Firstsun Capital Bancorp (FSUN) risk factors, FY2024 10-K

Risks Related to Our Business

1. 01Economic and Geographic-Related Risks
2. 02Inflationary pressures present a potential threat to our results of operation and financial condition
3. 03Our trust and wealth management business may be negatively impacted by changes in economic and market conditions and clients may seek legal remedies for investment performance
4. 04Monetary policies and regulations of the Federal Reserve could adversely affect our business, financial condition and results of operations
5. 05If we fail to effectively manage credit risk, our business and financial condition will suffer
6. 06Our allowance for credit losses in our loan portfolio may prove to be inadequate, which may adversely affect our business, financial condition and results of operations
7. 07We are exposed to higher credit risk by commercial and industrial and commercial real estate lending
8. 08These types of loans are more susceptible to a risk of loss during a downturn in the business cycle. Our underwriting, review, and monitoring cannot eliminate all of the risks related to these loans
9. 09A significant portion of our loan portfolio is secured by real estate, and events that negatively impact the real estate market could hurt our business
10. 10Nonperforming assets take significant time and resources to resolve and adversely affect our results of operations and financial condition
11. 11We are subject to interest rate risk, which could adversely affect our financial condition and profitability
12. 12Our cost of funds may increase as a result of general economic conditions, FDIC insurance assessments, interest rates and competitive pressures
13. 13Rapidly rising interest rates will impact the value of our investment securities and the cost of our funding sources, including deposits
14. 14Our mortgage revenue is cyclical and is sensitive to the level of interest rates, changes in economic conditions, decreased economic activity, and slowdowns in the housing market
15. 15We are subject to certain risks related to originating and selling mortgage loans that could have a material adverse effect on our financial condition and results of operations
16. 16In a period of rising or high-interest rates, we expect our mortgage revenue to decrease due to decreased residential mortgage origination volume and pricing decisions of competitors may adversely affect our profitability
17. 17We depend on U.S. government-sponsored entities and government agencies, and any changes in these entities, their current roles or the leadership at such entities or their regulators could materially and adversely affect our business, financial condition, liquidity and results of operations
18. 18We may be required to repurchase mortgage loans or indemnify buyers against losses in some circumstances, which could harm our liquidity, results of operations and financial condition

Operational Risks

1. 19We are subject to losses due to errors, omissions or fraudulent behavior by our employees, clients, counterparties or other third parties
2. 20Fraud is a major, and increasing, operational risk for us and all banks
3. 21Our ability to conduct and grow our businesses is dependent in part upon our ability to create, maintain, expand, and evolve an appropriate operational and organizational infrastructure, manage expenses, and recruit and retain personnel with the ability to manage a complex business
4. 22We are exposed to the possibility of technology failure and a disruption in our operations may adversely affect our business
5. 23earthquakes, tornadoes, and hurricanes; disease pandemics (such as the COVID-19 pandemic); events arising from local or larger scale political or social matters, including terrorist acts; and cyber-attacks
6. 24Our risk management framework may not be effective in mitigating risks and/or losses
7. 25We are a community bank and our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance
8. 26We depend on our executive officers and other key employees, and our ability to attract additional key personnel, to continue the implementation of our long-term business strategy, and we could be harmed by the unexpected loss of their services
9. 27We are subject to environmental and climate change risks

Industry-Related Risks

1. 28We are exposed to the possibility that more prepayments may be made by customers to pay down loan balances, which could reduce our interest income and profitability
2. 29We could experience a loss due to competition with other financial institutions
3. 30Consumers may decide not to use banks to complete their financial transactions
4. 31Failure to keep pace with technological change could adversely affect our business
5. 32Through technological innovations and changes in client habits, the manner in which clients use financial services continues to change at a rapid pace
6. 33The nature of technology-driven disruption to our industry is changing, in some cases seeking to displace traditional financial service providers rather than merely enhance traditional services or their delivery
7. 34We may be adversely affected by the lack of soundness of other financial institutions
8. 35Adverse developments affecting the financial services industry, such as recent bank failures or concerns involving liquidity, may have a material adverse effect on our operations
9. 36The value of securities in our investment portfolio may decline in the future
10. 37Our deposit insurance premiums could be higher in the future, which could have an adverse effect on our future earnings
11. 38We may be exposed to a need for additional capital resources in the future and these capital resources may not be available when needed or at all
12. 39Liquidity, primarily through deposits, is essential to our business model and a lack of liquidity, or an increase in the cost of liquidity could materially impair our ability to fund our operations and jeopardize our results of operation, financial condition and cash flows
13. 40conditions, adverse trends or events affecting business industry groups or specific businesses, declines in real estate values or markets, business closings or lay-offs, inclement weather, natural disasters and other factors. Furthermore, loans generally are not readily convertible to cash
14. 41We may not be able to maintain a strong core deposit base or access other low-cost funding sources
15. 42Deposits traditionally have provided our most affordable funds and by far the largest portion of funding. However, deposit trends can shift with economic conditions

