action taken pursuant to such written consent or consent by facsimile or electronic transmission shall have the same force and effect as if taken by the stockholders at a meeting thereof.

Section 2.03Advance Notice of Stockholder Nominations and Proposals.

(a)Annual Meetings. At a meeting of the stockholders, only such nominations of persons for the election of directors and such other business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, nominations or such other business must be:

(i)specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board or any committee thereof;

(ii) otherwise properly brought before the meeting by or at the direction of the Board or any committee thereof; or

(iii) otherwise properly brought before an annual meeting by a stockholder who is a stockholder of record of the Corporation at the time such notice of meeting is delivered, who is entitled to vote at the meeting, and who complies with the notice procedures set forth in this Section 2.03.

In addition, any proposal of business (other than the nomination of persons for election to the Board) must be a proper matter for stockholder action. For business (including, but not limited to, director nominations) to be properly brought before an annual meeting by a stockholder pursuant to Section 2.03(a)(iii), the stockholder or stockholders of record intending to propose the business (the “Proposing Stockholder”) must have given timely notice thereof pursuant to this Section 2.03(a), in writing to the Secretary of the Corporation even if such matter is already the subject of any notice to the stockholders or Public Disclosure from the Board. To be timely, a Proposing Stockholder’s notice for an annual meeting must be delivered to or mailed to the Secretary and received at the principal executive offices of the Corporation: (x) not later than the close of business on the 90th day, nor earlier than the close of business on the 120th day, in advance of the anniversary of the previous year’s annual meeting if such meeting is to be held on a day which is not more than 30 days in advance of the anniversary of the previous year’s annual meeting or not later than 60 days after the anniversary of the previous year’s annual meeting; and (y) with respect to any other annual meeting of stockholders, including in the event that no annual meeting was held in the previous year, not earlier than the close of business on the 120th day prior to the annual meeting and not later than the close of business on the later of: (1) the 90th day prior to the annual meeting and (2) the close of business on the tenth day following the first date of Public Disclosure of the date of such meeting. In no event shall the Public Disclosure of an adjournment or postponement of an annual meeting commence a new notice time period (or extend any notice time period).

(b)Stockholder Nominations. For the nomination of any person or persons for election to the Board pursuant to Section 2.03(a)(iii) or Section 2.03(d), a Proposing Stockholder’s notice to the Secretary of the Corporation shall set forth or include:

(i)the name, age, business address, and residence address of each nominee proposed in such notice;

(ii)the principal occupation or employment of each such nominee;

(iii)the class and number of shares of capital stock of the Corporation which are owned of record and beneficially by each such nominee (if any);

(iv)such other information concerning each such nominee as would be required to be disclosed in a proxy statement soliciting proxies for the election of such nominee as a director in an election contest (even if an election contest is not involved) or that is otherwise required to be disclosed, under Section 14(a) of the Exchange Act;

(v)a written questionnaire with respect to the background and qualification of such proposed nominee (which questionnaire shall be provided by the Secretary upon written request) and a written statement and agreement executed by each such nominee acknowledging that such person:

(A)consents to being named in the Corporation’s proxy statement as a nominee and to serving as a director if elected,

(B)intends to serve as a director for the full term for which such person is standing for election, and

(C)makes the following representations: (1) that the director nominee has read and agrees to adhere to the Corporation’s Code of Ethics and any of the Corporation’s other policies or guidelines applicable to directors, including with regard to securities trading, and (2) that the director nominee is not and will not become a party to any agreement, arrangement, or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s fiduciary duties under applicable law, and (3) that the director nominee is not and will not become a party to any agreement, arrangement, or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement, or indemnification (“Compensation Arrangement”) that has not been disclosed to the Corporation in connection with such person’s nomination for director or service as a director; and

(vi)as to the Proposing Stockholder:

(A)the name and address of the Proposing Stockholder as they appear on the Corporation’s books and of the beneficial owner, if any, on whose behalf the nomination is being made,

(B)the class and number of shares of the Corporation which are owned by the Proposing Stockholder (beneficially and of record) and owned by the beneficial owner, if any, on whose behalf the nomination is being made, as of the date of the Proposing Stockholder’s notice, and a representation that the Proposing Stockholder will notify the Corporation in writing of the class and number of such shares owned of record and beneficially as of the record date for the meeting within five business days after the record date for such meeting,

(C)a description of any agreement, arrangement, or understanding with respect to such nomination between or among the Proposing Stockholder or the beneficial owner, if any, on whose behalf the nomination is being made and any of their affiliates or associates, and any others (including their names) acting in concert with any of the foregoing, and a representation that

the Proposing Stockholder will notify the Corporation in writing of any such agreement, arrangement, or understanding in effect as of the record date for the meeting within five business days after the record date for such meeting,

(D)a description of any agreement, arrangement, or understanding (including any derivative or short positions, profit interests, options, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the Proposing Stockholder’s notice by, or on behalf of, the Proposing Stockholder or the beneficial owner, if any, on whose behalf the nomination is being made and any of their affiliates or associates, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of such person or any of their affiliates or associates with respect to shares of stock of the Corporation, and a representation that the Proposing Stockholder will notify the Corporation in writing of any such agreement, arrangement, or understanding in effect as of the record date for the meeting within five business days after the record date for such meeting,

(E)a representation that the Proposing Stockholder is a holder of record of shares of the Corporation entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, and

(F)a representation whether the Proposing Stockholder intends to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve the nomination and/or otherwise to solicit proxies from stockholders in support of the nomination.

The Corporation may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee. Any such update or supplement shall be delivered to the Secretary at the Corporation’s principal executive offices no later than five business days after the request by the Corporation for subsequent information has been delivered to the Proposing Stockholder.

(c)Other Stockholder Proposals. For all business other than director nominations, a Proposing Stockholder’s notice to the Secretary shall set forth as to each matter the Proposing Stockholder proposes to bring before the annual meeting:

(i)a brief description of the business desired to be brought before the annual meeting;

(ii)the reasons for conducting such business at the annual meeting;

(iii) the text of any proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend these Bylaws, the language of the proposed amendment);

(iv) any substantial interest (within the meaning of Item 5 of Schedule 14A under the Exchange Act) in such business of such stockholder and the beneficial owner (within the meaning of Section 13(d) of the Exchange Act), if any, on whose behalf the business is being proposed;

(v) any other information relating to such stockholder and beneficial owner, if any, on whose behalf the proposal is being made, required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the proposal and pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder;

(vi) a description of all agreements, arrangements, or understandings between or among such stockholder, the beneficial owner, if any, on whose behalf the proposal is being made, any of their affiliates or associates, and any other person or persons (including their names) in connection with the proposal of such business and any material interest of such stockholder, beneficial owner, or any of their affiliates or associates, in such business, including any anticipated benefit therefrom to such stockholder, beneficial owner, or their affiliates or associates; and

(vii)the information required by Section 2.03(b)(vi) above.

(d)Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board may be made at a special meeting of stockholders called by the Board at which directors are to be elected pursuant to the Corporation’s notice of meeting:

(i) by or at the direction of the Board or any committee thereof; or

(ii) provided that the Board has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time the notice provided for in this Section 2.03 is delivered to the Secretary of the Corporation, who is entitled to vote at the meeting and upon such election and who complies with the notice procedures set forth in this Section 2.03.

In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board, any such stockholder entitled to vote in such election of directors may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporation’s notice of meeting, if such stockholder delivers a stockholder’s notice that complies with the requirements of Section 2.03(b) to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 120th day prior to such special meeting and not later than the close of business on the later of: (x) the 90th day prior to such special meeting; or (y) the tenth (10th) day following the date of the first Public Disclosure of the date of the special meeting and of the nominees proposed by the

Board to be elected at such meeting. In no event shall the Public Disclosure of an adjournment or postponement of a special meeting commence a new time period (or extend any notice time period).

(e)Effect of Noncompliance. Only such persons who are nominated in accordance with the procedures set forth in this Section 2.03 shall be eligible to be elected at any meeting of stockholders of the Corporation to serve as directors and only such other business shall be conducted at a meeting as shall be properly brought before the meeting in accordance with the procedures set forth in this Section 2.03. The chairman of the meeting shall have the power and duty to determine whether a nomination or any other business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures of Section 2.03. If any proposed nomination was not made or proposed in compliance with this Section 2.03, or other business was not made or proposed in compliance with this Section 2.03, then except as otherwise required by law, the chairman of the meeting shall have the power and duty to declare that such nomination shall be disregarded or that such proposed other business shall not be transacted. Notwithstanding anything in these Bylaws to the contrary, unless otherwise required by law, if a Proposing Stockholder intending to propose business or make nominations at an annual meeting or propose a nomination at a special meeting pursuant to this Section 2.03 does not provide the information required under this Section 2.03 to the Corporation, including the updated information required by Section 2.03(b)(vi)(B), Section 2.03(b)(vi)(C), and Section 2.03(b)(vi)(D) within five business days after the record date for such meeting, or the Proposing Stockholder (or a qualified representative of the Proposing Stockholder) does not appear at the meeting to present the proposed business or nominations, such business or nominations shall not be considered, notwithstanding that proxies in respect of such business or nominations may have been received by the Corporation.

(f)Rule 14a-8. This Section 2.03 shall not apply to a proposal proposed to be made by a stockholder if the stockholder has notified the Corporation of the stockholder’s intention to present the proposal at an annual or special meeting only pursuant to and in compliance with Rule 14a-8 under the Exchange Act, but only if the Corporation is then subject to the requirements of Rule 14a-8, and such proposal has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such meeting.

ARTICLE 3
BOARD OF DIRECTORS

Section 3.01General Powers. The business and affairs of the Corporation shall be managed by or under the direction of its Board. The Board may exercise all such powers of the Corporation and do all such lawful acts and things that are not inconsistent with applicable law, the Certificate, the Stockholders’ Agreement or these Bylaws.

Section 3.02Board Structure.

(a)Number. The number of directors constituting the entire Board shall be one or more, subject to increase or decrease in accordance with applicable law, the Certificate, these Bylaws and the Stockholders’ Agreement.

(b)Classes and Term. The Board shall be divided into three (3) classes with directors serving staggered three-year terms in accordance with the Certificate and the Stockholders’ Agreement.

(c)Election. Subject to the other provisions of the Certificate, these Bylaws and the Stockholders’ Agreement, directors shall be elected at the annual meeting of the stockholders, or, if the Stockholders’ Agreement provides otherwise, at another meeting of the stockholders, by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote in the election of directors, except as provided in Section 3.02(f). The directors shall be designated for nomination in accordance with the Stockholders’ Agreement, unless the provisions of Section 2.02 of the Stockholders’ Agreement no longer apply with respect to a particular Designating Person (as defined in the Stockholders’ Agreement), in which case, at least a majority of the entire Board shall nominate each director. Election of directors need not be by written ballot. Directors shall hold office until their successors shall have been duly elected and qualified or until such director’s earlier death, resignation or removal.

