FIRSTSUN CAPITAL BANCORP (FSUN)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

General Overview

FirstSun Capital Bancorp, headquartered in Denver, Colorado, is the financial holding company for Sunflower Bank, National Association, which is headquartered in Dallas, Texas and operates as Sunflower Bank and First National 1870. We conduct a full-service community banking and trust business through our wholly-owned subsidiaries, which as of March 31, 2026, consisted of Sunflower Bank, Sunflower Wealth Advisors, LLC, and FEIF Capital Partners, LLC. The following discussion and analysis of our 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, 2025 included in our 2025 Annual Report that we filed with the SEC on March 6, 2026. 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.

Acquisition of First Foundation Inc.

On April 1, 2026, we completed our merger with First Foundation, the holding company for First Foundation Bank, a California-chartered banking corporation. The consummation of the acquisition with First Foundation expanded our markets in Southern California and Texas and added new markets in Florida, Nevada and Hawaii. The acquisition also added wealth management capabilities through the acquisition of First Foundation Advisors, a registered investment adviser under the Investment Advisers Act, and former wholly owned subsidiary of First Foundation.

Because the merger closed after quarter end, the historical consolidated financial results of First Foundation are not included in our consolidated financial results for the quarter ended March 31, 2026.

Deposits Classification

Previously, deposit amounts related to certain NOW accounts with limited monthly transaction activity were able to be reclassified to money market accounts to reduce reserve requirements at the Federal Reserve. As there is no longer any impact to reserve requirements across different deposit products, we have discontinued this product reclassification practice and have revised the presentation of those deposits to conform to the current presentation for periods prior to March 31, 2026. Reclassifications had no effect on prior years net income or stockholders’ equity.

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Financial Summary

First Quarter 2026 Highlights:

•Net interest margin of 4.25%

•Loan growth of 16.2%, annualized

•24.7% noninterest income to total revenue1

•Net income of $21.6 million, $0.76 per diluted share (adjusted, $23.7 million, $0.84 per diluted share, see “Non-GAAP Financial Measures and Reconciliations” below)

•Return on average total assets of 1.04% (adjusted, 1.14%, see “Non-GAAP Financial Measures and Reconciliations” below)

•Return on average stockholders’ equity of 7.47% (adjusted, 8.20%, see “Non-GAAP Financial Measures and Reconciliations” below)

Net income totaled $21.6 million for the first quarter of 2026 compared to net income of $23.6 million for the first quarter of 2025. Earnings per diluted share were $0.76 for the first quarter of 2026 compared to $0.83 for the first quarter of 2025. Adjusted net income, a non-GAAP financial measure, was $23.7 million or $0.84 per diluted share for the first quarter of 2026.

The following table sets forth certain summary financial and other information of FirstSun:

1 Total revenue is net interest income plus noninterest income.

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Non-GAAP Financial Measures and Reconciliations

The non-GAAP financial measures presented below are used by our management and our Board of Directors on a regular basis in addition to our GAAP results to facilitate the assessment of our financial performance and the efficiency of our operations. Management believes these non-GAAP financial measures provide greater understanding of our ongoing operations, enhance an investor’s understanding of our financial results by providing a meaningful basis for period-to-period comparisons, assisting in operating results analysis, and predicting future performance. This information supplements our GAAP reported results, and should not be viewed in isolation from, or as a substitute for, our GAAP results. Accordingly, this financial information should be read in conjunction with our consolidated financial statements and notes thereto for the three months ended March 31, 2026, included elsewhere in this report. Non-GAAP financial measures exclude certain items that are included in the financial results presented in accordance with GAAP. Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP. These non-GAAP measures are not necessarily comparable to similar measures that may be represented by other companies.

