FirstSun Capital Bancorp Reports Third Quarter 2021 Results

DENVER, Oct. 28, 2021 /PRNewswire/ -- FirstSun Capital Bancorp ("FirstSun") reported net income of $8.7 million for the third quarter of 2021, compared to net income of $11.3 million in the prior quarter and $14.8 million in the third quarter of 2020. Earnings per diluted share was $0.46 for the third quarter 2021, compared to $0.60 in the prior quarter and $0.81 in the third quarter of 2020.

Mollie Carter, FirstSun's Chairman and Chief Executive Officer, commented, "We continue to build momentum in our business with strong growth in C&I loans, excluding PPP balance forgiveness, and deposits. As we continue our strategic investments in the business, most notably in the Southwest, we are pleased with the growing diversification across our regions and business lines, as well as the strength of our fee business offerings. We maintain our belief in relationship banking and strong underwriting as evidenced by our asset quality metrics, including our year-to-date annualized net charge-off ratio of six basis points."

Third Quarter 2021 Results

Net income totaled $8.7 million, or $0.46 per diluted share, during the third quarter of 2021, compared to $11.3 million, or $0.60 per diluted share, during the prior quarter. The return on average assets was 0.62% in the third quarter of 2021, compared to 0.82% in the prior quarter, and the return on average equity was 6.68% in the third quarter of 2021, compared to 8.82% in the prior quarter.

Net Interest Income and Net Interest Margin

Net interest income totaled $40.0 million during the third quarter of 2021, an increase of $3.6 million compared to the prior quarter. Our net interest margin improved 20 basis points to 3.01% compared to the prior quarter. Results in the third quarter of 2021, compared to the prior quarter, were driven by an increase in average earning assets of $134.9 million, an increase of 16 basis points in yield on earning assets and a decrease of four basis points in the cost of interest bearing liabilities. Average loans grew by $43.4 million, investment securities grew by $8.6 million and interest bearing cash balances grew by $94.4 million in the third quarter of 2021, compared to the prior quarter. Loan yield increased by 29 basis points in the third quarter of 2021, compared to the prior quarter, due to a combination of an improving loan mix, fees from loan prepayments and a decline of $23.4 million in average PPP loan balances, net of deferred fees. Our total cost of deposits decreased by four basis points to 0.24% in the third quarter of 2021, compared to the prior quarter.

Asset Quality and Provision for Loan Losses

The provision for loan losses totaled $3.5 million during the third quarter of 2021, an increase of $4.9 million compared to the prior quarter. Net recoveries during the third quarter of 2021 were $1.4 million, or a ratio of net charge-offs (recoveries) to average loans of (0.15)% annualized, compared to net charge-offs of $2.8 million, or a ratio of net charge-offs to average loans of 0.30% annualized, in the prior quarter. The year to date annualized net charge-off ratio through the third quarter of 2021 was 0.06%. The allowance for loan losses as a percentage of total loans totaled 1.26% at September 30, 2021, compared to 1.13% at June 30, 2021. The allowance for loan losses as a percentage of total loans, excluding PPP loans, a non-GAAP financial measure, totaled 1.30% at September 30, 2021, compared to 1.20% at June 30, 2021. The ratio of nonperforming assets to total assets was 0.63% at September 30, 2021, compared to 0.85% at June 30, 2021.

Noninterest Income

Noninterest income totaled $28.7 million during the third quarter of 2021, a decrease of $3.6 million from the prior quarter, primarily driven by lower mortgage banking income. Service charges on deposits increased $0.8 million during the third quarter of 2021 from the prior quarter, due to increases in both commercial and consumer deposit fees. Mortgage banking income decreased $2.8 million during the third quarter of 2021 from the prior quarter, due primarily to a decline in loan origination volume and mortgage servicing asset and hedging valuation impacts. Total mortgage loan originations declined by $83.9 million, or 13.6%, in the third quarter of 2021 from the prior quarter, with mortgage loan refinance volumes declining by $80.5 million. Noninterest income as a percentage of total revenue totaled 41.8% in the third quarter of 2021, compared to 47.0% in the prior quarter.

Noninterest Expense

Noninterest expense totaled $54.6 million during the third quarter of 2021, a decrease of $2.1 million from the prior quarter, primarily driven by lower salaries and benefits expense in both our banking and mortgage banking segments. Noninterest expenses for the third quarter of 2021 also included $0.7 million in merger expenses related to the pending transaction with Pioneer Bancshares, Inc., compared to $1.3 million in the prior quarter. Merger expenses reduced diluted earnings per share by $0.04 for the third quarter compared to an impact of $0.06 in the prior quarter. 