(d)Removal. No director may be removed from office by the stockholders except for cause with the affirmative vote of the holders of not less than a majority of the outstanding shares entitled to vote at an election of directors, at a meeting duly called for that purpose or by action taken pursuant to the provisions of Section 2.02.

(e)Resignation. Any director may resign at any time by providing written notice to the other directors and the Corporation.

(f)Vacancies. Subject to the Stockholders’ Agreement, if any directorship becomes vacant for any reason, the remaining directors may fill the vacancy by a majority vote of the directors then in office (even though less than a quorum) or may continue to manage the Corporation until the stockholders elect a successor to serve for the unexpired term at a meeting duly called for that purpose or by action taken pursuant to the provisions of Section 2.02. A director elected to fill a vacancy shall be elected for the unexpired term of his or her predecessor in office. Except as otherwise provided in the Stockholders’ Agreement, any vacancy to be filled by reason of an increase in the number of directors shall be filled by a majority vote of the directors serving at the time of such increase.

(g)Compensation. Directors shall receive such compensation for their services as the Board may determine, subject to and in accordance with the Stockholders’ Agreement.

(h)Reimbursement. The directors shall be reimbursed in accordance with policies and procedures established from time to time by the Board for any reasonable out-of-pocket expenditures incurred by them in connection with their service on the Board or any committee of the Board.

Section 3.03Meetings.

(a)Regular Meetings. The Board shall hold regular meetings at the date, time and place, within or without the State of Delaware, as determined by the Board and in accordance with the Stockholders’ Agreement. The purpose of the regular meetings will be the transaction of such business as may come before the Board. A meeting of the Board for the election of

officers and the transaction of such other business as may come before it may be held without notice immediately following the annual meeting of stockholders.

(b)Special Meetings. Subject to Section 3.03(c) below, special meetings may be called by the Chairman, the Chief Executive Officer, or any two directors at the date, time and place, within or without the State of Delaware, specified by the Person(s) calling the meeting.

(c)Notice.

(i)General. Notice of all Board meetings shall be delivered to each director not less than two (2) days before the meeting date.

(ii)Delivery. For purposes of this Section 3.03(c), delivery of notice means and includes: (A) direct telephonic contact with the applicable director; (B) hand delivery of written notice to the director; (C) notice deposited in the United States mail, postage prepaid, and addressed to the director at the address last furnished to the Corporation; or (D) facsimile or e-mail transmission of the notice to the director at the facsimile number or e-mail address last furnished to the Corporation.

(iii)Emergency. Notwithstanding any other requirement under this Section 3.03(c), if the Chairman, the Chief Executive Officer, or any two directors reasonably determine that an emergency situation exists that must be acted on before a meeting can be convened in accordance with Section 3.03(c)(i) above, then a special meeting for the limited purpose of addressing that emergency may be called on not less than twelve hours’ notice. The Person calling the meeting shall make direct contact with each director in order to notify that director of the special meeting; for the avoidance of doubt, direct contact shall mean a person-to-person telephone call with the director or an email correspondence which is responded to by the director personally. If any action is taken at the special meeting, a written description of that action shall be immediately prepared and circulated among all the directors.

(d)Waiver. Any director may waive notice of any meeting in writing either before or after that meeting. Additionally, a director’s attendance at any meeting constitutes a waiver of notice of that meeting except when the director is attending to expressly object to the transaction of business at that meeting because it was not lawfully called.

(e)Means of Attendance. Directors may attend Board meetings in person or by means of conference telephone or other suitable communications equipment or systems; provided that all Persons participating can communicate simultaneously with one another.

management directors or any directors that may have a conflict of interest in the matters to be discussed.

(g)Quorum. Except as otherwise provided by these Bylaws, the Certificate, or required by applicable law, the presence of a majority of the entire Board shall constitute a quorum for the transaction of business at any Board meeting. If a quorum is not present at any Board meeting, the directors present at the meeting may adjourn the meeting, without notice other than an announcement at the meeting, until a quorum is present.

(h)Manner of Acting. Subject to Section 3.03(i), unless otherwise required by law, the Certificate or these Bylaws, the act of a majority of directors at a meeting at which a quorum is present shall constitute the act of the Board. If there is a vacancy on the Board and an individual has been nominated to fill such vacancy, the first order of business shall be to fill such vacancy, subject to the Stockholders’ Agreement.

(i)Supermajority Board Approvals. Notwithstanding anything to the contrary in these Bylaws, prior to an initial Public Offering, the Corporation shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, take any of the following actions without the prior affirmative vote or written consent of at least two-thirds (2/3) of the entire Board (a “Supermajority Board Approval”):

(i)effect any merger, consolidation or other business combination or sale of a significant portion of its assets (in a single transaction or series of related transactions) to any unaffiliated Person;

(ii)acquire (in a single transaction or series of related transactions, including by purchase of stock or assets, merger or otherwise) any assets, business or operations for a purchase price greater than one hundred and twenty-five percent (125%) of the aggregate tangible book value of the assets being acquired;

(iii)acquire (in a single transaction or series of related transactions, including by purchase of stock or assets, merger or otherwise) any assets, business or operations for a purchase price greater than seven and one-half percent (7.5%) of the aggregate tangible book value of the assets of the Corporation and its Subsidiaries;

(iv)effect an initial public offering or register a class of the Corporation’s securities under the Securities Exchange Act of 1934, as amended, except as would be caused by the exercise by a stockholder of its rights under any applicable registration rights agreement;

(v)effect any voluntary liquidation, bankruptcy, dissolution, recapitalization, reorganization or assignment to its creditors or any similar transaction;

(vi)issue, redeem, repurchase or amend the terms of any Securities or Subsidiary Securities, as applicable; provided that such requirement shall not apply to (i) issuances to employees, officers, directors or consultants of the Corporation or any of its Subsidiaries pursuant to employee benefit plans or compensatory arrangements approved in accordance with Section 5.07(a) of the Stockholders’ Agreement by (A) the Board and

(B) to the extent required thereby, by the stockholders holding a majority of the outstanding shares of the Corporation’s Common Stock; (ii) issuances, redemptions, repurchases or amendments made as consideration in connection with any bona fide, arm’s-length direct or indirect merger, acquisition or similar transaction (whether or not otherwise subject to Supermajority Board Approval); (iii) issuances made pursuant to a written requirement to raise additional capital issued by the Federal Reserve or any other regulatory authority; or (iv) any exercise by a CFS Pledgee (as defined in the Stockholders’ Agreement) of its right to foreclose upon, or exercise any remedy available to a secured lender resulting in the ownership of, CFS Pledged Shares (as defined in the Stockholders’ Agreement) by the CFS Pledgee, including the various actions referred to in clause (j) of the definition of “Permitted Transferee” in the Stockholders’ Agreement;

(vii)sell or otherwise transfer any CFS Pledged Shares;

(viii)sell or otherwise transfer any Subsidiary Security (as defined in the Stockholders’ Agreement); provided that such requirement shall not apply to sales or other transfers to a wholly-owned Subsidiary of the Corporation;

(ix) pay any dividends or otherwise make a distribution with respect to any Securities other than on a pro rata basis to all holders of the relevant class or series thereof;

(x) (A) approve any operating budget or long-term strategic business plan or any amendment to any such budget or plan or (B) approve any material deviation from any previously approved operating budget or long-term strategic business plan;

(xi) determine the compensation and/or benefits of any executive officer (including, for the avoidance of doubt, the chief executive officer, the chief financial officer, the president and the chief operating officer); or

(xii)the adoption or modification of any material employee benefit plan or arrangement providing for compensation, bonus, profit sharing, equity or other incentive compensation, investment, vacation, welfare, severance post-employment, retirement or other benefits.

For the avoidance of doubt, this Section 3.03(i) shall be of no further force and effect following an initial Public Offering.

(j)Majority Board Approvals. Prior to an initial Public Offering, the Corporation shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, take any of the following actions without the prior affirmative vote or written consent of at least a majority of the entire Board:

(i) change in any way the principal nature of its business or any entry into any line of business unrelated to the principal nature of its business;

(ii) effect any material sale, transfer, lease, pledge, assignment, conveyance or other disposition of any property or assets;

(iii) enter into any material joint venture, partnership or similar arrangement;

(iv) incur, assume or guarantee any indebtedness for borrowed money (or any amendment of any instrument representing any such indebtedness for borrowed money) in an amount in excess $75 million (in any single transaction or series of related transactions); or

(v) designate, elect, appoint, replace or remove any member of the board of directors of any bank Subsidiary; provided that the composition of the board of directors of any such bank Subsidiary shall at all times meet any director independence requirements required under applicable law.

For the avoidance of doubt, this Section 3.03(j) shall be of no further force and effect following an initial Public Offering.

Section 3.04Informal Action. Unless expressly prohibited by law, the Certificate or these Bylaws, the Board or any committee thereof may take any action without a meeting and without prior notice if a unanimous written consent (including facsimile or electronic transmissions) describing the action taken is signed or transmitted by all of the directors or all members of such committee, as applicable. No signature is required for any e-mail transmission as long as the e-mail is received from a recognized e-mail address of the director sending the e-mail. For the avoidance of doubt and unless otherwise required under applicable law, unanimous written consent of the Board shall only require the consent of the directors then in office and, if there are one or more vacancies on the Board at the time of such unanimous written consent, the consent of any Replacement Nominee (as defined in the Stockholders’ Agreement) who has not yet been appointed to the Board by the applicable stockholder entitled to designate such Replacement Nominee shall not be required; provided that, if there is a vacancy, notice of any Board meeting or action to be taken by written consent must be provided to any stockholder with a designation right with respect to such vacancy at least five (5) Business Days prior thereto and such stockholder shall have the right to designate an individual to fill such vacancy and if such designation occurs within such five (5) Business Day period the first order of business shall be to fill such vacancy and the consent of such new director shall be required for such written consent of the Board to be effective.

ARTICLE 4
OFFICERS; CHAIRMAN

Section 4.01Officers. The officers of the Corporation shall be a Chairman, a Chief Executive Officer, a Chief Financial Officer, a Chief Operating Officer, one or more Vice Presidents and a Secretary. In addition, the Corporation may have, at the discretion of the Board,

such other officers or assistant officers as may be appointed in accordance with the provisions of these Bylaws. The officers shall have the duties and responsibilities as set forth in Section 4.06 below. Any number of offices may be held by the same Person.

Section 4.02Appointment and Term. The officers shall be appointed by the Board annually. Subject to Section 4.03 below, each officer appointed shall hold office until a successor is duly appointed and qualified, or until his or her earlier death, resignation or removal. An officer may be appointed to succeed himself or herself in the same office. Appointment as an officer does not of itself create contract rights.

Section 4.03Removal. The Board may remove any officer at any time for any reason.

Section 4.04Resignation. Any officer may resign at any time for any reason by giving written notice to the Board.