The following table presents GAAP to non-GAAP reconciliations:

[[GREPCENT_TABLE]]
[["","As of and for the three months ended"],["($ in thousands, except share and per share amounts)","March 31, 2026","","","","","","","","March 31, 2025"],["Tangible stockholders\u2019 equity to tangible assets:"],["Total stockholders' equity (GAAP)","$","1,175,507","","","","","","","","","$","1,068,295"],["Less: Goodwill and other intangible assets"],["Goodwill","(93,483)","","","","","","","","","(93,483)"],["Other intangible assets","(4,476)","","","","","","","","","(6,806)"],["Tangible stockholders' equity (non-GAAP)","$","1,077,548","","","","","","","","","$","968,006"],["Total assets (GAAP)","$","8,565,123","","","","","","","","","$","8,216,458"],["Less: Goodwill and other intangible assets"],["Goodwill","(93,483)","","","","","","","","","(93,483)"],["Other intangible assets","(4,476)","","","","","","","","","(6,806)"],["Tangible assets (non-GAAP)","$","8,467,164","","","","","","","","","$","8,116,169"],["Total stockholders' equity to total assets (GAAP)","13.72","%","","","","","","","","13.00","%"],["Less: Impact of goodwill and other intangible assets","(0.99)","%","","","","","","","","(1.07)","%"],["Tangible stockholders' equity to tangible assets (non-GAAP)","12.73","%","","","","","","","","11.93","%"],["Tangible stockholders\u2019 equity to tangible assets, reflecting net unrealized losses on HTM securities, net of tax:"],["Tangible stockholders' equity (non-GAAP)","$","1,077,548","","","","","","","","","$","968,006"],["Less: Net unrealized losses on HTM securities

[Excerpt truncated for page length; source filing is linked above.]

Item 7.

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, Sunflower Bank, Sunflower Wealth Advisors, LLC, and FEIF Capital Partners, LLC.

The following discussion is an analysis of our consolidated results of operations for the years ended December 31, 2025, 2024 and 2023, and financial condition for the years ended December 31, 2025 and 2024. This discussion and analysis should be read in conjunction with our consolidated financial statements and accompanying footnotes filed with this report in “Part II, Item 8. Financial Statements.” We have omitted discussion of 2023 results where it would be redundant to the discussion previously included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations of FirstSun” section of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 7, 2025. 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 our 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 3 of this report.

General Overview

FirstSun Capital Bancorp, headquartered in Denver, Colorado, is the financial holding company for Sunflower Bank, National Association, which is headquartered in Dallas, Texas and operates as Sunflower Bank, First National 1870 and Sunflower Bank Mortgage Lending. We conduct a full-service community banking and trust business through our wholly-owned subsidiaries—Sunflower Bank, Sunflower Wealth Advisors, LLC and FEIF Capital Partners, LLC.

We offer a full range of relationship-focused services to meet our clients’ personal, business and wealth management financial objectives throughout Texas, Kansas, Colorado, New Mexico, Arizona, California and Washington and a mortgage lending platform with capabilities in 44 states. Our product line includes commercial and industrial loans, commercial real estate loans, residential mortgage, public finance 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 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. For additional information on our segments, see Note 21 - Segment Information included in our consolidated financial statements included elsewhere in this report.

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Pending merger with First Foundation Inc.

On October 27, 2025, we entered into a merger agreement with First Foundation, the holding company of First Foundation Bank, headquartered in Irvine, California, as amended by amendment no. 1 to the merger agreement dated February 6, 2026. Under the merger agreement, First Foundation will merge with and into FirstSun, with FirstSun continuing as the surviving entity. Immediately following the merger, First Foundation Bank will merge with and into Sunflower Bank, with Sunflower Bank continuing as the surviving bank. The consummation of the proposed merger will expand our markets in California and Texas, as well as add new markets in Florida, Nevada and Hawaii.

The merger agreement, as amended, was unanimously approved by the boards of directors of FirstSun and First Foundation, and is subject to customary closing conditions, including receipt of remaining required regulatory approvals. The stockholders of FirstSun and First Foundation approved the merger agreement and transactions contemplated thereby at special stockholders’ meetings held on February 27, 2026. The merger is expected to close early in the second quarter of 2026.