Tax Rate

The effective tax rate was 17.5% compared to 16.2% in the prior quarter.

Loans

Total loans were $3.8 billion at both September 30, 2021 and June 30, 2021. Excluding PPP loan balances, loans grew $99.0 million in the third quarter of 2021, or 11.0% on an annualized basis from the prior quarter, resulting primarily from growth in commercial and industrial balances.

Deposits

Average deposits increased $142.2 million in the third quarter of 2021, or 12.3% on an annualized basis, to $4.8 billion, compared to the prior quarter, with growth in both business and consumer deposits. Noninterest bearing deposit accounts represented 32.5% of total deposits at September 30, 2021 and the loan to deposit ratio was 80.8% at September 30, 2021.

Capital

Capital ratios remain strong and above "well capitalized" thresholds. As of September 30, 2021, the common equity tier 1 risk based capital ratio was 10.32%, the total risk based capital ratio was 12.55% and tier 1 leverage ratio was 8.19%. Book value per common share was $28.38 at September 30, 2021, an increase of $0.51 from June 30, 2021.  Tangible book value per common share, a non-GAAP financial measure, was $26.10 at September 30, 2021, an increase of $0.53 from June 30, 2021.

Non-GAAP Financial Measures

This press release contains financial information and performance measures determined by methods other than in accordance with principles generally accepted in the United States ("GAAP").  FirstSun management uses these non-GAAP financial measures in their analysis of FirstSun's performance and the efficiency of its operations. Management believes these non-GAAP measures provide a greater understanding of ongoing operations, enhance comparability of results with prior periods and demonstrate the effects of significant items in the current period. FirstSun believes a meaningful analysis of its financial performance requires an understanding of the factors underlying that performance. FirstSun management believes investors may find these non-GAAP financial measures useful. These disclosures should not be viewed as a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Below is a listing of the types of non-GAAP measures used in this press release:

• Tangible stockholders' equity
• Tangible assets
• Tangible stockholders' equity to tangible assets
• Tangible book value per common share
• Total loans, excluding PPP loans
• Allowance for loan losses to total loans outstanding, excluding PPP loans
• Fully tax equivalent (FTE) net interest income
• Net interest margin on an FTE basis

The tables within the "Non-GAAP Financial Measures and Reconciliations" section provide a reconciliation of each non-GAAP financial measure to the most comparable GAAP equivalent.   

About FirstSun Capital Bancorp

FirstSun Capital Bancorp, headquartered in Denver, Colorado, is the financial holding company for Sunflower Bank, N.A., which operates as Sunflower Bank, First National 1870 and Guardian Mortgage. Sunflower Bank provides a full range of relationship-focused services to meet personal, business and wealth management financial objectives, with a branch network in five states and mortgage capabilities in 43 states. FirstSun had total consolidated assets of $5.7 billion as of September 30, 2021.

First National 1870 and Guardian Mortgage are divisions of Sunflower Bank, N.A. To learn more, visit SunflowerBank.com, FirstNational1870.com or GuardianMortgageOnline.com.

Cautionary Note Regarding Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the financial condition, results of operations, business plans and the future performance of FirstSun. Words such as "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "plans," "projects," "may," "will," "should," "would," "could" and other similar expressions are intended to identify these forward-looking statements.  Forward-looking statements are not based on historical facts but instead represent management's expectations and assumptions regarding FirstSun's business, the economy and other future conditions. Such statements involve inherent uncertainties, risks and changes in circumstances that are difficult to predict. As such, FirstSun's actual results may differ materially from those contemplated by forward-looking statements. While there can be no assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those contemplated by forward-looking statements include the following, without limitation, as well as the risks and uncertainties more fully discussed under the "Risk Factors" section in our proxy statement/prospectus dated August 10, 2021 that we filed with the SEC pursuant to Securities Act Rule 424(b)(3) in connection with our proposed merger with Pioneer Bancshares, Inc. on August 12, 2021 and in FirstSun's subsequent filings with the Securities and Exchange Commission:

• the failure to obtain necessary regulatory approvals for the merger (the "merger") of Pioneer Bancshares, Inc. ("Pioneer") with and into 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 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 continuing impact of COVID-19 and its variants on FirstSun's 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 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;
• the inability to sustain revenue and earnings growth;
• the inability to efficiently manage operating expenses; and
• adverse changes in asset quality and credit risk.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Except to the extent required by applicable law or regulation, FirstSun undertakes no obligation to revise or update any forward-looking statements.