Section 4.05Vacancies. If any office becomes vacant by any reason, the Board may appoint a successor to hold office for the unexpired term or, in the case of the office of Vice President, may leave such office vacant.

Section 4.06Duties.

(a)Chairman. The Chairman shall preside at all meetings of the stockholders and the Board and shall have such other powers and perform such other duties as may be assigned by the Board.

(b)Chief Executive Officer. The Chief Executive Officer shall have general supervision, direction and control of the business and affairs of the Corporation. The Chief Executive Officer shall report to the Board and perform such other duties and may exercise such other powers as from time to time may be assigned to him or her by the Board or these Bylaws. In the absence or disability of the Chairmen, the Chief Executive Officer shall perform all the duties of the Chairmen. In the absence or disability of the Chief Executive Officer, the Board shall designate one or more officers to perform all the duties of the Chief Executive Officer until a successor Chief Executive Officer is designated by the Board.

(c)Chief Financial Officer. The Chief Financial Officer shall report directly to the Chief Executive Officer, and shall perform duties consistent with such position as may be assigned to the Chief Financial Officer from time to time by the Board, the Chief Executive Officer, or these Bylaws.

(d)Chief Operating Officer. The Chief Operating Officer shall report directly to the Chief Executive Officer, and shall perform duties consistent with such position as may be assigned to the Chief Operating Officer from time to time by the Board, the Chief Executive Officer, or these Bylaws.

(e)Vice Presidents. Each Vice President shall perform such duties and may exercise such powers as may be assigned to him or her from time to time by the Board, the Chief Executive Officer or these Bylaws.

(f)Secretary. The Secretary shall keep the minutes and give notices of all meetings of stockholders and the Board and of such committees as directed by the Board. The Secretary shall have charge of such books and papers as the Board may require. The Secretary is authorized to certify copies of extracts from minutes and of documents in the Secretary’s charge, and anyone may rely on such certified copies to the same effect as if such copies were originals and may rely upon any statement of fact concerning the Corporation certified by the Secretary. The Secretary shall perform all acts incident to the office of secretary, subject to the control of the Board.

(g)Other Officers and Assistant Officers. Any other officer or assistant officer shall perform such duties and may exercise such powers as from time to time may be assigned to him or her by the Board.

Section 4.07Compensation. Subject to the Stockholders’ Agreement, the Board shall fix the officers’ compensation from time to time.

Section 4.08Expense Reimbursement. The officers shall be reimbursed in accordance with policies and procedures established from time to time by the Board for any reasonable and necessary out-of-pocket expenditures incurred by them in connection with their employment by the Corporation.

ARTICLE 5
COMMITTEES

At any time and from time to time the Board may establish and delegate authority, except to the extent limited by law, to committees. The composition of such committees and of the full Board shall at all times comply with applicable regulatory guidelines. The Board shall set forth the purpose, authority and responsibilities of each committee. The Board shall appoint and remove committee members. The establishment of a committee or the delegation of authority to it shall not relieve the Board of any responsibility imposed by law, the Certificate, the Stockholders’ Agreement or these Bylaws. A committee shall not have the power or authority to approve, adopt or recommend to the stockholders any action or matter (other than the election or removal of directors) expressly required by the General Corporation Law to be submitted to stockholders for approval.

ARTICLE 6
INDEMNIFICATION

Section 6.01Indemnitees. Any person who is or was a director or officer of the Corporation, or who serves or served, at the request of the Corporation, as a director, officer, employee or agent of another corporation, partnership, limited liability company, joint venture, trust or other enterprise (each individually, an “Indemnitee”), shall have a right to be indemnified and held harmless under the terms and conditions of this Article 6. Notwithstanding the foregoing, the Corporation shall not be required to indemnify any Indemnitee in connection with a proceeding initiated by such person if the proceeding was not authorized in advance by the Board.

Section 6.02Indemnification. To the fullest extent permitted by law and the Certificate, each Indemnitee shall be indemnified and held harmless by the Corporation from and against any Claims arising from any Proceeding relating to or arising out of the Corporation or its management or operations in which the Indemnitee may be involved, as a party or otherwise, by reason of its status specified in Section 6.01.

Section 6.03Advanced Payment. To the fullest extent permitted by law and the Certificate, the right of indemnification granted by this Article 6 shall also include the right to be paid by the Corporation the expenses incurred in connection with any such Proceeding in advance of its final disposition to the fullest extent authorized by the General Corporation Law.

Section 6.04Indemnification of Employees and Agents. The Corporation, upon approval by the Board, may provide indemnification consistent with the rights set forth in this Article 6 to employees, agents and legal representatives of the Corporation.

Section 6.05Non-Exclusivity of Rights. The right to indemnification and the advancement and payment of expenses conferred in this Article 6 is not exclusive of, and shall be in addition to, any other right of indemnification or contribution that any Indemnitee may have or acquire under any law (common or statutory), provision of these Bylaws, or the Corporation’s other governing documents, determination of the Board, or otherwise.

Section 6.06Insurance. The Corporation may purchase and maintain insurance, at its expense, to protect any Indemnitee against any Claim, regardless of whether the Corporation would have the power to indemnify such Indemnitee against that Claim under this Article 6. With respect to any proceeds received from an insurance policy purchased to protect a particular Indemnitee in accordance with this Section 6.06, the proceeds shall be applied by the Corporation: (a) first, to satisfy (to the extent possible) any remaining indemnification obligation to such Indemnitee; then: (b) second, to repay the Corporation for any corporate assets it used to satisfy its indemnification obligation to such Indemnitee. Any excess proceeds shall be the sole property of the Corporation and shall be subject to no restrictions regarding corporate usage that may arise out of these Bylaws.

Section 6.07Stockholder Liability. Any indemnification under this Article 6 shall be satisfied solely out of the assets of the Corporation or any insurance proceeds received by the Corporation under Section 6.06. In no event may an Indemnitee subject any of the stockholders of the Corporation to personal or other liability by reason of these indemnification provisions.

Section 6.08Interested Transactions. An Indemnitee shall not be denied indemnification in whole or in part under this Article 6 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by, or approved by the Board in accordance with, the terms of these Bylaws or another governing document of the Corporation. Notwithstanding the foregoing, indemnification under this Article 6 shall only extend to the Indemnitee’s activities with respect to or on behalf of the Corporation and not to the Indemnitee’s other interest, if any, in the transaction.

Section 6.09No Additional Rights; Continuation of Rights. The indemnification provided in Article 6 is for the benefit of the Indemnitees and shall not be deemed to create any

right to indemnification for any other Persons. A Person that ceases to qualify as an Indemnitee under Section 6.01 nevertheless shall retain its right to indemnification under this Article 6 (which right also shall inure to the benefit of that Person’s heirs, successors, assigns and administrators) as to actions taken by that Person while it qualified as an Indemnitee under Section 6.01.

ARTICLE 7
SHARE CERTIFICATES

Section 7.01Certificates for Shares; Uncertificated Shares. The Corporation shall deliver certificates representing shares to which stockholders are entitled; provided that the Board may provide by resolution that some or all of any or all classes and series of its shares shall be uncertificated shares, provided that such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Certificates representing shares shall be signed either by original signatures or facsimile signatures by the Chief Executive Officer and by the Secretary, or by such other officer or officers as may be authorized from time to time by resolution of the Board, and, if applicable, shall be sealed with the seal of the Corporation or a facsimile thereof, if any. Each certificate representing shares shall be consecutively numbered or otherwise identified, and shall state upon the face thereof: (a) that the Corporation is organized under the laws of the State of Delaware; (b) the name of the Person to whom the shares represented thereby are issued; (c) the number and class of shares and the designation of the series, if any, that such certificate represents; and (d) the par value of each share represented by such certificate, or a statement that the shares are without par value. In the event the Corporation is authorized to issue shares of more than one class, each certificate representing shares issued by the Corporation shall conspicuously state on the face or back of the certificate that a full statement of all the designations, preferences, limitations and relative rights of the shares of each class authorized to be issued is set forth in the Certificate and that the Corporation will furnish a copy of such statement to the record holder of the certificate without charge on written request to the Corporation at its principal place of business or registered office. All information on each certificate, along with the date of issuance of the shares represented thereby, shall be entered on the share transfer records of the Corporation. All certificates surrendered to the Corporation for transfer shall be canceled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and canceled, except that, in the case of a lost, destroyed or mutilated certificate, a new certificate may be issued therefor upon such terms and indemnity to the Corporation as the Board may prescribe. If shares are uncertificated, the Corporation shall, in accordance with applicable law, after the issuance or transfer of uncertificated shares, send to the registered owner of the uncertificated shares a written notice containing the information required to be set forth or stated on certificates by these Bylaws or law to be set forth or stated. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated shares and the rights and obligations of holders of certificates representing shares of the same class and series shall be identical.

Section 7.02Lost, Stolen, or Destroyed Certificates. If the holder of a certificate representing shares of the Corporation claims that the certificate has been lost, stolen or destroyed, the Corporation shall issue a new certificate representing those shares; provided that

the holder, if requested by the Corporation, files with the Corporation a sufficient indemnity bond and makes an affidavit under oath stating that the certificate is lost, stolen or destroyed.

Section 7.03Registered Stockholders. Unless otherwise provided by law, the Corporation may regard the Person in whose name any shares issued by the Corporation are registered in the stock transfer records of the Corporation at any particular time as the owner of those shares at that time for purposes of voting those shares, receiving distributions thereon or notices in respect thereof, transferring those shares, exercising rights of dissent with respect to those shares, entering into agreements with respect to those shares, or giving proxies with respect to those shares. Neither the Corporation nor any of the Corporation’s directors, officers, employees, or agents shall be liable for regarding that Person as the owner of those shares at that time for those purposes, regardless of whether that Person does not possess a certificate for those shares.

ARTICLE 8
MISCELLANEOUS

Section 8.01Interpretation. The headings and subheadings contained in these Bylaws are solely for the purpose of reference, are not part of these Bylaws, and shall not in any way affect the meaning or interpretation of these Bylaws. All references to days or months shall be deemed references to calendar days or months. Any reference to any federal, state, county, local or foreign statute or legal requirement shall be deemed also to refer to all rules and regulations promulgated thereunder, including any successor thereto, unless the context requires otherwise. Unless the context requires otherwise: (a) words (including defined terms) importing the singular number or plural number will include the plural number and singular number respectively; (b) words (including defined terms) importing the masculine gender will include the feminine and neuter genders and vice versa; (c) references to “include,” “includes,” and “including” will be deemed to be followed by the phrase “without limitation”; (d) references in these Bylaws to “hereof,” “herein,” “hereto,” “herewith,” “hereby,” “hereunder” or any other words of similar import, will be deemed to refer to these Bylaws as a whole and not to any particular term or provision of these Bylaws; (e) references to Articles and Sections refer to articles within these Bylaws as a whole and sections within these Bylaws as a whole; (f) references to “written” or comparable expressions include a reference to facsimile or e-mail transmission or comparable means of communication; and (g) references to “written consent” or “consent” include any such consent given by facsimile or electronic transmissions. No signature is required for any e-mail transmission as long as the e-mail is received from a recognized e-mail address of the Person sending the e-mail.