Financial Highlights For 2025

We delivered strong financial results in 2025, compared to 2024, which included:

•Net income of $97.9 million, $3.47 per diluted share (adjusted net income of $100.5 million1, $3.56 adjusted per diluted share1)

•Net interest margin of 4.10%

•Return on average total assets of 1.18% (adjusted return on average total assets of 1.21%1)

•Return on average stockholders’ equity of 8.88% (adjusted return on average stockholders’ equity of 9.11%1)

•Loan growth of 4.7%

•Average deposit growth of 6.6%

•24.3% noninterest income to total revenue (defined as net interest income plus noninterest income)

Net income totaled $97.9 million, or $3.47 per diluted share, in 2025, compared to $75.6 million, or $2.69 per diluted share, in 2024. Adjusted net income, a non-GAAP financial measure, was $100.5 million, or $3.56 per diluted share, in 2025 compared to $87.7 million, or $3.13 per adjusted diluted share, in 2024.

The return on average total assets was 1.18% in 2025, compared to 0.96% in 2024, and the return on average stockholders’ equity was 8.88% in 2025, compared to 7.56% in 2024. Adjusted return on average total assets and adjusted return on average stockholders’ equity, each a non-GAAP financial measure, were 1.21% and 9.11% respectively in 2025 compared to 1.12% and 8.77% respectively in 2024.

The following tables set forth certain financial highlights of FirstSun as of and for the years ended December 31,:

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Non-GAAP Financial Measures and Reconciliations

The non-GAAP financial measures presented below are used by our management and our board of directors on a regular basis in addition to our GAAP results to facilitate the assessment of our financial performance and the efficiency of our operations. Management believes these non-GAAP financial measures provide a greater understanding of our ongoing operations, enhance an investor’s understanding of our financial results by providing a meaningful basis for period-to-period comparisons, assisting in operating results analysis, and predicting future performance. This information supplements our GAAP reported results, and should not be viewed in isolation from, or as a substitute for, our GAAP results. Accordingly, this financial information should be read in conjunction with our consolidated financial statements and notes thereto for the year ended December 31, 2025, included elsewhere in this report. Non-GAAP financial measures exclude certain items that are included in the financial results presented in accordance with GAAP. Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP. These non-GAAP measures are not necessarily comparable to similar measures that may be represented by other companies.

The following table presents GAAP to non-GAAP reconciliations as of and for the years ended December 31,:

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Segments

Our operations are conducted through two operating segments: Banking and Mortgage Operations. We also allocate certain expenses to Corporate, which is not an operating segment. 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. For additional information on our segments, see Note 21 - Segment Information included in our audited consolidated financial statements included elsewhere in this report.

Comparison of fiscal years 2025 and 2024

Banking

Income before income taxes increased $18.3 million to $116.6 million in 2025, from $98.3 million in 2024. The period over period increase was primarily driven by an increase in net interest income, an increase in noninterest income, and a decrease in provision for credit losses, partially offset by an increase in noninterest expense. Net interest income increased $13.8 million to $297.0 million in 2025 compared to $283.2 million in 2024. The increase in net interest income was a result of lower interest expense primarily due to a decrease in balances and rates for certificates of deposit amidst the declining interest rate environment, partially offset by an increase in promotional rate money market deposit balances. Noninterest income increased $3.9 million to $52.3 million in 2025 compared to $48.4 million in 2024 primarily due to an increase in treasury management service fees and loan syndication and swap fees. Provision for credit losses decreased $1.7 million to $26.7 million in 2025 compared to $28.4 million in 2024. Noninterest expense increased $1.1 million to $206.0 million in 2025, compared to $204.9 million in 2024. The increase in noninterest expense was primarily the result of an increase in salary and employee benefits of $10.1 million primarily due to an increase in headcount of C&I bankers and support personnel, higher levels of variable compensation, and an increase in medical insurance costs. Merger related expenses decreased $8.1 million to $0.5 million in 2025 compared to $8.6 million in 2024. Identifiable assets for our Banking segment increased by $0.4 billion to $7.2 billion at December 31, 2025 from $6.8 billion at December 31, 2024.