Risks Related to Strategic Plans

1. 43We may be adversely affected by risks associated with mergers and acquisitions, including execution risk, which could disrupt our business and dilute stockholder value
2. 44Our merger and acquisition activities could be material and could require us to issue a significant number of shares of our common stock or other securities and/or to use a substantial amount of cash, other liquid assets, and/or incur debt
3. 45If we do not successfully manage these risks, our merger and acquisition activities could have a material adverse effect on our business, financial condition, and results of operations, including short-term and long‑term liquidity, our ability to successfully implement our strategic plan and our stock price
4. 46Future mergers and acquisitions may be delayed, impeded, not approved or prohibited due to regulatory issues
5. 47Additional growth will subject FirstSun to additional regulation, increased supervision and increased costs
6. 48Failure to achieve one or more key elements needed for successful organic growth could adversely affect our business and earnings
7. 49New lines of business or new products and services may subject us to additional risk

Legal, Accounting, Tax, Regulatory and Compliance Risks

1. 50The banking industry is heavily regulated and that regulation could limit or restrict our activities and adversely affect our operations or financial results
2. 51From time to time, we are, or may become, involved in suits, legal proceedings, information-gatherings, reviews, investigations and proceedings by governmental and self-regulatory agencies that may lead to material adverse consequences
3. 52Failure to maintain certain regulatory capital levels and ratios could result in regulatory actions that would be materially adverse to our shareholders
4. 53We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations
5. 54Federal, state and local consumer lending laws restrict our ability to originate certain mortgage loans and increase our risk of liability with respect to such loans and increase our cost of doing business
6. 55We are subject to federal and state fair lending laws, and failure to comply with these laws could lead to material penalties and materially restrict our organic growth and strategic growth and expansion activity
7. 56The Federal Reserve may require us to commit capital resources to support Sunflower Bank
8. 57We could become subject to claims and litigation pertaining to our fiduciary responsibility
9. 58We are party to various claims and lawsuits incidental to our business. Litigation is subject to many uncertainties such that the expenses and ultimate exposure with respect to many of these matters cannot be ascertained
10. 59The expanding body of federal, state and local regulations and/or the licensing of loan servicing, collections or other aspects of our business and our sales of loans to third parties may increase the cost of compliance and the risks of noncompliance and subject us to litigation
11. 60We face risks related to the adoption of future legislation and potential changes in federal regulatory agency leadership, policies, and priorities
12. 61and regulations, as well as the interpretation and implementation of such laws and regulations, could affect us in substantial and unpredictable ways, including those listed above or other ways that could have a material adverse effect on our business, financial condition or results of operations
13. 62Data privacy is a major political concern. The laws governing it are new, and they are likely to evolve and expand
14. 63The preparation of our consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make significant assumptions, estimates and judgments that affect the financial statements
15. 64We could be subject to changes in tax laws, regulations and interpretations or challenges to our income tax provision
16. 65Our internal controls and procedures may fail or be circumvented

Risks Related to FirstSun Common Stock and Market Risk

1. 66The trading volumes in our common stock, may not provide adequate liquidity for investors
2. 67The trading price of our common stock may be subject to continued significant fluctuations and volatility
3. 68Certain of the larger stockholders of FirstSun own, in the aggregate, approximately 67.4% of our common stock. As a result, our larger stockholders exercise significant influence over FirstSun through such ownership
4. 69of additional capital stock, the incurrence of additional indebtedness, mergers and acquisitions, the decision of whether or not to declare dividends and other extraordinary corporate matters
5. 70Some provisions of our organizational documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders
6. 71We do not intend to pay dividends for the foreseeable future
7. 72An investment in FirstSun common stock is not an insured deposit and is subject to risk of loss
8. 73We are an “emerging growth company,” and the reduced reporting requirements applicable to emerging growth companies may make our common stock less attractive to investors
9. 74We may issue additional shares of stock or equity derivative securities that may dilute the percentage ownership of existing stockholders and the book value per share of our common stock, which may cause the price of our common stock to decline and adversely affect the terms on which we may obtain additional capital
10. 75We are authorized to issue up to 50,000,000 shares of our common stock, and to issue up to 10,000,000 shares of preferred stock, without further stockholder approval. As of March 6, 2024, FirstSun had 27,753,918 shares of common stock outstanding, and no shares of preferred stock outstanding
11. 76Sales by FirstSun stockholders of substantial amounts of our common stock, as well as the anticipation of such sales by the public markets, could depress the market price of our common stock
12. 77Natural disasters and weather-related events exacerbated by climate change could have a negative impact on our results of operations and financial condition
13. 78The markets in which we operate also are exposed to the adverse impacts of climate change, as well as uncertainties related to the transition to a low-carbon economy. Climate change presents both immediate and long-term risks to us and our customers and clients, with the risks expected to increase over time