Section 8.02Amendment. These Bylaws may be amended, altered, changed or repealed, and new bylaws adopted, by the Board or the stockholders in accordance with applicable law, Article X of the Certificate and the Stockholders’ Agreement; provided, that (i) Sections 3.02(b), 3.02(c), 3.03(g), 3.03(h), 3.03(j) and 3.04, Article 5 and this clause (i) may be amended, altered, changed or repealed only upon the prior written consent of the Corporation and stockholders holding at least two-thirds (2/3) of the shares of Common Stock then outstanding and (ii) Section 3.03(i) and this clause (ii) may be amended, altered, changed or repealed only upon the prior written consent of the Corporation and stockholders holding at least eighty percent (80%) of the shares of Common Stock then outstanding.

Section 8.03Voting of Securities Owned by the Corporation. Powers of attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the Chairman or the Chief Executive Officer. The Chairman or the Chief Executive Officer may, in the name of and on behalf of the Corporation, take all such action as he or she may deem advisable to vote in person or by proxy at any meeting of security holders of any Person in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and powers incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board may from time to time confer like powers upon any other Person or Persons.

Section 8.04Principal and Business Offices. The Corporation may have such principal and other business offices, either within or outside of the state of Delaware, as the Board may designate or as the Corporation’s business may require from time to time.

Section 8.05Fiscal Year. The fiscal year of the Corporation shall be determined and fixed by the Board.

Section 8.06Corporate Seal. No corporate seal shall be required.

Section 8.07Books and Records. The books of the Corporation may be kept (subject to any provision contained in applicable law) outside the State of Delaware at such place or places as may be designated from time to time by the Board.

Section 8.08Severability. Every provision of these Bylaws is intended to be severable, and, if any term or provision of these Bylaws is invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other term or provision of these Bylaws, and these Bylaws shall be construed as if such invalid, illegal or unenforceable term or provision had never been a part of them. Notwithstanding the foregoing, the immediately preceding sentence shall be of no force or effect if the consequence of enforcing the remainder of these Bylaws without such invalid, illegal or unenforceable term or provision would defeat or substantially impair the accomplishment of the essential purpose of these Bylaws.

Section 8.09Conflicts. If there is a conflict between the Certificate and these Bylaws, the Certificate shall govern and control.

Exhibit 10.1

FirstSun Capital Bancorp

2021 Equity Incentive Plan

Effective October 18, 2021

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1. General.

(a)Establishment. FirstSun Capital Bancorp, a Delaware corporation (the “Company”), hereby establishes the FirstSun Capital Bancorp 2021 Equity Incentive Plan (the “Plan”), as it may be amended and restated from time to time. Capitalized terms shall have the respective meanings set forth in Section 14.

(b)Purpose. The Plan is intended to provide eligible persons, who are designated by the Board of Directors of the Company (the “Board”) to participate in the Plan, with equity-based incentives to: (i) attract and retain them, (ii) provide additional compensation incentives to them, and (iii) create in them a direct interest in the future success of the operations of the Company.

(c)Effective Date & Approval by Shareholders. The Effective Date of the Plan (the “Effective Date”) is October 18, 2021, the date of its adoption by the Board. The effectiveness of the Plan shall be subject to approval by the shareholders of the Company within 12 months before or after the date the Plan is adopted by the Board. Such approval shall be obtained in the manner and to the degree required under applicable laws. Awards may be granted prior to shareholder approval, but no Award may be exercised or settled until the Plan is approved by the shareholders, and if the Plan is not so approved within 12 months, the Plan, and all Awards granted under the Plan, shall be null and void.

(d)Eligible Award Recipients. The persons eligible to receive Awards are Employees, Directors and Consultants.

(e)Available Awards. The Plan provides for the grant of the following Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) Stock Appreciation Rights, (iv) Restricted Stock Awards, and (vii) Other Stock Awards.

2. Administration.

(a) Administration by the Board. The Plan shall be administered by the Board.

(b) Powers of Board. The Board shall have the following powers, subject to the limitations specifically set forth in the Plan:

(i)to determine from time to time (1) which of the persons eligible under the Plan shall be granted Awards; (2) when and how each Award shall be granted; (3) what type or combination of types of Award shall be granted; (4) the provisions of each Award granted (which need not be identical), including any Performance Goals and the time or times when a Participant shall be permitted to receive cash or shares of Common Stock pursuant to an Award; (5) the number of shares of Common Stock with respect to which an Award shall be granted; and (6) the Fair Market Value applicable to an Award, provided that, Awards to non-employee

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members of the Board shall not exceed $300,000 annually, as determined on the date of grant of the Award.

(ii) to construe and interpret the Plan and Awards granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Award Agreement in a manner and to the extent it shall deem necessary or expedient to make the Plan or Award fully effective.

(iii)to settle all controversies regarding the Plan and Awards granted under it, including to correct any defect, omission or inconsistency in the Plan or in an Award Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.

(iv)to accelerate the time at which an Award may first be exercised or the time during which an Award or any part thereof will vest in accordance with the Plan.

(v)to suspend or terminate the Plan at any time, subject to the limitations set forth in Section 10.

(vi)to amend the Plan or any Award in any respect the Board deems necessary or advisable; provided, however, except as provided in Section 9 relating to Capitalization Adjustments, or to the extent required by applicable law or listing requirements, shareholder approval shall be required for any amendment of the Plan that (1) increases the number of shares of Common Stock available for issuance under the Plan, (2) expands the class of individuals eligible to receive Awards under the Plan, (3) increases the benefits accruing to Participants under the Plan or reduces the price at which shares of Common Stock may be issued or purchased under the Plan, (4) extends the term of the Plan, or (5) expands the types of Awards available for issuance under the Plan. Shareholder approval shall also be obtained where required by any federal or state law or regulation or the rules of any stock exchange on which the shares of Common Stock may then be listed. Except as provided above, rights under any Award granted before an amendment of the Plan shall not be impaired by any such amendment to the Plan or by an amendment of such Award (provided that an amendment that impairs or causes loss of Incentive Stock Options status shall not be treated as an impairment), except with the written consent of the affected Participant or where necessary or advisable to maintain the qualified status of the Award as an Incentive Stock Option or to bring the Award into compliance with (or within an exemption from) Section 409A of the Code or other tax, securities or other laws.

(vii)to submit any amendment to the Plan for shareholder approval.

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(viii)generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan or Awards.

(ix)to adopt such procedures, addenda and sub-plans as are necessary or appropriate to permit participation in the Plan by Employees, Directors or Consultants who are foreign nationals or employed outside the United States, to the extent that such participation is desired by the Board.

(x)to delegate, to the extent permitted by applicable law (e.g., Delaware §157(c)), its authority to one or more Officers of the Company with respect to Awards, provided, however, that such delegation may not apply to Awards involving Covered Employees or “insiders” (within the meaning of Section 16 of the Exchange Act) on or after the date the Company becomes Publicly-Traded.

(i) General. The Board may delegate some or all of the administration of the Plan to a Committee or Committees. If administration of the Plan is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, and references in this Plan to the Board shall thereafter be to the Committee, subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated. Acts of a majority of the Committee at which a quorum is present, or acts reduced to or approved in writing by unanimous consent of the member of the Committee, shall be valid acts of the Committee.

(ii) Rule 16b-3 Compliance. To the extent that the Board determines that Rule 16b-3 applies to an Award made under the Plan or, the Committee approving such Award or otherwise taking action with respect to such Award shall consist, as applicable, of not fewer than two Directors of the Company who are Non-Employee Directors (as provided in Rule 16b-3), and “independent directors” (for purposes of the rules of the exchange on which the shares are traded); provided, however, that if at any time any member of the Committee does not so qualify, the Committee may establish a subcommittee of members who satisfy the above requirements.

(d) Effect of Board’s Decision. All determinations, interpretations and constructions made by the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.

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(e)Repricing; Cancellation and Re-Grant of Awards. Subject to Section 9 relating to Capitalization Adjustments, neither the Board nor any Committee shall have the authority to: (i) reduce the exercise price of any outstanding Options or Stock Appreciation Rights under the Plan, (ii) issue to any Participant a new Award in exchange for the surrender and cancellation of any other Award, if such new Award has an Exercise Price lower than that of the Award for which it is exchanged, or (iii) cancel any outstanding Options or Stock Appreciation Rights that have an exercise price greater than the current Fair Market Value of the Common Stock in exchange for cash or other Awards under the Plan.

(f)Indemnification. To the maximum extent permitted by applicable law, each member of the Committee (including officers of the Company, if applicable), or of the Board, as applicable, shall be indemnified and held harmless by the Company against and from (i) any loss, liability, cost or expense that may be imposed upon or reasonably incurred by him in connection with or resulting from any claim, action, suit or proceeding to which he may be a party or in which he may be involved by reason of any action taken or failure to act under the Plan or pursuant to the terms and condition of any Award except for actions taken in bad faith or failures to act in good faith, and (ii) any and all amounts paid by him in settlement thereof, with the Company’s approval, or paid by him in satisfaction of any judgment in any such claim, action, suit, or proceeding against him, provided that such member shall give the Company an opportunity, at its own expense, to handle and defend any such claim, action, suit or proceeding before he undertakes to handle and defend it on his behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Bylaws, by contract, as a matter of law, or otherwise, or under any other power that the Company may have to indemnify or hold harmless such person.

3. Shares Subject to the Plan.

(a)Share Reserve. Subject to Section 9 relating to Capitalization Adjustments, the aggregate number of shares of Common Stock that may be issued pursuant to Awards under the Plan from and after the Effective Date shall not exceed 2,476,571 shares (the “Share Reserve”), all of which may be issued pursuant to the exercise of Incentive Stock Options. For clarity, the Share Reserve in this Section 3(a) is a limitation on the number of shares of Common Stock that may be issued pursuant to the Plan, subject to Section 9(b).

(b)Adjustments. Subject to Section 3(c), the number of shares available for issuance under the Plan shall be reduced by one share for each share of Common Stock issued pursuant to an Award upon that grant of the Award. If an Award or any portion thereof (i) expires or otherwise terminates without all of the shares of Common Stock covered by such Award having been issued, or (ii) is settled in cash (i.e., the Participant receives cash rather than stock), any shares of Common

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Stock not issued upon such expiration, termination or settlement event shall be returned to the amount available for issuance under the Plan or otherwise shall not reduce (or otherwise offset) the number of shares of Common Stock that may be available for issuance under the Plan, in each case upon such event.

(c)Subsequent Issuance.

(i) Shares Available For Subsequent Issuance. If any shares of Common Stock issued pursuant to an Award are forfeited back to the Company because of the failure to meet a contingency or condition required to vest such shares in the Participant, then the shares that are forfeited shall revert to and again become available for issuance under the Plan.

(ii) Shares Not Available For Subsequent Issuance. The following shares of Common Stock reduce the total number of shares of Common Stock available under the Plan and shall no longer be available for issuance under the Plan: (1) all shares of Common Stock issued pursuant to Restricted Stock Awards that vest, or are issued in settlement of any Award, (2) all shares subject to a Stock Appreciation Right, where such Stock Appreciation Right settled in stock (regardless of the number of shares of Common Stock used to settle the Award), (3) any shares of Common Stock subject to an Award that are not delivered to a Participant because the Award is exercised through a reduction of shares subject to the Award (i.e., “net exercise”), and (4) any shares of Common Stock reacquired by the Company to cover tax withholding.

(d)Source of Shares. The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market or otherwise.

4. Eligibility.

(a) Eligibility for Specific Awards. Incentive Stock Options may be granted only to U.S. Employees of the Company or any Subsidiary that satisfies the definition of “subsidiary” under Rule 422 of the Securities Act. Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants.

(b) Clawback. If required by the Sarbanes-Oxley Act of 2002 and/or by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, each Participant’s Award shall be conditioned on repayment or forfeiture in accordance with applicable law and the related Award Agreement shall reflect any such condition. In addition, the Board may establish such conditions for repayment or forfeiture of Awards as the Board may adopt by policy for the Company or any affiliate.

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5. Provisions Relating to Options and Stock Appreciation Rights.

(a)Form of Option or SAR. Each Option or SAR shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. All Options shall be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates shall be issued for shares of Common Stock purchased on exercise of each type of Option. If an Option is not specifically designated as an Incentive Stock Option, then the Option shall be a Nonstatutory Stock Option. The provisions of separate Options or SARs need not be identical. Each Award Agreement shall conform to (through incorporation of provisions hereof by reference in the applicable Award Agreement or otherwise) the substance of each of the following provisions:

(i) Term. No Option or SAR shall be exercisable after the expiration of 10 years (or, in the case of an Incentive Stock Option granted to a Participant who is a Ten Percent Shareholder, 5 years) from the date of its grant or such shorter period specified in the Award Agreement.

(ii) Exercise Price. The exercise price of each Option or SAR shall be not less than 100% (or, in the case of an Incentive Stock Option granted to a Participant who is a Ten Percent Shareholder, 110%) of the Fair Market Value of the Common Stock subject to the Option or SAR on the date the Option or SAR is granted; provided, however, a lower exercise price may be permissible where such Award is being granted pursuant to a merger or other corporate transaction (in which case the exercise price and other terms must comply with Section 422 or 409A of the Code, as applicable) or where such Award contains terms that comply with, or exempt such Award from, the requirements of Section 409A of the Code applicable to nonqualified deferred compensation. Each SAR will be denominated in shares of Common Stock equivalents.

(iii) Vesting Generally. An Option or SAR may vest and become exercisable at such times, and subject to such other terms and conditions (which may include satisfaction of Performance Goals or other criteria) as the Board may deem appropriate and set forth in the Award Agreement. The Award Agreement may set forth the minimum number of shares of Common Stock as to which an Option or SAR may be exercised.

(b)Exercise of Options. An Option may not be exercised for a fraction of a share of Common Stock. Except where an Option provides for automatic exercise, to exercise any vested outstanding Option and receive shares of Common Stock issued by the Company with respect to such Option, the Participant must provide written notice of exercise to the Company in accordance with the provisions of the applicable Award Agreement, which shall be accompanied by the payment of the aggregate exercise price as to all shares of Common Stock being exercised and

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payment of, or arrangement made to satisfy, any applicable tax, withholding or other required payments, including pursuant to Section 8(e). Payment, to the extent permitted by applicable law, shall be made by any combination of the methods set forth below:

(i) by cash, check, bank draft or money order payable to the Company; or

(ii) by delivery to the Company (either by actual delivery or attestation) of shares of Common Stock (held for any minimum period needed to avoid adverse impacts to the Company’s earnings for financial reporting purposes), valued at their Fair Market Value at the time of exercise, with such documentation as the Board may require.

In addition, payment may be made by one or more of the following methods:

(1) pursuant to a “cashless exercise” involving the delivery of irrevocable instructions to a broker in a form acceptable to the Company providing for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of the shares being acquired upon exercise of the Option pursuant to a program or procedure approved by the Company (including, without limitation, a program developed under Regulation T as promulgated by the Federal Reserve Board); or

(2) in the case of an Option that is a Nonstatutory Stock Option, by (A) a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issuable upon exercise by the largest whole number of shares having a Fair Market Value that does not exceed the aggregate exercise price; and (B) a payment as described in (i) above from the Participant for any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued.

(c)Exercise and Payment of a SAR. Except where a SAR provides for automatic exercise, to exercise any outstanding vested SAR, the Participant must provide written notice of exercise to the Company in compliance with the provisions of the applicable Award Agreement. The distribution payable on the exercise of a SAR will be an amount equal to the excess of (i) the aggregate Fair Market Value (on the date of the exercise of the SAR) of a share of Common Stock equal to the Common Stock equivalent with respect to which the Participant is exercising the SAR on such date, over (ii) the exercise price of the SAR. The payment with respect to a SAR may be made in shares of Common Stock, in cash, or in any combination of the two, or in any other form of consideration, as determined by the Board and contained in the applicable Award Agreement. In addition, payment of, or arrangement made to satisfy, any applicable tax, withholding or other required payments, due upon vesting of a SAR shall be governed pursuant to Sections 5(b) and 8(e) hereof.

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(d)Transferability of Options and SARs. An Option or SAR shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Participant only by the Participant; provided, however, that

(i)the Board may, in its sole discretion and upon the Participant’s request, permit transfer of the Option or SAR in a manner that is not prohibited by applicable tax and securities laws. Except as explicitly provided herein, neither an Option nor a SAR may be transferred for consideration.

(ii)an Option or SAR may be transferred pursuant to a domestic relations order that is acceptable to the Board. If an Option is an Incentive Stock Option, such Option may be deemed to be a Nonstatutory Stock Option as a result of such transfer.

(iii)the Participant may, by delivering written notice to the Company, in a form provided by or otherwise satisfactory to the Company, designate a third party who, in the event of the death of the Participant, shall thereafter be entitled to exercise the Option or SAR and receive the Common Stock or other consideration resulting from such exercise. In the absence of such a designation, the executor or administrator of the Participant’s estate shall be entitled to exercise the Option or SAR and receive the shares of Common Stock or other consideration resulting from such exercise.

(iv)the Board may, in its sole discretion, impose such additional limitations on the transferability of Options and SARs as the Board shall determine and set forth in the applicable Award Agreement.

(e)Termination of Continuous Service.

(i)Termination Without Cause. Except as otherwise provided in the applicable Award Agreement or other written agreement between the Participant and the Company, if a Participant’s Continuous Service terminates (other than for Cause, or upon the Participant’s death or Disability), each unvested Option or SAR shall automatically and immediately terminate and the Participant may exercise any vested Option or SAR until the earlier of (1) the date that is three months following the termination of the Participant’s Continuous Service (or such longer or shorter period specified in the applicable Award Agreement), or (2) the expiration of the term of the Option or SAR as set forth in the Award Agreement. If, after termination of Continuous Service, the Participant does not exercise a vested Option or SAR within the time specified herein or in the Award Agreement (as applicable), the Option or SAR shall terminate.

(ii) Disability of Participant. Except as otherwise provided in the applicable Award Agreement or other agreement between the Participant and the Company,

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if a Participant’s Continuous Service terminates as a result of the Participant’s Disability, each unvested Option or SAR shall automatically and immediately terminate and the Participant may exercise any vested Option or SAR, until the earlier of (1) the date that is 12 months following such termination of Continuous Service (or such longer or shorter period specified in the Award Agreement), or (2) the expiration of the term of the Option or SAR as set forth in the Award Agreement. If, after termination of Continuous Service, the Participant does not exercise a vested Option or SAR within the time specified herein or in the Award Agreement (as applicable), the Option or SAR shall terminate.

(iii) Death of Participant. Except as otherwise provided in the applicable Award Agreement or other agreement between the Participant and the Company, if (1) a Participant’s Continuous Service terminates as a result of the Participant’s death, or (2) the Participant dies within the period (if any) specified in the Award Agreement after the termination of the Participant’s Continuous Service for a reason other than death or Cause, then each unvested Option or SAR shall automatically and immediately terminate and any vested Option or SAR may be exercised by the Participant’s estate, by a person who acquired the right to exercise the vested Option or SAR by bequest or inheritance, or by a person designated to exercise the vested Option or SAR upon the Participant’s death, until the earlier of (1) the date that is 12 months following the date of death (or such longer or shorter period specified in the Award Agreement), or (2) the expiration of the term of such vested Option or SAR as set forth in the Award Agreement. If, after the Participant’s death, the vested Option or SAR is not exercised within the time specified herein or in the Award Agreement (as applicable), the Option or SAR shall terminate.

(iv) Termination for Cause. If a Participant’s Continuous Service is terminated for Cause, all vested and unvested Options or SARs shall automatically and immediately terminate and shall no longer be exercisable.

(v) Extension of Termination Date. If the exercise of an Option or SAR following the termination of the Participant’s Continuous Service (other than for Cause or upon the Participant’s death or Disability) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then to the extent applicable, the Option or SAR shall terminate on the earlier of (1) the expiration of a total period of three months (that need not be consecutive) after the termination of the Participant’s Continuous Service during which the exercise of the Option or SAR would not be in violation of such registration requirements, or (2) the expiration of the term of the Option or SAR as set forth in the applicable Award Agreement. In addition, unless otherwise provided in the applicable Award Agreement, if the sale of any shares of Common Stock received upon exercise of an Option or SAR following the termination of the Participant’s Continuous Service (other than for Cause) would violate the Company’s insider trading policy, then the Option or

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SAR shall terminate on the earlier of (1) the expiration of a period equal to the applicable post-termination exercise period after the termination of the Participant’s Continuous Service during which the sale of the shares of Common Stock received upon exercise of the Option or SAR would not be in violation of the Company’s insider trading policy, or (2) the expiration of the term of the Option or SAR as set forth in the applicable Award Agreement.

(f)Non-Exempt Employees. Except as otherwise provided in the applicable Award Agreement, no Option or SAR, whether or not vested, granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall be first exercisable for any shares of Common Stock until at least 6 months following the date of grant of the Option or SAR. Notwithstanding the foregoing, consistent with the provisions of the Worker Economic Opportunity Act, (i) in the event of the Participant’s death or Disability, (ii) upon the consummation of any corporate transaction in which such Option or SAR is not assumed, continued, or substituted, or (iii) upon a Change in Control, any such vested Options and SARs may be exercised earlier than 6 months following the date of grant. The foregoing provision is intended to operate so that any income derived by a non-exempt employee in connection with the exercise or vesting of an Option or SAR will be exempt from his or her regular rate of pay.

(g)Incentive Stock Option $100,000 Limitation. To the extent that the aggregate Fair Market Value (determined at the time of grant) of shares of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under all plans of the Company and any affiliates) exceeds one hundred thousand dollars ($100,000), the Options or portions thereof that exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of the applicable Award Agreement(s).

(h)Extension of Exercise Period. The Board may, in its sole discretion, subject to the terms of the Plan, exercisable either at the time an Award is granted or at any time while the Award remains outstanding, extend the period of time for which the Option or Stock Appreciation Right is to remain exercisable following the Participant’s termination of employment or service from the limited exercise period otherwise in effect for that Option or Stock Appreciation Right to such greater period of time as the Board shall deem appropriate, but in no event beyond the expiration of the Option or Stock Appreciation Right term, and/or to permit the Option or Stock Appreciation Right to be exercised, during the applicable post-termination exercise period, not only with respect to the number of vested shares of Common Stock for which such Option or Stock Appreciation Right is exercisable at the time of the Participant’s termination of employment or service but also with respect to one or more additional installments in which the Participant would have vested had the Participant continued in Service. Such an extension may result in recharacterization of an Incentive Stock Option as a

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Nonstatutory Stock Option.

6. Restricted Stock Awards and Other Stock Awards.

(a) Restricted Stock Awards. Each Award Agreement with respect to a Restricted Stock Award shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. To the extent consistent with the Company’s Bylaws, at the Board’s election, shares of Common Stock may be held in book entry form subject to the Company’s instructions until any restrictions relating to the Restricted Stock Award lapse, or evidenced by a certificate that shall be held in such form and manner as determined by the Board. The terms and conditions of separate Restricted Stock Awards need not be identical. Each Award Agreement shall conform to (through incorporation of the provisions hereof by reference in the Award Agreement or otherwise) the substance of each of the following provisions:

(i) Consideration. A Restricted Stock Award may be awarded in consideration for (1) cash, check, bank draft or money order payable to the Company, (2) past services to the Company, or (3) any other form of legal consideration (including future services) that may be acceptable to the Board, in its sole discretion, and that is permissible under applicable law.

(ii) Vesting; Withholding. Shares of Common Stock awarded pursuant to a Restricted Stock Award may be subject to forfeiture to the Company in accordance with a vesting schedule based on time or such other terms and conditions (which may include the satisfaction of Performance Goals or other criteria) as the Board may deem appropriate and set forth in the Award Agreement. Payment of, or arrangement made to satisfy, any applicable tax, withholding or other required payments, due upon vesting of a Restricted Stock Award shall be governed pursuant to Section 8(e).

(iii) Termination of Participant’s Continuous Service. Except as otherwise provided in the applicable Award Agreement or other written agreement between the Participant and the Company, if a Participant’s Continuous Service terminates for any reason, all shares of Common Stock awarded pursuant to a Restricted Stock Award that have not yet vested shall automatically and immediately after such termination be forfeited for no consideration and the Participant shall have no further rights with respect to such shares or such Award.

(iv) Transferability. Shares of Common Stock awarded pursuant to a Restricted Stock Award that have not yet vested shall be transferable by the Participant only upon such terms and conditions as are set forth in the applicable Award Agreement, as the Board shall determine in its sole discretion.

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(v) Shareholder Rights. No shareholder rights, including without limitation dividends and voting rights, shall apply to any Award, including shares of Common Stock subject to a Restricted Stock Award except as provided in an applicable Restricted Stock Award agreement. If a Restricted Stock Award provides that any dividends are paid on the underlying shares of Common Stock, such dividends shall be subject to the same vesting and forfeiture restrictions as apply to the shares subject to the Restricted Stock Award to which they relate and the payment of such dividends must comply with or be exempt from the requirements imposed upon non-qualified deferred compensation under Section 409A of the Code. As a condition to receipt of shares of Common Stock pursuant to any Restricted Stock Award, the Participant shall execute any voting proxies or other similar documents requested by the Board.

(b) Other Stock Awards. Other forms of Awards valued in whole or in part by reference to, or otherwise based on, shares of Common Stock, including the appreciation in value thereof, may be granted under the Plan. Subject to the provisions of the Plan, the Board shall have sole and complete authority to determine the persons to whom and the time or times at which such Other Stock Awards will be granted, the number of shares of Common Stock (or the cash equivalent thereof) to be granted pursuant to such Other Stock Awards, and all other terms and conditions of such Other Stock Awards, so long as the grant of such Other Stock Awards complies with or is exempt from the requirements imposed upon non-qualified deferred compensation under Section 409A of the Code.

7. Covenants of the Company.

(a) Availability of Shares. During the terms of the Plan and Awards issued thereunder, the Company shall keep available at all times the number of shares of Common Stock reasonably required to satisfy any Award that may be issued under the Plan.

(b) Securities Law Compliance. The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Awards and to issue and sell shares of Common Stock upon exercise of the Awards; provided, however, that this undertaking shall not require the Company to register the Plan, any Award, or any Common Stock issued or issuable pursuant to any such Award under the Securities Act. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority that legal counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue or sell Common Stock pursuant to such Awards unless and until such authority is obtained. A Participant shall not be eligible for the grant of an Award or the subsequent

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issuance of Common Stock pursuant to the Award if such grant or issuance would be in violation of any applicable securities law.

(c) No Obligation to Notify or Minimize Taxes. The Company shall have no duty or obligation to any Participant to advise such Participant as to the time or manner of exercising any Award. Furthermore, the Company shall have no duty or obligation to warn or otherwise advise such Participant of a pending termination or expiration of an Award or a possible period in which the Award may not be exercised. The Company has no duty or obligation to minimize the tax consequences of an Award to any person. Notwithstanding anything in this Plan or the applicable Award Agreement to the contrary, neither the Company nor any other person or entity guarantees, warrants or otherwise represents that an Award made under this Plan will produce any favorable or desired tax or other result; and any statement, inference or other communication to the contrary (under this Plan, the applicable Award Agreement or otherwise) is and shall be subject to the provisions and qualifications and disclaimer of this sentence. The Participant shall be solely and exclusively responsible for any and all such results.

8. Miscellaneous.

(a)Use of Proceeds from Sales of Common Stock. Proceeds from the sale of shares of Common Stock pursuant to Awards shall constitute general funds of the Company.

(b)Corporate Action Constituting Grant of Awards. Corporate action constituting a grant by the Company of an Award to any Participant shall be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument, certificate, or letter evidencing the Award is communicated to, or actually received or accepted by, the Participant, provided that the following terms of the Award are fixed and/or designated on the date of such corporate action (as applicable): the maximum number of shares of Common Stock subject to the Award, the exercise price of the Award (in the case of an Option or Stock Appreciation Right), and the identity of the Participant.

(c)Shareholder Rights. Unless otherwise provided in the applicable Award Agreement, no Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to such Award unless and until (i) such Participant has satisfied all requirements for vesting and, if applicable, exercise of the Award, and (ii) the issuance of shares of Common Stock subject to such Award has been entered into the books and records of the Company. Common Stock acquired pursuant to any Award is subject to the terms and conditions of the Certificate of Incorporation, Stockholders Agreement and other governing documents of the Company, as they may be amended from time to time. As a condition to the grant of an Award and/

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or the issuance of Common Stock on exercise or vesting of an Award, the Participant agrees, upon written request of the Company, to become a party to the Stockholders Agreement, and any buy-sell agreement, redemption agreement, repurchase agreement, restriction agreement, non-competition agreement or a governing document, of the Company or between the Company or an affiliate and stockholders, directors or employees of the Company or an affiliate, or among stockholders of the Company or an affiliate.

(d)No Employment or Other Service Rights. Nothing in the Plan, any Award Agreement, or any other instrument executed thereunder or in connection with any Award granted pursuant thereto, shall confer upon any Participant any right to continue in the service of the Company or a Subsidiary in the capacity in effect at the time the Award was granted or shall affect the right of the Company or a Subsidiary to terminate (i) the employment or service of an Employee or Consultant with or without notice and with or without cause, or (ii) the service of a Director pursuant to the Bylaws of the Company or any applicable Subsidiary, and any applicable provisions of the corporate law of the state in which the Company or any such Subsidiary is incorporated, as the case may be.

(e)Taxes; Withholding Obligations. Except where otherwise approved by the Committee with respect to an Award, and unless the Participant elects to make a direct payment to the Company, the Company shall withhold shares of Common Stock that would otherwise be acquired on exercise, vesting or settlement of an Award (valued at their Fair Market Value as of such withholding date) equal to the maximum Federal, State and local taxes, domestic or foreign, permitted by law or regulation to be withheld in the applicable jurisdiction with respect to such taxable event under the Plan. Only whole shares of Common Stock shall be withheld (rounded down so as not to exceed such limit). Any remaining amount determined by the Company to be due shall be withheld from other compensation due to the Participant by the Company or its affiliates or by the Participant remitting payment to the Company of such amount. Notwithstanding the above, in the case of Options or SARs, such tax withholding shall be accomplished based on the Participant’s election as set forth in Section 5. Regardless of whether the Company withholds with respect to any Award, or the method used, the Participant shall retain sole responsibility for all taxes due in connection with his or her Award.

(f)Electronic Delivery. Any reference herein to a “written” agreement or document shall include any agreement or document delivered electronically or posted on the Company’s intranet.

(g)Requirements Of Law.

(i)The granting of Awards and the issuance of shares of Common Stock under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as

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may be required. If at any time on or after the Effective Date, the Board, in its discretion, shall determine that the requirements of any applicable federal or state securities laws should fail to be met, no shares of Common Stock issuable under Awards and no Options or Stock Appreciation Rights shall be exercisable until the Board has determined that these requirements have again been met. The Board may suspend the right to exercise an Options or SAR at any time when it determines that allowing the exercise and issuance of shares of Common Stock would violate any federal or state securities or other laws, and may provide that any time periods to exercise the Option or SAR are extended during a period of suspension. Effective on and after the date that the Company becomes Publicly-Traded, transactions under this Plan with respect to “Insiders,” are intended to comply with all applicable conditions of Rule 16b-3 under the Exchange Act. To the extent any provision of the Plan or action by the Board fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Board.

(ii)Each Award Agreement and each certificate representing securities granted pursuant to the Plan (including securities issuable pursuant to the terms of derivative securities) may bear such restrictive legend(s) as the Company deems necessary or advisable under applicable law, including Federal and state securities laws.

(iii) If the date of the vesting or lapse of restriction with respect to any Award, other than an Option or SAR, held by Participant who is subject to the Company’s policy regarding trading of its stock by its officers and directors and shares of Common Stock (the “original vesting date”) is not within a “window period” applicable to the Participant, as determined by the Company in accordance with such policy, then the vesting or lapse of the restrictions with respect to such Award shall not occur on such original vesting date and shall instead occur on the first day of the next “window period” applicable to the Participant pursuant to such policy.

(h)Compliance with Section 409A. To the extent that the Board determines that any Award granted hereunder is subject to Section 409A of the Code, the Award Agreement evidencing such Award shall include provisions intended to cause such Award to be compliant with, or exempt from, Section 409A of the Code. To the extent applicable, the Plan and Award Agreements shall be interpreted accordingly. Notwithstanding anything to the contrary in this Plan (and unless the Award Agreement specifically provides otherwise), if the shares of Common Stock are publicly-traded and a Participant holding an Award that constitutes “deferred compensation” under Section 409A of the Code is a “specified employee” for purposes of Section 409A of the Code, no distribution or payment of any amount shall be made upon a “separation from service” before the first day of the calendar month following the date that is 6 months after the date of such Participant’s “separation from service” (as such term is defined in Section 409A of the Code and Treasury Reg. Section 1.409A-1(h) without regard to alternative

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definitions thereunder) or, if earlier, the date of the Participant’s death. If a Restricted Stock Award provides for payment of dividends to the Participant before the Restricted Stock Award vests, any such dividend payments shall be paid not later than March 15 of the calendar year following the calendar year in which the dividend is issued by the Company to all shareholders of record generally.

(i)Gender and Number; Headings. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural. Headings are included for the convenience of reference only and shall not be used in the interpretation or construction of any such provision contained in the Plan.

(j)Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

(k)Personal Information. The Board may decide to collect, use and transfer, in electronic or other form, personal data as described in this Plan or any Award for the exclusive purpose of implementing, administering and managing participation in the Plan. By accepting an Award, each Participant acknowledges that the Company holds certain personal information about the Participant, including, but not limited to, name, home address and telephone number, date of birth, social security number or other identification number, salary, nationality, job title, details of all Awards awarded, cancelled, exercised, vested or unvested, for the purpose of implementing, administering and managing the Plan (the “Data”). Each Participant further acknowledges that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan and that these third parties may be located in jurisdictions that may have different data privacy laws and protections, and each Participant authorizes such third parties to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purpose of implementing, administering and managing the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom the recipient or the Company may elect to deposit any Shares acquired upon any Award.

9. Adjustments upon Changes in Common Stock; Other Corporate Events.

(a) Capitalization Adjustments. In the event of a Capitalization Adjustment, the Board shall appropriately and proportionately adjust: (i) the class and maximum number of securities subject to the Plan, (ii) the class and maximum number of securities that may be issued pursuant to the exercise of Incentive Stock Options, (iii) the class and maximum number of securities that may be awarded to any person, and (iv) the class and number of securities and price per share of Common

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Stock subject to outstanding Awards. The Board shall make such adjustments, and its determination shall be final, binding and conclusive.

(b) Dissolution or Liquidation. Except as otherwise provided in the Award Agreement, in the event of a dissolution or liquidation of the Company, all outstanding Awards (other than Awards consisting of vested and outstanding shares of Common Stock not subject to a forfeiture condition) shall automatically terminate immediately prior to the completion of such dissolution or liquidation, and the shares of Common Stock subject to a forfeiture condition may be reacquired by the Company without consideration notwithstanding the fact that the holder of such Award is providing Continuous Service, provided, however, that the Board may, in its sole discretion, cause some or all Awards to become fully vested, exercisable and/or no longer subject to forfeiture (to the extent such Awards have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion.

(c) Corporate Transaction. The following provisions shall apply to Awards in the event of a Change in Control, unless otherwise provided in the applicable Award Agreement or any other written agreement between the Company, any Subsidiary, or any of their affiliates and the Participant. In the event of a Change in Control, notwithstanding any other provision of the Plan, the Board shall, in its sole discretion, and without the consent of or any other liability, duty or obligation to the Participant, take one or more of the following actions with respect to Awards, contingent upon the closing or completion of the transaction resulting in the Change in Control:

(i) arrange for the surviving company or acquiring company (or the surviving or acquiring company’s parent company) to assume or continue the Award or to substitute a similar award for the Award (including, but not limited to, an award to acquire the same consideration paid to the shareholders of the Company pursuant to the transaction).

(ii) arrange for the assignment of any reacquisition or repurchase rights held by the Company in respect of Common Stock issued pursuant to the Award to the surviving company or acquiring company (or the surviving or acquiring company’s parent company).

(iii) accelerate the vesting of an Award to a date prior to the effective time of such Change in Control as the Board shall determine (or, if the Board shall not determine such a date, to the date that is 15 days prior to the effective date of the Change in Control), with such Award terminating if not exercised (if applicable) at or prior to the effective time of the transaction resulting in the Change in Control.

(iv) arrange for the lapse of any reacquisition or repurchase rights held by the Company with respect to the Award.

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(v) cancel or arrange for the cancellation of the Award prior to the effective time of the Change in Control transaction in exchange for payment to the Participant of the excess of the Fair Market Value of the shares of Common Stock subject to the Award as of the closing date of the transaction over the exercise price, or purchase price paid or to be paid, as applicable, for the shares of Common Stock subject to the Award. Any payments with respect to the cancellation of an Award may be paid on the same schedule and in the same form as consideration is paid to the shareholders of Common Stock of the Company in connection with the corporate transaction resulting in the Change in Control so long as all payments shall be made, if at all, to the Participant by not later than the end of the five-year period following the closing date of the transaction and, to the extent applicable, such delay otherwise complies with Section 409A of the Code.

(vi) cancel any outstanding Award (with no payment due), provided that, at the time of cancellation, the exercise price of any such Award is equal to or greater than the per share consideration being paid in connection with the Change in Control transaction.

The Board need not take the same action or actions with respect to all Awards or portions thereof or with respect to all Participants.

(d) Change in Control Acceleration. An Award may be subject to additional acceleration of vesting and exercisability upon or after a Change in Control as may be provided in the applicable Award Agreement or as may be provided in any other written agreement between the Company or any Subsidiary and the Participant, but in the absence of such provision no such acceleration shall occur.

10. Termination or Suspension of the Plan.

(a) Plan Term. The Board may suspend or terminate the Plan at any time. Unless terminated sooner by the Board, the Plan shall automatically terminate on the day before the 10th anniversary of the date the Plan is adopted by the Board. Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and the Plan’s terms and conditions. No Awards may be granted under the Plan while the Plan is suspended or on or after it is terminated.

(b) No Impairment of Rights. Suspension or termination of the Plan shall not impair rights and obligations under any Award granted and outstanding while the Plan is in effect, except with the written consent of the affected Participant.

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11. Choice of Law.

The law of the State of Delaware shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to that state’s conflict of laws rules.

12. Damages/Arbitration.

(a)Binding Arbitration. Except where prohibited by law, any claim, dispute or other matter in question of any kind relating to this Plan must be settled by arbitration in accordance with the rules of the American Arbitration Association. Notice of demand for arbitration must be made in writing to the opposing party and to the American Arbitration Association within a reasonable time after the claim, dispute or other matter in question has arisen. In no event shall a demand for arbitration be made after the date when the applicable statute of limitations would bar the institution of a legal or equitable proceeding based on such claim, dispute or other matter in question. The decision of the arbitrators shall be final and may be enforced in any court of competent jurisdiction. The arbitrators may award reasonable fees and expenses to the prevailing party in any dispute under the Plan and shall award reasonable fees and expenses in the event that the arbitrators find that the losing party acted in bad faith or with intent to harass, hinder or delay the prevailing party in the exercise of its rights in connection with the matter under dispute.

(b)Limitation on Damages. In the event of any breach or other violation of any term of this Plan or the applicable Award Agreement, neither the Company, nor any of the Company’s owners, officers, Directors, Board, employees or other agents or affiliates or any other person shall be liable to the Participant for any punitive, consequential, special or other damages under or in connection with any breach or other violation of, under or in connection with this Plan or the applicable Award Agreement, and the Participant’s sole and exclusive remedy shall be only the Participant’s actual damage (if any) directly resulting directly from such applicable breach or other violation, if any.

13. Addenda. The Board may approve such addenda to the Plan as it may consider necessary or appropriate for the purpose of granting Awards other than Incentive Stock Options to foreign individuals. Such addenda may contain such terms and conditions as the Board deems necessary or appropriate to accommodate for differences in local law, tax policy or custom that deviate from the terms and conditions set forth in this Plan The terms of any such addenda shall supersede the terms of the Plan to the extent necessary to accommodate such differences, but shall not otherwise affect the terms of the Plan as in effect for any other purpose.

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14. Definitions. As used in the Plan, the following definitions shall apply to the capitalized terms indicated below:

(a) “Award” means any right to receive Common Stock granted under the Plan, including an Incentive Stock Option, a Nonstatutory Stock Option, a Restricted Stock Award, a Stock Appreciation Right, or any Other Stock Award.

(b) “Award Agreement” means a written agreement between the Company and a Participant evidencing the terms and conditions of an Award.

(d) “Capitalization Adjustment” means any change that is made in, or other events that occur with respect to, the Common Stock after the Effective Date without the receipt of consideration by the Company and not pursuant to a Change in Control, through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or any similar equity restructuring transaction. Notwithstanding the foregoing, the conversion of any convertible securities of the Company shall not be treated as a Capitalization Adjustment.

(e) “Cause” shall have the meaning ascribed to such term in any written agreement between the Participant and the Company defining such term and, in the absence of such agreement, such term shall include, but not be limited to, the commission of any felony, any act of fraud, embezzlement or dishonesty, any unauthorized use or disclosure of confidential information or trade secrets of the Company, or any other intentional misconduct or violation of Company policies adversely affecting the business or affairs of the Company in a material manner. The determination that a termination of the Participant’s Continuous Service is either for Cause or without Cause shall be made by the Board in its sole discretion. Any determination by the Board that the service of a Participant was terminated with or without Cause for purposes of this Plan shall have no effect upon any determination of the rights or obligations of the Company or such Participant for any other purpose.

(f) “Change in Control” means the occurrence of any one or more of the following events:

(i) the consummation of a transaction, or a series of related transactions undertaken with a common purpose, in which any individual, entity or group (a “Person”), acquires ownership of stock of the Company that, together with stock held by such Person, constitutes more than 50% of the total fair market value or total voting power of the Company’s stock; or

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(ii) a sale, lease, exchange or other transfer, in one transaction or a series of related transactions undertaken with a common purpose, of the Company’s assets having a total gross fair market value of 40% or more of the total gross fair market value of all of the assets of the Company. For this purpose, “gross fair market value” means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

For purposes of this Plan, a Change in Control will not include (1) a transaction in which the holders of the outstanding voting securities of the Company immediately prior to the transaction hold at least 50% of the outstanding voting securities of the successor company immediately after the transaction; (2) any transaction or series of transactions approved by the Board principally for bona fide equity financing purposes in which cash is received by the Company or any successor company or indebtedness of the Company is cancelled or converted or a combination thereof, (3) a sale, lease, exchange or other transfer of all or substantially all of the Company’s assets to a majority-owned subsidiary company; or (4) a transaction undertaken for the principal purpose of restructuring the capital of the Company, including, but not limited to, reincorporating the Company in a different jurisdiction, or creating a holding company. Notwithstanding the foregoing, in the event that an Award is “deferred compensation” subject to compliance with Code Section 409A, a “Change in Control” will only be deemed to occur if the consummation of the corporate transaction meets the requirements of Reg. Section 1.409A-3(a)(5).

(g) “Code” means the Internal Revenue Code of 1986, as amended, including any applicable regulations and guidance issued thereunder.

(h) “Committee” means a committee of one or more Directors of the Company to whom authority has been delegated by the Board in accordance with Section 2(c).

(i) “Common Stock” means the common stock of the Company.

(j) “Company” means FirstSun Capital Bancorp, a Delaware corporation.

(k) “Consultant” means any individual person, including an advisor, who is (i) engaged by the Company or a Subsidiary to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the board of directors of a Subsidiary and is compensated for such services. However, service solely as a Director, or payment of a fee for such service, shall not cause a Director to be considered a “Consultant” for purposes of the Plan.

(l) “Continuous Service” means that the Participant’s service with the Company or a Subsidiary, whether as an Employee, Director or Consultant, is not interrupted or

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terminated. A change in the capacity in which the Participant renders service to the Company or a Subsidiary as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s service with the Company or a Subsidiary, shall not terminate a Participant’s Continuous Service; provided, however, if the Entity for which a Participant is rendering services ceases to qualify as a Subsidiary, as determined by the Board, in its sole discretion, such Participant’s Continuous Service shall be considered to have terminated on the date such Entity ceases to qualify as a Subsidiary. To the extent permitted by law, the Board or the Chief Executive Officer of the Company, in that party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of (i) any leave of absence approved by the Board or Chief Executive Officer, including sick leave, military leave or any other personal leave, or (ii) transfers between the Company, a Subsidiary, or their successors. A leave of absence shall be treated as Continuous Service for purposes of vesting in an Award only to such extent as may be provided in the Company’s leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to the Participant, or as otherwise required by law. Notwithstanding the foregoing, if an Employee is holding an Incentive Stock Option and a leave of absence exceeds three months, then for purposes of Incentive Stock Option status only, such Employee’s service as an Employee shall be deemed terminated on the first day following such three-month period and the Incentive Stock Option shall thereafter automatically become a Nonstatutory Stock Option in accordance with applicable law, unless reemployment upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to a written Company policy.

(m) “Director” means a member of the Board or a director of a Subsidiary.

(n) “Disability” means, with respect to a Participant, the inability of such Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months, as provided in Sections 22(e)(3) and 409A(a)(2)(c)(i) of the Code, and shall be determined by the Board on the basis of such medical evidence as the Board deems warranted under the circumstances.

(o) “Effective Date” means the effective date of this Plan, as determined pursuant to Section 1(c) of the Plan.

(p) “Employee” means any person employed as an employee by the Company or a Subsidiary as evidenced by payroll records. Service solely as a Director, or payment of a fee for such services, shall not cause a Director to be considered an “Employee” for purposes of the Plan.

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(q) “Entity” means a corporation, partnership, limited liability company or other entity.

(r) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations issued thereunder.

(s) “Fair Market Value” means, as of any date, the value of the Common Stock determined as follows:

(i) If the Common Stock is listed on any established stock exchange (other than if the Common Stock is quoted on an over-the-counter market), the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock as quoted on such exchange (or the exchange with the greatest volume of trading in the Common Stock) on the date of determination, as reported in a source the Board deems reliable.

(ii) Unless otherwise provided by the Board, if there is no closing sales price for the Common Stock on the date of determination, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation as described in subsection (s)(i) above exists.

(iii) In the absence of such markets for the Common Stock, the Fair Market Value shall be determined by the Board in good faith by the reasonable application of a reasonable valuation method and in a manner that complies with Sections 409A and 422 of the Code.

(t) “Incentive Stock Option” means an option granted under the Plan that is intended to be, and qualifies as, an “incentive stock option” within the meaning of Section 422 of the Code.

(u) “Non-Employee Director” means a Director who either (i) is not a current employee or officer of the Company or a Subsidiary, does not receive compensation, either directly or indirectly, from the Company or a Subsidiary for services rendered as a consultant or in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act (“Regulation S-K”)), does not possess an interest in any other transaction for which disclosure would be required under Item 404(a) of Regulation S-K, and is not engaged in a business relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K; or (ii) is otherwise considered a “non-employee director” for purposes of Rule 16b-3.

(v) “Nonstatutory Stock Option” means any option granted under the Plan that does not qualify as an Incentive Stock Option.

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(w) “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act.

(x) “Option” means an Incentive Stock Option or a Nonstatutory Stock Option to purchase shares of Common Stock granted pursuant to the Plan.

(y) “Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.

(z) “Other Stock Award” means an award based in whole or in part by reference to the Common Stock which is granted pursuant to the terms and conditions of Section 6(b).

(aa) “Own,” “Owned,” “Owner,” “Ownership” means, with respect to any person or Entity, such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.

(bb) “Participant” means a person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Award.

(cc) “Performance Criteria” means the criterion or criteria that the Board shall select for purposes of establishing the Performance Goal(s) for a Performance Period with respect to any Award under the Plan. The Performance Criteria that will be used to establish the Performance Goal(s) shall be based on the attainment of specific levels of performance of the Company (or Subsidiary, affiliate, division, business unit or operational unit of the Company) and shall include, but not be limited to, the following:

(i)return on assets, return on tangible assets, cash return on assets, or cash return on tangible assets;

(ii)return on equity, return on tangible equity, cash return on equity, or cash return on tangible equity;

(iii)levels of or changes in levels of net interest income, net interest margin, efficiency ratio, cash efficiency ratio, provision, provision rate, net charge-off, net charge-off ratio, fee income, total revenue, earnings per share, pre-tax income, or net income;

(iv)levels or trends in specified financial statement line items or components thereof (may include, but is not limited to, cost of deposits, growth of deposits, cost of funds, loan growth, loan yields, or interest earning asset yields);

(v)levels of or trends in non-performing assets;

(vi)earnings per share (basic or diluted), or core earnings per share and growth;

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(vii)book value per share, tangible book value per share or growth thereof;

(viii)absolute or relative metrics of stock performance, dividends, and total return to shareholders;

(ix)achieving or maintaining specified levels of performance under GAAP and/or regulatory capital;

(x)strategic business criteria, consisting of one or more objectives based on meeting specified market penetration, geographic business expansion, customer satisfaction, employee satisfaction, human resources management, supervision of litigation, regulatory matters, information technology, and goals relating to acquisitions, divestitures, joint ventures and similar transactions, and budget comparisons;

(xi)personal professional objectives, including any of the foregoing performance goals, the implementation of policies and plans, the negotiation of transactions, the development of long term business goals, formation of joint ventures, and the completion of other corporate transactions; and

(xii)any combination of, or a specified increase in, any of the foregoing, and any of the foregoing goals may be measured at enterprise level or at business line or geographic level.

Any one or more of the Performance Criteria may be used on an absolute or relative basis to measure the performance of the Company and/or a Subsidiary as a whole or any division, business unit or operational unit of the Company and/or a Subsidiary or any combination thereof, as the Board may deem appropriate, or as compared to the performance of a group of comparable companies, or published or special index that the Board, in its sole discretion, deems appropriate. The Board also has the authority to provide for accelerated vesting of any Award based on the achievement of Performance Goals pursuant to the Performance Criteria specified in this paragraph.

(ad)“Performance Goals” means, for a Performance Period, the one or more goals established by the Board for the Performance Period based upon the Performance Criteria.

(ae)“Performance Period” means the one or more periods of time as established by the Board, terminations of employment or service, termination of the Plan, Change in Control, or Company liquidation or dissolution as the Board may select in accordance with applicable law, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to and the payment of an Award.

(af)“Plan” means this 2021 First Sun Capital Bancorp Equity Incentive Plan.

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(ag)“Publicly-Traded” means the Company’s Common Stock is registered on a national securities exchange or the Company has filed a registration statement pursuant to Section 12(g) of the Exchange Act.

(ah)“Restricted Stock Award” means an award of shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(a) of the Plan.

(ai)“Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.

(aj)“Securities Act” means the Securities Act of 1933, as amended.

(ak)“Stock Appreciation Right” or “SAR” means a right to receive the appreciation on Common Stock that is granted pursuant to the terms and conditions of Section 5.

(al)“Stockholders Agreement” means the Stockholders’ Agreement of FirstSun Capital Bancorp dated June 19, 2017, as amended from time to time, or any successor agreement.

(am)“Subsidiary” means, with respect to the Company, (i) any corporation of which more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership, limited liability company or other entity in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than 50%. The Board shall have the authority to determine the time or times at which “Subsidiary” status is determined within the foregoing definition.

(an)“Ten Percent Shareholder” means a person who Owns (or is deemed to Own pursuant to Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any of its affiliates.

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Exhibit 31.1

Rule 13a-14(a)/15d-14(a) Certification of the Principal Executive Officer

I, Mollie H. Carter, certify that:

1. I have reviewed this quarterly report on Form 10-Q of FirstSun Capital Bancorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) [Intentionally omitted in accordance with Exchange Act Rule 13a-14(a)/15d-14(a)];

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 5, 2021

/s/ Mollie H. Carter

_____________________________________

Mollie H. Carter, Chief Executive Officer

Principal Executive Officer

Exhibit 31.2

Rule 13a-14(a)/15d-14(a) Certification of the Principal Executive Officer

I, Robert A. Cafera, Jr., certify that:

1. I have reviewed this quarterly report on Form 10-Q of FirstSun Capital Bancorp;

(b) [Intentionally omitted in accordance with Exchange Act Rule 13a-14(a)/15d-14(a)];

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 5, 2021

/s/ Robert A. Cafera, Jr.

_____________________________________

Robert A. Cafera, Jr., Chief Financial Officer

Principal Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Mollie H. Carter, the Chief Executive Officer of FirstSun Capital Bancorp (the “Company”), hereby certify that, to my knowledge:

1. The quarterly report of the Company on Form 10-Q for the period ended June 30, 2021 as filed with the Securities and Exchange Commission on this date (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 5, 2021

/s/ Mollie H. Carter

________________________________

Mollie H. Carter

Chief Executive Officer

(Principal Executive Officer)

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert A. Cafera, Jr., the Executive Vice President and Chief Financial Officer of FirstSun Capital Bancorp (the “Company”), hereby certify that, to my knowledge:

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 5, 2021

/s/ Robert A. Cafera, Jr.

________________________________

Robert A. Cafera, Jr.

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)