Mortgage Operations

Income before income taxes increased $8.0 million to $17.6 million in 2025, from $9.7 million in 2024. The period over period increase was primarily driven by an increase in net interest income, an increase in mortgage banking service revenues, and a decrease in provision for (benefit from) credit losses, partially offset by an increase in noninterest expense. Net interest income increased $6.3 million to $24.9 million in 2025 compared to $18.6 million in 2024. The increase in net interest income was a result of a higher average balance and higher average yield on residential real estate loans and the impact of internal funds transfer pricing. Mortgage banking service revenues increased $8.2 million to $49.6 million in 2025 compared to $41.4 million in 2024, primarily due to an increase in gain on sales driven by higher origination volume and an increase in mortgage servicing revenue driven by higher servicing portfolio balances. Total mortgage loan originations for sale were $1.4 billion in 2025, an increase of $0.3 billion from $1.1 billion in 2024. The unpaid principal balance of mortgage loans serviced for others were $6.3 billion in 2025, an increase of $0.5 billion from $5.8 billion in 2024. Provision for (benefit from) credit losses decreased $1.3 million to $(2.1) million in 2025 compared to $(0.9) million in 2024. The increase in noninterest expense was primarily the result of an increase in salary and employee benefits of $6.2

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million to $37.8 million in 2025, from $31.6 million in 2024 primarily due to higher levels of variable compensation associated with an increase in mortgage loan originations. Identifiable assets for our Mortgage Operations segment increased by $0.1 billion to $1.2 billion at December 31, 2025 from $1.1 billion at December 31, 2024.

Critical Accounting Estimates

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Our accounting and reporting estimates are in accordance with U.S. generally accepted accounting principles, or “GAAP,” and conform to general practices within the banking industry. Changes in underlying factors, estimates, assumptions or judgments could result in material changes in our consolidated financial position and/or 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 credit losses (“ACL”) and fair value measurement of MSRs 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.

The following is a description of our critical accounting estimates and an explanation of the methods and assumptions underlying their application.

Allowance for Credit Losses - Management maintains an ACL for loans based upon management’s estimate of the lifetime expected credit losses in the loan portfolio, as of the balance sheet date, excluding loans held for sale. Additionally, management maintains an ACL for held-to-maturity or available-for-sale debt securities, and other off-balance sheet credit exposures (e.g., unfunded loan commitments). For loans and unfunded loan commitments, the estimate of lifetime credit losses includes the use of quantitative models that incorporate forward-looking macroeconomic scenarios that are applied over the contractual lives of the portfolios, adjusted, as appropriate, for prepayments and permitted extension options using historical experience. For purposes of the ACL for lending commitments, such allowance is determined using the same methodology as the ACL for loans, while also taking into consideration the probability of drawdowns or funding, and whether such commitments are cancellable by us. The ACL for held-to-maturity and available-for-sale debt securities is measured using a risk-adjusted discounted cash flow approach that also considers relevant current and forward-looking economic variables and the ACL is limited to the difference between the fair value of the security and its amortized cost. Judgment is specifically applied in the determination of economic assumptions, length of the initial loss forecast period, the reversion of losses beyond the initial forecast period, usage of macroeconomic scenarios, probabilities of default, losses given default, amortization and prepayment rates, and qualitative factors, which may not be adequately captured in the loss model, as further discussed below.

The macroeconomic scenarios utilized by management include variables that have historically been key drivers of increases and decreases in credit losses. These variables include, but are not limited to, unemployment rates, housing and commercial real estate prices, gross domestic product levels, corporate bond spreads and changes in equity market prices. Management derives the economic forecasts it uses in its ACL model from Moody’s Analytics. The latter has a large team of economists, database managers and operational engineers with a history of producing monthly economic forecasts for over 25 years.

Management has currently set an initial forecast period (“reasonable and supportable period”) of four years and a reversion period of one year, utilizing a straight-line approach and reverting back to the historical macroeconomic mean. After the reversion period, a historical loss forecast period covering the remaining contractual life, adjusted for prepayments, is used based on changes in key historical economic variables during representative historical expansionary and recessionary periods. Changes in economic forecasts impact the probability of default (“PD”), loss-given default (“LGD”), and exposure at default (“EAD”) for each instrument, and therefore influence the amount of future cash flows for each instrument that management does not expect to collect.

Further, management periodically considers the need for qualitative adjustments to the ACL. Qualitative adjustments may be related to and include, but not limited to, factors such as the following: (i) management’s assessment of economic forecasts used in the model and how those forecasts align with management’s overall evaluation of current and expected economic conditions; (ii) organization specific risks such as credit concentrations, collateral specific risks, nature, and size of the portfolio and external factors that may ultimately impact credit quality, and (iii) other limitations associated with factors such as changes in underwriting and loan resolution strategies, among others. The qualitative factors applied on

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December 31, 2025, and the importance and levels of the qualitative factors applied, may change in future periods depending on the level of changes to items such as the uncertainty of economic conditions and management’s assessment of the level of credit risk within the loan portfolio as a result of such changes, compared to the amount of ACL calculated by the model. The evaluation of qualitative factors is inherently imprecise and requires significant management judgment.

The ACL can also be impacted by factors outside of management’s control, which include unanticipated changes in asset quality of the portfolio, such as deterioration in borrower delinquencies, or credit scores in our residential real estate and consumer portfolio. Further, the current fair value of collateral is utilized to assess the expected credit losses when a financial asset is considered to be collateral dependent.

Our process for determining ACL is further discussed in “Note 1- Basis of Presentation, Description of Business and Summary of Significant Accounting Policies” included in Item 8 of this Form 10-K.

Fair Value Measurement of MSRs - Our residential mortgage servicing rights are measured at fair value on a recurring basis. We estimate the fair value of our MSRs using a process that utilizes a discounted cash flow model and analysis of current market data to arrive at the estimate. The cash flow assumptions used in the model are based on numerous factors, with the key assumptions being mortgage prepayment speeds, discount rates and cost to service that management believes are consistent with the assumptions that other similar market participants use in valuing MSRs. The change of any of these key assumptions due to market conditions or other factors could materially affect the fair value of our MSRs. We also utilize a third-party consulting firm to assist us with the valuation. Because of the nature of the valuation inputs, we classify the valuation of our MSRs as Level 3 in the fair value hierarchy. See Note 4 - Mortgage Servicing Rights included in our audited consolidated financial statements included elsewhere in this report for our assumptions used in valuing the MSRs. For information concerning the hypothetical sensitivity of the key assumptions under adverse changes on our MSRs, see the table under “Noninterest Income” elsewhere in the Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report.

Results of Operations

Comparison of fiscal years 2025 and 2024

The following table sets forth our results of operations as of and for the year ended December 31,:

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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 mortgage banking services, deposit account service fees, trust and investment advisory fees and credit and debit card fees. Other factors contributing to our results of operations include our provisions for credit losses, income taxes, and noninterest expenses, such as salaries and employee benefits, occupancy and equipment, amortization of intangible assets and other operating costs.

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 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. Non-PCD loans acquired are initially recorded at fair value and the resulting discount or premium is recognized as an adjustment of the yield on the related loans.

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.

Our net interest income was $317.4 million in 2025, an increase of $20.5 million, or 6.9%, compared to 2024. Interest income on loans increased by $3.5 million in 2025, compared to 2024. Interest income on investment securities decreased by $1.0 million in 2025, compared to 2024. Interest income on cash and other assets increased $5.7 million in 2025, compared to 2024. Interest expense from total interest-bearing liabilities decreased by $12.3 million in 2025, compared to 2024.

Our net interest margin increased four basis points to 4.10% in 2025, compared to 2024. The increase in 2025, compared to the prior year, was driven by a decrease of 36 basis points in the cost of interest-bearing liabilities, partially offset by a decrease of 24 basis points in yield on earning assets.

Total average loans, including loans held-for-sale, grew to $6.6 billion in 2025, an increase of $0.2 billion, or 3.5%, compared to 2024, due to organic growth in our loan portfolios. Yield on loans decreased 17 basis points in 2025, compared to 2024, primarily due to the declining interest rate environment and its impact on variable rate loans in our loan portfolio. Average interest-bearing cash and other assets, grew to $0.6 billion in 2025, an increase of $0.2 billion. Yield on interest-bearing cash and other assets decreased 88 basis points in 2025, compared to 2024, primarily due to the declining interest rate environment.

Average interest-bearing liabilities grew to $5.4 billion in 2025, an increase of $0.2 billion, or 4.3%, compared to 2024, primarily to support the growth in our loan portfolio. Average interest-bearing deposits increased $0.4 billion, or 7.2%, in 2025, compared to 2024. Total cost of deposits decreased by 30 basis points to 2.73% in 2025, compared to 2024, primarily due to a decrease in balances and rates for certificates of deposit amidst the declining interest rate environment, partially offset by an increase in promotional rate money market deposit balances. Average FHLB borrowings decreased $117.0 million in 2025, compared to 2024. The cost of FHLB borrowings decreased by 87 basis points to 4.61% in 2025, compared to 2024.

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The following table sets 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.

As of and for the year ended December 31,:

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Rate-Volume Analysis

The table below presents 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 current 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.

Provision for Credit Losses

We established an allowance for credit losses through a provision for credit losses charged as an expense in our consolidated statements of income. The provision for credit losses is the amount of expense that, based on our judgment, is required to maintain the allowance for credit losses at an adequate level to absorb expected losses 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 credit losses and corresponding provision for credit 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 credit losses is increased by the provision for credit losses and is decreased by charge-offs, net of recoveries on prior loan charge-offs.

The provision for credit losses totaled $24.6 million in 2025, primarily due to a combination of deterioration of two customer relationships in our commercial and industrial (C&I) portfolio, impacts from net portfolio downgrades, and impacts from growth in loan portfolio balances.

Net charge-offs in 2025 were $28.3 million, or a ratio of net charge-offs to average loans of 0.43%, compared to net charge-offs of $20.4 million, or a ratio of net charge-offs to average loans of 0.32%, in 2024. Net charge-offs in 2025 were elevated primarily due to write-downs of two customer relationships in our C&I loan portfolio.

The allowance for credit losses as a percentage of total loans was 1.27% at December 31, 2025, compared to 1.38% at December 31, 2024. The ratio of nonperforming assets to total assets was 0.85% at December 31, 2025, compared to 0.92% at December 31, 2024.

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

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Noninterest Income

The following table presents noninterest income for the year ended December 31,:

Noninterest income totaled $101.9 million in 2025, an increase of $12.1 million from 2024, primarily due to increases in mortgage banking services, treasury management service fees, and other noninterest income.

Deposit account service fees include overdraft and non-sufficient funds charges, and other maintenance fees on deposit accounts. Deposit account service fees decreased $1.2 million for the year ended December 31, 2025 compared to 2024, primarily due to a decrease in overdraft and non-sufficient funds charges.

Treasury management service fees include financial information management, accounts receivable management, accounts payable services, fraud mitigation services, and cash flow management. Treasury management service fees increased $2.6 million, primarily due to growth in services provided to our business customers.

Credit and debit card fees represent interchange income from credit and debit card activity and referral fees earned from processing fees on card transactions by our business customers. Credit and debit card fees decreased $0.4 million for the year ended December 31, 2025 compared to 2024, primarily due to a decrease in 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. Trust and investment advisory fees increased $0.2 million for the year ended December 31, 2025 compared to 2024, primarily due to higher average assets under management.

The components of mortgage banking services, were as follows for the year ended December 31,:

Mortgage banking services increased $8.1 million in 2025, compared to 2024. We experienced an increase of $5.1 million in 2025, compared to 2024, in revenue related to net sale gains and fees from mortgage loan originations, including fair value changes in the held-for-sale portfolio and hedging activity primarily due to an increase in gain on sales driven by higher origination volume. We retain servicing rights on the majority of mortgage loans that we sell, which drove the increase in servicing income of $1.7 million to $18.7 million in 2025, from $17.0 million in 2024. Net MSR capitalization and changes in fair value, net of derivative activity, increased $1.3 million in 2025, compared to 2024. Revenue was higher in 2025, compared to 2024 due to an increase in net MSR capitalization of $2.3 million partially offset by a decrease in MSR fair value, net of derivative activity of $1 million. 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. See the impact of changes to our key MSR valuation assumptions in the table below.

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The following table shows the hypothetical effect on the fair value of our MSRs when applying certain unfavorable variations of key assumptions to these assets as of December 31, 2025.

These hypothetical sensitivities should be evaluated with care. The effect on fair value of an adverse change in assumptions generally cannot be determined because the relationship of the change in assumptions to the fair value may not be linear. Additionally, the impact of a variation in a particular assumption on the fair value is calculated while holding other assumptions constant. In reality, changes in one factor may lead to changes in other factors, which could impact the above hypothetical effects.

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 mortgage banking services.

Other noninterest income increased $2.8 million for the year ended December 31, 2025 compared to 2024, primarily due to an increase in loan syndication fees and swap fee income.

Noninterest Expense

The following table presents noninterest expense for the year ended December 31,:

Noninterest expenses totaled $271.8 million in 2025, an increase of $7.7 million from 2024, primarily due to an increase in salary and employee benefits due to the higher headcount of C&I bankers and support personnel, higher levels of variable compensation, including compensation associated with an increase in mortgage loan originations, and higher medical insurance costs, partially offset by a decrease in merger related expenses of $10.4 million in 2025 compared to 2024.

The efficiency ratio for 2025 was 64.82% compared to 68.28% in 2024. The adjusted efficiency ratio, a non-GAAP financial measure, in 2025 was 64.17% compared to 64.13% in 2024.

Income Taxes

We had income tax expense in 2025 of $25.0 million, compared to $19.5 million in 2024. The increase in income tax expense was primarily due to our increased income during 2025. Our effective tax rate was 20.3% in 2025, compared to 20.5% in 2024. For additional information on our income taxes, see Note 15 - Income Taxes included in our audited consolidated financial statements included elsewhere in this report.

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Financial Condition

Balance Sheet

Our total assets were $8.5 billion at December 31, 2025, compared to $8.1 billion at December 31, 2024. Our total loans held-for-investment, net of deferred fees, costs, premiums and discounts were $6.7 billion at December 31, 2025, an increase of $0.3 billion from 2024, which was due to organic growth.

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 December 31, 2025 and 2024. 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 decreased by $0.1 million to $469.0 million at December 31, 2025, compared to December 31, 2024. The decrease was primarily due to amortization of the portfolio. Securities held-to-maturity decreased $1.4 million to $33.8 million at December 31, 2025, compared to December 31, 2024, due primarily to amortization of the portfolio.

The following table is a summary of our investment portfolio as of December 31,:

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The following tables show the weighted average yield to average life of each category of investment securities as of December 31, 2025:

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 Texas, Kansas, Colorado, New Mexico, Arizona and California primarily comprised of commercial and industrial, commercial real estate, residential real estate, public finance and consumer financing 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. Our lending focus continues to be on operating companies, including commercial and industrial loans and lines-of-credit, as well as owner occupied commercial real estate loans.

Total loans, net of deferred fees, costs, premiums and discounts, as of December 31, 2025 and 2024 were $6.7 billion and $6.4 billion, respectively.

The following table sets forth the composition of our loan portfolio, as of December 31,:

Commercial and industrial loans include loans to commercial customers for use in normal business operations to finance working capital needs, equipment and inventory purchases, and other expansion projects. 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 (“CRE”) 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. Non-owner occupied CRE loans were 62.5% of the Company’s risk-based capital, or 11.1% of total loans as of December 31, 2025. Non-owner occupied CRE loans associated with office space were $48.9 million, or 0.7% of total loans as of December 31, 2025. Owner occupied CRE loans associated with office space were $215.5 million, or 3.2% of total loans as of December 31, 2025.

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.

Public finance loans include loans to our charter school and municipal based customers.

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

Other loans consist of loans to nondepository financial institutions, lease financing receivables and loans for agricultural production.

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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 December 31, 2025: