Firstsun Capital Bancorp

11/09/2026 | Press release | Distributed by Public on 11/09/2026 16:15

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
General Overview
FirstSun Capital Bancorp, headquartered in Greenwood Village, Colorado, a suburb of Denver, 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 September 30, 2026, consisted of Sunflower Bank, FEIF Capital Partners, LLC, and FirstSun Advisors, an SEC-registered investment adviser. 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.
Recent Developments
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, and we successfully completed the core system conversion of First Foundation in late September. 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 expanded our wealth management capabilities through the acquisition of FirstSun Advisors (formerly First Foundation Advisors), an SEC-registered investment adviser under the Investment Advisers Act and a former wholly owned subsidiary of First Foundation.
First Foundation and its results of operations are included in our consolidated financial results since the date of acquisition. Therefore, our third quarter and first nine months of 2026 results reflect increased levels of average balances, net interest income, non-interest income and expenses compared to the third quarter and first nine months of 2025.
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.
Financial Summary
Net income totaled $38.4 million in the third quarter of 2026 compared to net income of $23.2 million in the third quarter of 2025. Earnings per diluted share were $0.82 in both the third quarter of 2026 and 2025. Adjusted net income, a non-GAAP financial measure, was $48.2 million or $1.03 per diluted share in the third quarter of 2026 compared to $23.4 million or $0.83 per diluted share in the third quarter of 2025. See "Non-GAAP Financial Measures and Reconciliations" below.
Net income totaled $37.1 million in the nine months ended September 30, 2026 compared to net income of $73.1 million in the same period in 2025. Earnings per diluted share were $0.91 in the nine months ended September 30, 2026 compared to $2.59 in the same period in 2025. Adjusted net income, a non-GAAP financial measure, was $92.9 million or $2.27 per diluted share in the nine months ended September 30, 2026 compared to $73.7 million or $2.61 per diluted share in the same period in 2025. See "Non-GAAP Financial Measures and Reconciliations" below.
The following table sets forth certain summary financial and other information of FirstSun:
As of and for the three months ended
As of and for the nine months ended
($ in thousands, except per share amounts) September 30,
2026 		September 30,
2025 		September 30,
2026 		September 30,
2025
Income Statement:
Net interest income $ 140,301 $ 80,953 $ 366,275 $ 233,930
Provision for credit losses 4,400 10,100 53,050 18,400
Noninterest income 39,382 26,333 107,505 75,135
Noninterest expense 126,553 68,901 373,606 199,733
Income before income taxes 48,730 28,285 47,124 90,932
Provision for income taxes 10,348 5,111 10,009 17,803
Net income 38,382 23,174 37,115 73,129
Adjusted net income1
48,212 23,412 92,906 73,655
Balance Sheet:
Total assets $ 15,276,885 $ 8,495,437 $ 15,276,885 $ 8,495,437
Loans held-for-sale 120,491 85,250 120,491 85,250
Loans held-for-investment 11,457,891 6,681,629 11,457,891 6,681,629
Total deposits 12,970,958 7,105,415 12,970,958 7,105,415
Total borrowed funds 206,222 76,163 206,222 76,163
Total stockholders' equity 1,810,506 1,127,513 1,810,506 1,127,513
Per Common Share Data:
Period end common shares outstanding 45,552,676 27,854,764 45,552,676 27,854,764
Weighted average common shares outstanding, basic 46,304,015 27,801,255 40,343,797 27,769,320
Basic earnings per share $ 0.83 $ 0.83 $ 0.92 $ 2.63
Weighted average common shares outstanding, diluted 46,871,679 28,291,778 40,901,707 28,274,134
Diluted earnings per share $ 0.82 $ 0.82 $ 0.91 $ 2.59
Adjusted diluted earnings per share1
1.03 0.83 2.27 2.61
Cash dividends $ - $ - $ - $ -
Dividend payout ratio - % - % - % - %
Book value per share $ 39.75 $ 40.48 $ 39.75 $ 40.48
Tangible book value per share1
35.60 36.92 35.60 36.92
Performance Ratios:
Return on average total assets 0.98 % 1.09 % 0.36 % 1.19 %
Adjusted return on average total assets1
1.23 % 1.10 % 0.91 % 1.20 %
Return on average stockholders' equity 8.23 % 8.22 % 3.04 % 8.99 %
Adjusted return on average stockholders' equity1
10.33 % 8.31 % 7.61 % 9.05 %
Return on average tangible stockholders' equity1
9.97 % 9.20 % 4.02 % 10.08 %
Adjusted return on average tangible stockholders' equity1
12.32 % 9.30 % 9.10 % 10.16 %
Net interest margin 3.82 % 4.07 % 3.81 % 4.07 %
Net interest margin (FTE basis)1
3.87 % 4.12 % 3.86 % 4.13 %
Efficiency ratio 70.43 % 64.22 % 78.86 % 64.62 %
Adjusted efficiency ratio1
63.06 % 64.00 % 63.35 % 64.45 %
Noninterest income to total revenue2
21.9 % 24.5 % 22.7 % 24.3 %
Balance Sheet Ratios:
Loan to deposit ratio 88.3 % 94.0 % 88.3 % 94.0 %
Net charge-offs to average loans outstanding 0.11 % 0.55 % 0.75 % 0.48 %
Allowance for credit losses to loans 1.52 % 1.26 % 1.52 % 1.26 %
Nonperforming loans to total loans3
1.77 % 1.04 % 1.77 % 1.04 %
Capital Ratios:
Total risk-based capital to risk-weighted assets 14.29 % 15.81 % 14.29 % 15.81 %
Tier 1 risk-based capital to risk-weighted assets 11.99 % 13.79 % 11.99 % 13.79 %
Common Equity Tier 1 (CET 1) to risk-weighted assets 11.99 % 13.79 % 11.99 % 13.79 %
Tier 1 leverage capital to average assets 10.33 % 12.44 % 10.33 % 12.44 %
Average stockholders' equity to average total assets 11.92 % 13.27 % 11.93 % 13.23 %
Tangible stockholders' equity to tangible assets1
10.75 % 12.25 % 10.75 % 12.25 %
Tangible stockholders' equity to tangible assets reflecting net unrealized losses on HTM securities, net of tax1
10.72 % 12.21 % 10.72 % 12.21 %
Nonfinancial Data:
Full-time equivalent employees 1,587 1,179 1,587 1,179
Banking branches 99 71 99 71
1 See section entitled "Non-GAAP Financial Measures and Reconciliations" for information regarding these non-GAAP financial measures and a reconciliation to the most comparable GAAP equivalent.
2 Total revenue is net interest income plus noninterest income.
3 Nonperforming loans include nonaccrual loans and accrual loans greater than 90 days past due.
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, and assist in analyzing our operating results and comparing them across periods and to those of other companies. 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 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 presented by other companies.
The following table presents GAAP to non-GAAP reconciliations:
As of and for the three months ended
As of and for the nine months ended
($ in thousands, except share and per share amounts) September 30,
2026 		September 30,
2025 		September 30,
2026 		September 30,
2025
Tangible stockholders' equity to tangible assets:
Total stockholders' equity (GAAP) $ 1,810,506 $ 1,127,513 $ 1,810,506 $ 1,127,513
Less: Goodwill and other intangible assets
Goodwill (102,536) (93,483) (102,536) (93,483)
Other intangible assets (86,215) (5,650) (86,215) (5,650)
Tangible stockholders' equity (non-GAAP) $ 1,621,755 $ 1,028,380 $ 1,621,755 $ 1,028,380
Total assets (GAAP) $ 15,276,885 $ 8,495,437 $ 15,276,885 $ 8,495,437
Less: Goodwill and other intangible assets
Goodwill (102,536) (93,483) (102,536) (93,483)
Other intangible assets (86,215) (5,650) (86,215) (5,650)
Tangible assets (non-GAAP) $ 15,088,134 $ 8,396,304 $ 15,088,134 $ 8,396,304
Total stockholders' equity to total assets (GAAP) 11.85 % 13.27 % 11.85 % 13.27 %
Less: Impact of goodwill and other intangible assets (1.10) % (1.02) % (1.10) % (1.02) %
Tangible stockholders' equity to tangible assets (non-GAAP) 10.75 % 12.25 % 10.75 % 12.25 %
Tangible stockholders' equity to tangible assets, reflecting net unrealized losses on HTM securities, net of tax:
Tangible stockholders' equity (non-GAAP) $ 1,621,755 $ 1,028,380 $ 1,621,755 $ 1,028,380
Less: Net unrealized losses on HTM securities, net of tax (4,315) (3,432) (4,315) (3,432)
Tangible stockholders' equity less net unrealized losses on HTM securities, net of tax (non-GAAP) $ 1,617,440 $ 1,024,948 $ 1,617,440 $ 1,024,948
Tangible assets (non-GAAP) $ 15,088,134 $ 8,396,304 $ 15,088,134 $ 8,396,304
Less: Net unrealized losses on HTM securities, net of tax (4,315) (3,432) (4,315) (3,432)
Tangible assets less net unrealized losses on HTM securities, net of tax (non-GAAP) $ 15,083,819 $ 8,392,872 $ 15,083,819 $ 8,392,872
Tangible stockholders' equity to tangible assets (non-GAAP) 10.75 % 12.25 % 10.75 % 12.25 %
Less: Net unrealized losses on HTM securities, net of tax (0.03) % (0.04) % (0.03) % (0.04) %
Tangible stockholders' equity to tangible assets reflecting net unrealized losses on HTM securities, net of tax (non-GAAP) 10.72 % 12.21 % 10.72 % 12.21 %
Tangible book value per share:
Total stockholders' equity (GAAP) $ 1,810,506 $ 1,127,513 $ 1,810,506 $ 1,127,513
Tangible stockholders' equity (non-GAAP) $ 1,621,755 $ 1,028,380 $ 1,621,755 $ 1,028,380
Total shares outstanding 45,552,676 27,854,764 45,552,676 27,854,764
Book value per share (GAAP) $ 39.75 $ 40.48 $ 39.75 $ 40.48
Tangible book value per share (non-GAAP) $ 35.60 $ 36.92 $ 35.60 $ 36.92
As of and for the three months ended
As of and for the nine months ended
($ in thousands, except share and per share amounts) September 30,
2026 		September 30,
2025 		September 30,
2026 		September 30,
2025
Adjusted net income:
Net income (GAAP) $ 38,382 $ 23,174 $ 37,115 $ 73,129
Add: Adjustments
Merger related expenses, net of tax 9,830 238 55,791 526
Total adjustments, net of tax 9,830 238 55,791 526
Adjusted net income (non-GAAP) $ 48,212 $ 23,412 $ 92,906 $ 73,655
Adjusted diluted earnings per share:
Diluted earnings per share (GAAP) $ 0.82 $ 0.82 $ 0.91 $ 2.59
Add: Impact of adjustments
Merger related expenses, net of tax 0.21 0.01 1.36 0.02
Adjusted diluted earnings per share (non-GAAP) $ 1.03 $ 0.83 $ 2.27 $ 2.61
Adjusted return on average total assets:
Return on average total assets (ROAA) (GAAP) 0.98 % 1.09 % 0.36 % 1.19 %
Add: Impact of adjustments
Merger related expenses, net of tax 0.25 % 0.01 % 0.55 % 0.01 %
Adjusted ROAA (non-GAAP) 1.23 % 1.10 % 0.91 % 1.20 %
Adjusted return on average stockholders' equity:
Return on average stockholders' equity (ROAE) (GAAP) 8.23 % 8.22 % 3.04 % 8.99 %
Add: Impact of adjustments
Merger related expenses, net of tax 2.10 % 0.09 % 4.57 % 0.06 %
Adjusted ROAE (non-GAAP) 10.33 % 8.31 % 7.61 % 9.05 %
Tangible net income
Net Income (GAAP) $ 38,382 $ 23,174 $ 37,115 $ 73,129
Add: Intangible amortization, net of tax 3,348 457 7,096 1,409
Tangible net income (non-GAAP) $ 41,730 $ 23,631 $ 44,211 $ 74,538
Return on average tangible stockholders' equity:
Return on average stockholders' equity (ROAE) (GAAP) 8.23 % 8.22 % 3.04 % 8.99 %
Add: Impact of excluding average goodwill and other intangible assets, inclusive of after-tax intangible amortization
Goodwill 0.94 % 0.81 % 0.34 % 0.90 %
Other intangible assets 0.80 % 0.17 % 0.64 % 0.19 %
Return on average tangible stockholders' equity (ROATE) (non-GAAP) 9.97 % 9.20 % 4.02 % 10.08 %
Adjusted return on average tangible stockholders' equity:
Return on average tangible stockholders' equity (ROATE) (non-GAAP) 9.97 % 9.20 % 4.02 % 10.08 %
Add: Impact of adjustments
Merger related expenses, net of tax 2.35 % 0.10 % 5.08 % 0.08 %
Adjusted ROATE (non-GAAP) 12.32 % 9.30 % 9.10 % 10.16 %
Adjusted total noninterest expense:
Total noninterest expense (GAAP) $ 126,553 $ 68,901 $ 373,606 $ 199,733
Less: Adjustments
Merger related expenses (13,246) (241) (73,486) (526)
Total adjustments (13,246) (241) (73,486) (526)
Adjusted total noninterest expense (non-GAAP) $ 113,307 $ 68,660 $ 300,120 $ 199,207
Adjusted efficiency ratio:
Efficiency ratio (GAAP) 70.43 % 64.22 % 78.86 % 64.62 %
Less: Impact of adjustments
Merger related expenses (7.37) % (0.22) % (15.51) % (0.17) %
Adjusted efficiency ratio (non-GAAP) 63.06 % 64.00 % 63.35 % 64.45 %
As of and for the three months ended
As of and for the nine months ended
($ in thousands, except share and per share amounts) September 30,
2026 		September 30,
2025 		September 30,
2026 		September 30,
2025
Fully tax equivalent ("FTE") net interest income and net interest margin:
Net interest income (GAAP) $ 140,301 $ 80,953 $ 366,275 $ 233,930
Gross income effect of tax exempt income 1,904 1,225 5,300 3,621
FTE net interest income (non-GAAP) $ 142,205 $ 82,178 $ 371,575 $ 237,551
Average earning assets $ 14,578,482 $ 7,888,042 $ 12,861,466 $ 7,681,360
Net interest margin 3.82 % 4.07 % 3.81 % 4.07 %
Net interest margin on FTE basis (non-GAAP) 3.87 % 4.12 % 3.86 % 4.13 %
Segments
Effective April 1, 2026, we revised our segment reporting structure to better reflect how the CODM evaluates the performance and allocates resources across the business following our acquisition of First Foundation. Historically, the Company had two primary operating segments: Banking and Mortgage Operations. Corporate represents costs not allocated to the operating segments, including those of FirstSun and our non-bank subsidiaries.
Beginning April 1, 2026, we added a third primary operating segment, Private Wealth Banking. This new segment reflects FirstSun Advisors (formerly First Foundation Advisors), an SEC-registered investment adviser acquired as part of the First Foundation acquisition. As a result, we now have three primary operating segments: Banking, Private Wealth Banking and Mortgage Operations, and we will continue to report Corporate, which represents costs not allocated to the operating segments, including those of FirstSun and our non-bank subsidiaries. The results discussed below reflect the updated segment structure for all current-period activity. Prior-period segment information has been recast, where applicable, to conform to the current presentation. The change in reportable segments did not impact our consolidated financial statements for prior periods other than reclassifications to conform prior period segment information to the current presentation.
Banking
Three months ended September 30, 2026 and 2025
Income before income taxes increased $27.9 million to $53.6 million for the third quarter of 2026, from $25.7 million for the same period in 2025. The period-over-period increase was primarily due to an increase in net interest income, partially offset by an increase in noninterest expense. Net interest income increased $60.9 million to $134.4 million for the third quarter of 2026, compared to $73.5 million for the same period in 2025, primarily due to the addition of interest-earning assets and interest-bearing liabilities acquired in the First Foundation acquisition and related purchase accounting accretion. Noninterest expense increased $44.2 million to $92.8 million for the third quarter of 2026, from $48.6 million for the same period in 2025. Salary and employee benefits, a component of noninterest expense, increased $10.3 million to $42.6 million for the third quarter of 2026, from $32.3 million for the same period in 2025, primarily due to an increase in headcount associated with the acquisition of First Foundation. Merger related expenses, a component of noninterest expense, increased $11.9 million to $12.0 million for the third quarter of 2026, compared to $0.1 million for the same period in 2025, related to the First Foundation acquisition. Identifiable assets for our Banking segment increased $6.7 billion to $13.7 billion at September 30, 2026 from $7.1 billion at September 30, 2025. The growth in identifiable assets was primarily driven by our acquisition of First Foundation.
Nine months ended September 30, 2026 and 2025
Income before income taxes decreased $17.9 million to $68.6 million for the nine months ended September 30, 2026, from $86.4 million for the same period in 2025. The period-over-period decrease was primarily due to an increase in provision for credit losses, an increase in salary and employee benefits expense, and an increase in merger related expenses, partially offset by an increase in net interest income. Provision for credit losses increased $34.0 million to $53.1 million for the nine months ended September 30, 2026, compared to $19.1 million for the same period in 2025, primarily related to increased net charge-offs on two commercial and industrial ("C&I") loans with no previous specific reserves. Salary and employee benefits expense increased $28.8 million to $121.2 million for the nine months ended September 30, 2026, compared to $92.4 million for the same period in 2025, primarily due to higher headcount from the acquisition of First Foundation, the addition of C&I bankers and support personnel, and higher medical insurance costs. Merger related expenses increased $54.9 million to $55.2 million for the nine months ended September 30, 2026, compared to $0.4 million for the same
period in 2025, related to the First Foundation acquisition. Net interest income increased $132.9 million to $345.8 million for the nine months ended September 30, 2026 compared to $212.9 million for the same period in 2025, primarily due to the addition of interest-earning assets and interest-bearing liabilities acquired in the First Foundation acquisition and related purchase accounting accretion.
Private Wealth Banking
Three months ended September 30, 2026 and 2025
Income before income taxes increased $0.2 million to $0.2 million for the third quarter of 2026, compared to a loss before income taxes of $0.1 million for the same period in 2025. The period-over-period increase was primarily due to an increase in trust and investment advisory fees, partially offset by an increase in noninterest expense. Trust and investment advisory fees increased $8.5 million to $10.0 million for the third quarter of 2026, compared to $1.5 million for the same period in 2025, primarily due to the addition of FirstSun Advisors (formerly First Foundation Advisors) following the acquisition of First Foundation. Noninterest expense increased $7.6 million to $11.8 million for the third quarter of 2026, from $4.2 million for the same period in 2025. Salary and benefits, a component of noninterest expense, increased $5.4 million to $7.6 million for the third quarter of 2026, from $2.2 million for the same period in 2025, primarily due to an increase in headcount associated with the acquisition of First Foundation. Additionally, amortization of intangible assets increased $0.5 million for the third quarter of 2026 compared to the same period in 2025. Identifiable assets for our Private Wealth Banking segment increased $31.7 million to $124.7 million at September 30, 2026 from $92.9 million at September 30, 2025. The growth in identifiable assets was primarily driven by the acquisition of First Foundation.
Nine months ended September 30, 2026 and 2025
Loss before income taxes increased $1.7 million to a loss of $2.1 million for the nine months ended September 30, 2026, compared to a loss of $0.4 million for the same period in 2025. The period-over-period increase in loss was primarily due to an increase in noninterest expense, partially offset by an increase in trust and investment advisory fees. Noninterest expense increased $17.3 million to $29.3 million for the nine months ended September 30, 2026, from $12.0 million for the same period in 2025. Salary and benefits, a component of noninterest expense, increased $11.6 million to $17.8 million for the nine months ended September 30, 2026, from $6.2 million for the same period in 2025, primarily due to an increase in headcount associated with the acquisition of First Foundation. Additionally, amortization of intangible assets and merger related expenses, increased $1.2 million and $0.7 million, respectfully, for the nine months ended September 30, 2026 compared to the same period in 2025. Trust and investment advisory fees increased $16.6 million to $21.0 million for the nine months ended September 30, 2026, compared to $4.4 million for the same period in 2025, primarily due to the addition of FirstSun Advisors (formerly First Foundation Advisors) following the acquisition of First Foundation.
Mortgage Operations
Three months ended September 30, 2026 and 2025
Income before income taxes decreased $3.8 million to $1.5 million for the third quarter of 2026, compared to $5.3 million for the same period in 2025. The period-over-period decrease was primarily due to an increase in salary and employee benefits, an increase in provision for credit losses, and an increase in other noninterest expenses, partially offset by an increase in net interest income. Salary and employee benefits increased $2.1 million to $11.9 million for the third quarter of 2026, compared to $9.7 million for the same period in 2025, primarily due to higher levels of variable compensation associated with an increase in mortgage loan originations. Provision for credit losses increased $1.6 million to $1.1 million for the third quarter of 2026, compared to $(0.4) million for the same period in 2025, primarily due to an increase in residential loans balances. Other noninterest expenses increased $1.0 million to $5.5 million for the third quarter of 2026, compared to $4.5 million for the same period in 2025, primarily due to higher appraisal, servicing and collection expenses. Net interest income increased $1.0 million to $7.6 million for the third quarter of 2026, compared to $6.5 million for the same period in 2025, primarily due to higher average balance and higher average yield on residential real estate loans. Identifiable assets for our Mortgage Operations segment increased $0.1 billion to $1.3 billion at September 30, 2026 from $1.2 billion at September 30, 2025. The growth in identifiable assets was primarily driven by organic growth in our residential mortgage portfolio.
Nine months ended September 30, 2026 and 2025
Income before income taxes decreased $1.4 million to $10.8 million for the nine months ended September 30, 2026, compared to $12.2 million for the same period in 2025. The period over period decrease was primarily due to an increase in salary and employee benefits expense and an increase in other noninterest expense, partially offset by an increase in
mortgage banking services income and an increase in net interest income. Salary and employee benefits expense increased $8.6 million to $36.5 million for the nine months ended September 30, 2026, compared to $27.9 million for the same period in 2025, primarily due to higher levels of variable compensation associated with an increase in mortgage loan originations. Other noninterest expense increased $2.9 million to $16.0 million for the nine months ended September 30, 2026, compared to $13.1 million for the same period in 2025, primarily due to higher mortgage service expense and credit service fees. Revenue from mortgage banking services increased $8.4 million to $45.3 million for the nine months ended September 30, 2026, compared to $36.9 million for the same period in 2025, primarily due to an increase in loan originations sold and higher net MSR capitalization. Net interest income increased $3.7 million to $21.8 million for the nine months ended September 30, 2026, compared to $18.1 million for the same period in 2025, primarily due to higher average balance and higher average yield on residential real estate loans.
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. As a result of our acquisition of First Foundation, which closed on April 1, 2026, we have updated our critical accounting estimates to include acquisition fair value measurements. Accordingly, we have identified the determination of the allowance for credit losses, fair value measurements of MSRs, and acquisition 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 the estimates underlying these policies to be critical accounting estimates and we discuss them directly with the Audit Committee of our Board of Directors.
We provide additional information about our critical accounting estimates in "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates" in our 2025 Annual Report other than with respect to acquisition fair value measurements, which we discuss below. Other than as noted above and discussed below, there have been no material changes to our critical accounting policies or the estimates made pursuant to those policies during the most recent quarter from those disclosed in our 2025 Annual Report.
Our significant accounting policies are discussed in Note 1-Basis of Presentation, Description of Business and Summary of Significant Accounting Policies in the "Notes to the Consolidated Financial Statements" contained in Item 8 "Financial Statements and Supplementary Data" of our 2025 Annual Report.
Acquisition Fair Value Measurements
The acquisition method of accounting requires assets and liabilities in business combinations to be recorded at their estimated fair values as of the date of acquisition. To estimate fair value, we apply various valuation methodologies to assets acquired and liabilities assumed that often involve significant judgment. Examples of such estimates include loans held-for-investment and core deposit intangible assets, both of which we developed using an income approach. To value loans held-for-investment, management incorporated assumptions such as principal and interest cash flows, principal default and loss rates, prepayment rates, and discount rates utilizing company-specific and market data. The methodology used to value CDI assets considered the cost savings generated from the deposits relative to an alternative source of funds. Management incorporated assumptions in the CDI valuation such as customer attrition, discount rates, alternative cost of funding, and net maintenance costs. These fair value estimates are preliminary and subject to adjustment during the measurement period, which will not exceed one year from the acquisition date, as management obtains additional information about facts and circumstances that existed as of the acquisition date. Changes in these assumptions could result in materially different fair value measurements that may impact our financial condition, results of operations, or disclosures. Discussion of the assumptions and estimates used by us to assess and determine fair values associated with business combinations can be found in Note 2 - Acquisition of First Foundation Inc. of the Notes to Unaudited Consolidated Financial Statements.
Results of Operations
The following table sets forth components of our results of operations:
For the three months ended
September 30,
For the nine months ended
September 30,
($ in thousands, except per share amounts) 2026 2025 2026 2025
Net interest income $ 140,301 $ 80,953 $ 366,275 $ 233,930
Provision for credit losses 4,400 10,100 53,050 18,400
Noninterest income 39,382 26,333 107,505 75,135
Noninterest expense 126,553 68,901 373,606 199,733
Income before income taxes 48,730 28,285 47,124 90,932
Provision for income taxes 10,348 5,111 10,009 17,803
Net income 38,382 23,174 37,115 73,129
Diluted earnings per share $ 0.82 $ 0.82 $ 0.91 $ 2.59
Return on average total assets 0.98 % 1.09 % 0.36 % 1.19 %
Return on average stockholders' equity 8.23 % 8.22 % 3.04 % 8.99 %
Net interest margin 3.82 % 4.07 % 3.81 % 4.07 %
Net interest margin - FTE basis (non-GAAP)1
3.87 % 4.12 % 3.86 % 4.13 %
Efficiency ratio 70.43 % 64.22 % 78.86 % 64.62 %
Noninterest income to total revenue2
21.9 % 24.5 % 22.69 % 24.31 %
1 See section entitled "Non-GAAP Financial Measures and Reconciliations" for information regarding non-GAAP financial measures and a reconciliation to the most comparable GAAP equivalent.
2 Total revenue is net interest income plus noninterest income.
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, treasury management service fees, 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, equipment and software, 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. Our interest income also includes the accretion of discounts and amortization of premiums on loans we acquired in business combinations, which affects our net interest income and net interest margin. In each business combination, acquired loans are initially recorded at fair value. For loans acquired before our adoption of ASU 2025-08, non-PCD loans were recorded at fair value, with any resulting discount or premium accreted into interest income over the life of the related loan, while PCD loans were recorded at fair value plus an initial allowance for credit losses (the "gross-up approach"), with the resulting non-credit discount or premium similarly accreted into interest income. For loans acquired after our adoption of ASU 2025-08 on April 1, 2026 in connection with our acquisition of First Foundation, loans are evaluated as PCD loans, purchased
seasoned loans ("PSLs"), or other acquired loans. PCD loans and PSLs are accounted for using the gross-up approach, under which the initial allowance for credit losses is added to the purchase price to establish the loan's initial amortized cost basis. Other acquired loans are recorded at fair value and an initial allowance for credit losses is recognized through provision for credit losses. Any non-credit discount or premium is accreted or amortized into interest income over the remaining life of the loan.
Our net interest income can also 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, 2026 and 2025
Our net interest income was $140.3 million for the third quarter of 2026, an increase of $59.3 million, or 73.3%, compared to the same period in 2025. Interest income on loans increased by $76.8 million for the third quarter of 2026, compared to the same period in 2025. Interest income on investment securities increased by $17.4 million for the third quarter of 2026, compared to the same period in 2025. Interest income on interest-bearing cash and other assets increased by $1.3 million for the third quarter of 2026, compared to the same period in 2025. Interest expense from total interest-bearing liabilities increased by $36.2 million for the third quarter of 2026, compared to the same period in 2025. Included in net interest income was net accretion income of purchase accounting discounts of $25.6 million for the third quarter of 2026, compared to net accretion expense of $0.1 million for the same period in 2025.
Our net interest margin was 3.82% for the third quarter of 2026, compared to 4.07% for the same period in 2025, a decrease of 25 basis points. We experienced a 19 basis point decrease in yield from earning assets and a seven basis point decrease in our total cost of interest-bearing liabilities for the third quarter of 2026 as compared to the same period in 2025. Total average earning assets increased $6.7 billion, while total average interest-bearing liabilities increased $5.2 billion for the third quarter of 2026 as compared to the same period in 2025. The effect on net interest margin of net accretion income of purchase accounting discounts was an increase of 70 basis points for the third quarter of 2026, compared to a decrease of one basis point for the same period in 2025.
Total average loans grew to $11.7 billion for the third quarter of 2026, an increase of $5.0 billion or 74.7%, compared to the same period in 2025, due primarily to loans acquired from First Foundation, as well as organic growth in our loan portfolio. Yield on loans decreased 16 basis points for the third quarter of 2026, compared to the same period in 2025, reflecting the impact of the lower interest rate environment and its impact on variable rate loans in the portfolio and a change in portfolio mix resulting from the addition of lower-yielding public finance and multifamily loans acquired from First Foundation. Average investment securities grew to $1.9 billion for the third quarter of 2026, an increase of $1.4 billion or 278.1%, compared to the same period in 2025, due primarily to investment securities acquired from First Foundation. Yield on investment securities increased 109 basis points for the third quarter of 2026, compared to the same period in 2025, due primarily to investment securities acquired from First Foundation. Average interest-bearing cash and other assets grew to $1.0 billion for the third quarter of 2026, an increase of $300.3 million or 42.0%, compared to the same period in 2025. Yield on interest-bearing cash and other assets decreased 76 basis points for the third quarter of 2026, compared to the same period in 2025, primarily due to lower average short-term market interest rates relative to the prior period.
Average interest-bearing deposits grew to $10.5 billion for the third quarter of 2026, an increase of $5.1 billion or 93.7%, compared to the same period in 2025, due primarily to deposits assumed from First Foundation. Cost of interest-bearing deposits decreased six basis points for the third quarter of 2026, compared to the same period in 2025, primarily due to lower average short-term market interest rates, largely offset by the addition of higher-cost deposits acquired from First Foundation. Average certificates of deposit increased from approximately $1.4 billion for the third quarter of 2025 to approximately $1.9 billion for the third quarter of 2026, due primarily to certificates of deposit assumed from First Foundation. Average other long-term borrowings increased $129.7 million, or 170.4%, for the third quarter of 2026, compared to the same period in 2025. Cost of other long-term borrowings decreased 203 basis points for the third quarter of 2026, compared to the same period in 2025.
Nine months ended September 30, 2026 and 2025
Our net interest income was $366.3 million for the nine months ended September 30, 2026, an increase of $132.3 million, or 56.6%, compared to the same period in 2025. Interest income on loans increased by $172.6 million for the nine months ended September 30, 2026, compared to the same period in 2025. Interest income on investment securities increased by
$37.7 million for the nine months ended September 30, 2026, compared to the same period in 2025. Interest income on interest-bearing cash and other assets increased by $3.9 million for the nine months ended September 30, 2026, compared to the same period in 2025. Interest expense from total interest-bearing liabilities increased by $82.0 million for the nine months ended September 30, 2026, compared to the same period in 2025. Included in net interest income was net accretion income of purchase accounting discounts of $52.8 million for the nine months ended September 30, 2026, compared to $0.3 million for the same period in 2025.
Our net interest margin was 3.81% for the nine months ended September 30, 2026, compared to 4.07% for the same period in 2025, a decrease of 26 basis points. We experienced a 22 basis point decrease in yield from earning assets and a seven basis point decrease in total cost of interest-bearing liabilities for the nine months ended September 30, 2026, compared to the same period in 2025. Total average earning assets increased $5.2 billion, while total average interest-bearing liabilities increased $4.1 billion for the nine months ended September 30, 2026 as compared to the same period in 2025. The effect on net interest margin of net accretion income of purchase accounting discounts was an increase of 55 basis points for the nine months ended September 30, 2026, compared to zero basis points for the same period in 2025.
Total average loans grew to $10.4 billion for the nine months ended September 30, 2026, an increase of $3.8 billion, compared to the same period in 2025, due primarily to loans acquired from First Foundation, as well as organic growth in our loan portfolio. Yield on loans decreased 16 basis points for the nine months ended September 30, 2026, compared to the same period in 2025, reflecting the impact of the lower interest rate environment and its impact on variable rate loans in the portfolio and a change in portfolio mix resulting from the addition of lower-yielding public finance and multifamily loans acquired from First Foundation. Average investment securities grew to $1.5 billion for the nine months ended September 30, 2026, an increase of $1.0 billion or 197.8%, compared to the same period in 2025, due primarily to investment securities acquired from First Foundation. Yield on investment securities increased 104 basis points for the nine months ended September 30, 2026, compared to the same period in 2025, due primarily to investment securities acquired from First Foundation. Average interest-bearing cash and other assets grew to $0.9 billion for the nine months ended September 30, 2026, an increase of $0.3 billion or 54.7%, compared to the same period in 2025. Yield on interest-bearing cash and other assets decreased 95 basis points for the nine months ended September 30, 2026, compared to the same period in 2025, primarily due to lower average short-term market interest rates relative to the prior year period.
Average interest-bearing deposits grew to $9.3 billion for the nine months ended September 30, 2026, an increase of $4.0 billion or 75.0%, compared to the same period in 2025, due primarily to deposits assumed from First Foundation. Cost of interest-bearing deposits decreased eight basis points for the nine months ended September 30, 2026, compared to the same period in 2025, primarily due to lower average short-term market interest rates, largely offset by the addition of higher-cost deposits acquired from First Foundation. Average FHLB borrowings increased from $10.5 million to $50.2 million for the nine months ended September 30, 2026, compared to the same period in 2025, due primarily to the acquisition of First Foundation. Cost of FHLB borrowings decreased 66 basis points for the nine months ended September 30, 2026, compared to the same period in 2025. Average other long-term borrowings increased $73.7 million, or 96.9%, for the nine months ended September 30, 2026, compared to the same period in 2025. Cost of other long-term borrowings decreased 65 basis points for the nine months ended September 30, 2026 compared to the same period in 2025.
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.
As of and for the three months ended September 30,:
2026 2025
(In thousands) Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate
Interest Earning Assets
Loans1
11,650,322 185,937 6.33 % 6,667,158 109,092 6.49 %
Investment securities 1,912,990 21,791 4.52 % 505,999 4,376 3.43 %
Interest-bearing cash and other assets 1,015,170 8,934 3.49 % 714,885 7,660 4.25 %
Total earning assets 14,578,482 216,662 5.90 % 7,888,042 121,128 6.09 %
Other assets 953,709 540,079
Total assets $ 15,532,191 $ 8,428,121
Interest-bearing liabilities
Demand and NOW deposits $ 2,782,453 $ 14,396 2.05 % $ 1,437,298 $ 6,836 1.89 %
Savings deposits 1,917,139 13,606 2.82 % 391,444 578 0.59 %
Money market deposits 3,896,991 28,505 2.90 % 2,211,754 18,302 3.28 %
Certificates of deposit 1,935,244 16,419 3.37 % 1,397,371 12,809 3.64 %
Total deposits 10,531,827 72,926 2.75 % 5,437,867 38,525 2.81 %
Repurchase agreements 19,963 126 2.50 % 8,055 37 1.82 %
Total deposits and repurchase agreements 10,551,790 73,052 2.75 % 5,445,922 38,562 2.81 %
FHLB borrowings - - % - - - %
Other long-term borrowings 205,786 3,309 6.38 % 76,117 1,613 8.41 %
Total interest-bearing liabilities 10,757,576 76,361 2.82 % 5,522,039 40,175 2.89 %
Noninterest-bearing deposits 2,665,398 1,642,346
Other liabilities 257,967 145,730
Stockholders' equity 1,851,250 1,118,006
Total liabilities and stockholders' equity $ 15,532,191 $ 8,428,121
Net interest income $ 140,301 $ 80,953
Net interest spread 3.08 % 3.20 %
Net interest margin 3.82 % 4.07 %
Net interest margin - FTE basis (non-GAAP)2
3.87 % 4.12 %
1 Includes loans held-for-investment, including nonaccrual loans, and loans held-for-sale.
2 See section entitled "Non-GAAP Financial Measures and Reconciliations" for information regarding non-GAAP financial measures and a reconciliation to the most comparable GAAP equivalent.
As of and for the nine months ended September 30,:
2026 2025
(In thousands) Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate
Interest Earning Assets
Loans1
10,418,262 488,535 6.27 % 6,570,356 315,889 6.43 %
Investment securities 1,507,230 50,919 4.52 % 506,068 13,179 3.48 %
Interest-bearing cash and other assets 935,974 23,350 3.34 % 604,936 19,428 4.29 %
Total earning assets 12,861,466 562,804 5.85 % 7,681,360 348,496 6.07 %
Other assets 814,541 542,038
Total assets $ 13,676,007 $ 8,223,398
Interest-bearing liabilities
Demand and NOW deposits $ 2,445,045 $ 36,240 1.98 % $ 1,475,608 $ 19,525 1.77 %
Savings deposits 1,410,811 27,620 2.62 % 397,745 1,723 0.58 %
Money market deposits 3,443,184 74,085 2.88 % 1,947,606 47,027 3.23 %
Certificates of deposit 1,982,827 49,654 3.35 % 1,482,529 41,829 3.77 %
Total deposits 9,281,867 187,599 2.70 % 5,303,488 110,104 2.78 %
Repurchase agreements 17,752 319 2.40 % 8,892 110 1.66 %
Total deposits and repurchase agreements 9,299,619 187,918 2.70 % 5,312,380 110,214 2.77 %
FHLB borrowings 50,154 1,480 3.95 % 10,491 361 4.61 %
Other long-term borrowings 149,676 7,131 6.37 % 76,017 3,991 7.02 %
Total interest-bearing liabilities 9,499,449 196,529 2.77 % 5,398,888 114,566 2.84 %
Noninterest-bearing deposits 2,307,562 1,587,670
Other liabilities 237,672 148,675
Stockholders' equity 1,631,324 1,088,165
Total liabilities and stockholders' equity $ 13,676,007 $ 8,223,398
Net interest income $ 366,275 $ 233,930
Net interest spread 3.08 % 3.23 %
Net interest margin 3.81 % 4.07 %
Net interest margin - FTE basis (non-GAAP)2
3.86 % 4.13 %
1 Includes loans held-for-investment, including nonaccrual loans, and loans held-for-sale.
2 See section entitled "Non-GAAP Financial Measures and Reconciliations" for information regarding non-GAAP financial measures and a reconciliation to the most comparable GAAP equivalent.
Rate-Volume Analysis
The tables below present the effect of volume and rate changes on interest income and expense. Changes due to volume are changes in the average balance multiplied by the previous period's average rate. Changes due to rate are changes in the average rate multiplied by the average balance from the prior 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,
2026 Versus 2025 Increase (Decrease) Due to:
(In thousands) Rate Volume Total
Interest Earning Assets
Loans1
$ (2,749) $ 79,594 $ 76,845
Investment securities 1,783 15,632 17,415
Interest-bearing cash (1,540) 2,814 1,274
Total earning assets (2,506) 98,040 95,534
Interest-Bearing Liabilities
Demand and NOW deposits 649 6,911 7,560
Savings deposits 6,434 6,594 13,028
Money market deposits (2,338) 12,541 10,203
Certificates of deposit (1,013) 4,623 3,610
Total deposits 3,732 30,669 34,401
Repurchase agreements 18 71 89
Total deposits and repurchase agreements 3,750 30,740 34,490
FHLB borrowings - - -
Other long-term borrowings (472) 2,168 1,696
Total interest-bearing liabilities 3,278 32,908 36,186
Net interest income $ (5,784) $ 65,132 $ 59,348
1 Includes loans held-for-investment, including nonaccrual loans, and loans held-for-sale.
For the nine months ended September 30,
2026 Versus 2025 Increase (Decrease) Due to:
(In thousands) Rate Volume Total
Interest Earning Assets
Loans1
$ (7,975) $ 180,621 $ 172,646
Investment securities 4,930 32,810 37,740
Interest-bearing cash (5,024) 8,946 3,922
Total earning assets (8,069) 222,377 214,308
Interest-Bearing Liabilities
Demand and NOW deposits 2,585 14,130 16,715
Savings deposits 15,023 10,874 25,897
Money market deposits (5,610) 32,668 27,058
Certificates of deposit (5,100) 12,925 7,825
Total deposits 6,898 70,597 77,495
Repurchase agreements 65 144 209
Total deposits and repurchase agreements 6,963 70,741 77,704
FHLB borrowings (59) 1,178 1,119
Other long-term borrowings (400) 3,540 3,140
Total interest-bearing liabilities 6,504 75,459 81,963
Net interest income $ (14,573) $ 146,918 $ 132,345
1 Includes loans held-for-investment, including nonaccrual loans, and loans held-for-sale.
Provision for Credit Losses
We establish 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.
We recorded a provision for credit losses of $4.4 million in the third quarter of 2026, primarily reflecting specific reserves established for two commercial real estate ("CRE") loans, partially offset by a decrease in the loan portfolio, compared to a provision for credit losses of $10.1 million for the same period in 2025.
We recorded a provision for credit losses of $53.1 million for the nine months ended September 30, 2026, compared to $18.4 million for the same period in 2025. The increase in our provision for credit losses for the nine months ended September 30, 2026 was primarily related to increased net charge-offs on two C&I loans with no previous specific reserves in the second quarter of 2026.
Noninterest Income
The following table presents noninterest income:
For the three months ended
September 30,
For the nine months ended
September 30,
(In thousands) 2026 2025 2026 2025
Deposit account service fees $ 2,371 $ 2,162 $ 6,759 $ 6,205
Treasury management service fees 5,096 4,402 14,776 12,929
Credit and debit card fees 3,060 2,671 8,725 7,985
Trust and investment advisory fees 9,881 1,536 20,783 4,430
Mortgage banking services, net 12,743 12,641 43,016 34,970
Other noninterest income 6,231 2,921 13,446 8,616
Total noninterest income $ 39,382 $ 26,333 $ 107,505 $ 75,135
Three months ended September 30, 2026 and 2025
Our noninterest income increased $13.0 million to $39.4 million for the third quarter of 2026 from $26.3 million for the same period in 2025.
Deposit account service fees include online banking, outgoing wires, overdrafts, stop payment orders, and ATM fees. Deposit account service fees increased $0.2 million for the third quarter of 2026, compared to the same period in 2025, primarily due to an increase in overdraft fees.
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 $0.7 million for the third quarter of 2026 compared to the same period in 2025, primarily due to an overall increase in our business customer base as a result of our acquisition of First Foundation as well as an increase in products and services provided to our existing customer base.
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 increased $0.4 million for the third quarter of 2026 compared to the same period in 2025, due to an increase in VISA purchase 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 $8.3 million for the third quarter of 2026 compared to the same period in 2025, primarily due to higher assets under management associated with the acquisition of First Foundation.
The components of mortgage banking services were as follows:
For the three months ended
September 30,
(In thousands) 2026 2025
Net sale gains and fees from mortgage loan originations, including loans held-for-sale changes in fair value and hedging $ 6,291 $ 6,392
Mortgage servicing income 5,113 4,726
Net MSR capitalization and changes in fair value, net of derivative activity 1,339 1,523
Mortgage banking services, net $ 12,743 $ 12,641
For the third quarter of 2026, mortgage banking services increased $0.1 million, compared to the same period in 2025. Total loan originations for sale were $421.9 million for the third quarter of 2026, an increase of $50.4 million from $371.5 million for the same period in 2025. Despite the increase in loan originations sold, net sale gains and fees from loan originations, including loans held-for-sale changes in fair value and hedging, decreased $0.1 million, as higher revenue from loan sales was more than offset by fair value changes in the held-for-sale portfolio and hedging activity. We retain servicing rights on the majority of mortgage loans that we sell, which drove the increase in servicing income of $0.4 million to $5.1 million for the third quarter of 2026, from $4.7 million for the same period in 2025. Net MSR capitalization and changes in fair value, net of derivative activity, decreased $0.2 million in the third quarter of 2026, compared to the same period in 2025. The decrease in revenue related to our MSRs was due to a decrease in MSR fair value, net of derivative activity, partially offset by higher net MSR capitalization.
The following table shows the hypothetical effect on the fair value of our residential real estate MSRs when applying certain unfavorable variations of key assumptions to these assets as of September 30, 2026.
(In thousands) 10% 20%
Discount rate $ (2,618) $ (5,102)
Total prepayment speeds (3,330) (6,434)
Cost of servicing each loan (1,112) (2,225)
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.
Other noninterest income increased $3.3 million for the third quarter of 2026 compared to the same period in 2025, primarily due to higher swap and loan syndication revenue, the addition of multifamily banking servicing income and increases in credit line and other loan fees resulting from the acquisition of First Foundation, partially offset by a decline in the fair value of investments associated with our deferred compensation plan.
Nine months ended September 30, 2026 and 2025
Our noninterest income increased $32.4 million to $107.5 million for the nine months ended September 30, 2026 from $75.1 million for the same period in 2025.
Deposit account service fees increased $0.6 million for the nine months ended September 30, 2026, compared to the same period in 2025, primarily due to an increase in overdraft fees and wire transfer service charges.
Treasury management service fees increased $1.8 million for the nine months ended September 30, 2026, compared to the same period in 2025, primarily due to an increase in products and services provided to our existing customer base as well as an overall increase in our business customer base as a result of our acquisition of First Foundation.
Credit and debit card fees increased $0.7 million for the nine months ended September 30, 2026, compared to the same period in 2025, due to an increase in VISA purchase card transaction volumes.
Trust and investment advisory fees increased $16.4 million for the nine months ended September 30, 2026, compared to the same period in 2025, primarily due to higher assets under management associated with the acquisition of First Foundation.
The components of mortgage banking services were as follows:
For the nine months ended
September 30,
(In thousands) 2026 2025
Net sale gains and fees from mortgage loan originations, including loans held-for-sale changes in fair value and hedging $ 22,885 $ 17,556
Mortgage servicing income 15,072 13,871
Net MSR capitalization and changes in fair value, net of derivative activity 5,059 3,543
Mortgage banking services, net $ 43,016 $ 34,970
For the nine months ended September 30, 2026, mortgage banking services income increased $8.0 million, compared to the same period in 2025. Total loan originations for sale were $1.3 billion for the nine months ended September 30, 2026, an increase of $309.4 million from $1.0 billion for the same period in 2025. The increase in loan originations sold and higher margins resulted in the increase in revenue related to net sale gains and fees from loan originations, including fair value changes in the held-for-sale portfolio and hedging activity. We retain servicing rights on the majority of mortgage loans that we sell, which drove the increase in servicing income of $1.2 million to $15.1 million for the nine months ended September 30, 2026, from $13.9 million for the same period in 2025. Net MSR capitalization and changes in fair value, net of derivative activity, increased $1.5 million for the nine months ended September 30, 2026, compared to the same period in 2025. The increase in revenue related to our MSRs was primarily the result of higher net MSR capitalization, partially offset by a decrease in MSR fair value, net of derivative activity.
Other noninterest income increased $4.8 million for the nine months ended September 30, 2026 compared to the same period in 2025, primarily due to higher swap and loan syndication revenue, the addition of multifamily banking servicing income, increases in credit line and other loan fees resulting from the acquisition of First Foundation, and an increase in income from BOLI, partially offset by a write-down of an OREO property.
Noninterest Expense
The following table presents noninterest expense:
For the three months ended
September 30,
For the nine months ended
September 30,
(In thousands) 2026 2025 2026 2025
Salary and employee benefits $ 63,344 $ 44,822 $ 179,444 $ 128,304
Occupancy, equipment and software 15,532 9,591 41,042 28,668
Customer service costs 2,762 - 5,504 -
Amortization of intangible assets 4,238 578 8,982 1,784
Merger related expenses 13,246 241 73,486 526
Other noninterest expenses 27,431 13,669 65,148 40,451
Total noninterest expenses $ 126,553 $ 68,901 $ 373,606 $ 199,733
Three months ended September 30, 2026 and 2025
Our noninterest expenses increased $57.7 million to $126.6 million for the third quarter of 2026, from $68.9 million for the same period in 2025.
Salary and employee benefits increased $18.5 million for the third quarter of 2026 compared to the same period in 2025, primarily due to an increase in headcount associated with the acquisition of First Foundation.
Occupancy, equipment and software increased $5.9 million for the third quarter of 2026 compared to the same period in 2025, primarily due to higher software subscriptions and license fees, and rent expense resulting from the acquisition of First Foundation.
Customer service costs were $2.8 million for the third quarter of 2026 and consist of costs reimbursed to deposit customers in connection with noninterest-bearing demand deposit accounts assumed from First Foundation.
Amortization of intangible assets increased $3.7 million for the third quarter of 2026 compared to the same period in 2025, primarily due to core deposit and customer relationship intangibles amortization resulting from the acquisition of First Foundation.
Merger related expenses increased $13.0 million for the third quarter of 2026 compared to the same period in 2025, resulting from the acquisition of First Foundation.
Other noninterest expense increased $13.8 million for the third quarter of 2026 compared to the same period in 2025, primarily due to higher data processing and FDIC insurance expenses associated with our increased scale following the acquisition of First Foundation, and higher loan collection expenses.
Nine months ended September 30, 2026 and 2025
Our noninterest expenses increased $173.9 million to $373.6 million for the nine months ended September 30, 2026, from $199.7 million for the same period in 2025.
Salary and employee benefits increased $51.1 million for the nine months ended September 30, 2026 compared to the same period in 2025, primarily due to an increase in headcount associated with the acquisition of First Foundation, and due to an increase in headcount of C&I bankers and support personnel, higher levels of variable compensation associated with an increase in residential mortgage loan originations, and higher medical insurance costs.
Occupancy, equipment and software increased $12.4 million for the nine months ended September 30, 2026 compared to the same period in 2025, primarily due to higher software subscriptions and license fees and rent expense resulting from the acquisition of First Foundation.
Customer service costs were $5.5 million for the nine months ended September 30, 2026 and consist of costs reimbursed to deposit customers in connection with noninterest-bearing demand deposit accounts assumed from First Foundation.
Amortization of intangible assets increased $7.2 million for the nine months ended September 30, 2026 compared to the same period in 2025, primarily due to core deposit and customer relationship intangibles amortization resulting from the acquisition of First Foundation.
Merger related expenses increased $73.0 million for the nine months ended September 30, 2026 compared to the same period in 2025, resulting from the acquisition of First Foundation.
Other noninterest expense increased $24.7 million for the nine months ended September 30, 2026 compared to the same period in 2025, primarily due to higher data processing and FDIC insurance expenses associated with our increased scale following the acquisition of First Foundation, and higher loan collection expenses.
Income Taxes
Three months ended September 30, 2026 and 2025
We recorded income tax expense for the third quarter of 2026 of $10.3 million, compared to $5.1 million for the same period in 2025. The increase in income tax expense was due to an increase in income during the third quarter of 2026, compared to the same period in 2025. Our effective tax rate was 21.2% for the third quarter of 2026, compared to 18.1% for the same period in 2025.
Nine months ended September 30, 2026 and 2025
We recorded income tax expense for the nine months ended September 30, 2026 of $10.0 million, compared to $17.8 million for the same period in 2025. The decrease in income tax expense was primarily due to a decrease in income during the nine months ended September 30, 2026, compared to the same period in 2025. Our effective tax rate was 21.2% for the nine months ended September 30, 2026, compared to 19.6% for the same period in 2025.
Financial Condition
Balance Sheet
Our total assets were $15.3 billion and $8.5 billion, total liabilities were $13.5 billion and $7.3 billion, and total stockholders' equity was $1.8 billion and $1.2 billion at September 30, 2026 and December 31, 2025, respectively.
On September 30, 2026, our consolidated balance sheet included the impact of our acquisition of First Foundation, which closed on April 1, 2026, as discussed in Note 2 - Acquisition of First Foundation Inc. in Part I, Item 1 of this Quarterly Report.
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. 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 $1.4 billion to $1.8 billion at September 30, 2026, compared to December 31, 2025, due primarily to the First Foundation acquisition. During the period ended September 30, 2026, the securities held-to-maturity decreased $1.6 million to $32.2 million compared to December 31, 2025.
The following table is a summary of our investment portfolio as of:
September 30, 2026 December 31, 2025
(In thousands) Carrying Amount % of Portfolio Carrying Amount % of Portfolio
Available-for-sale:
U.S. treasury $ 33,581 1.8 % $ 33,270 7.1 %
U.S. agency 6,124 0.3 % 412 0.1 %
Obligations of states and political subdivisions 28,759 1.6 % 28,073 6.0 %
Mortgage backed - residential 676,261 37.0 % 96,176 20.5 %
Collateralized mortgage obligations 681,833 37.3 % 150,797 32.1 %
Mortgage backed - commercial 385,035 21.1 % 143,993 30.7 %
Other debt 15,751 0.9 % 16,249 3.5 %
Total available-for-sale $ 1,827,344 100.0 % $ 468,970 100.0 %
Held-to-maturity:
Obligations of states and political subdivisions $ 25,383 78.8 % $ 25,890 76.5 %
Mortgage backed - residential 4,809 14.9 % 5,467 16.2 %
Collateralized mortgage obligations 2,021 6.3 % 2,482 7.3 %
Total held-to-maturity $ 32,213 100.0 % $ 33,839 100.0 %
The following table shows the weighted average yield to average life, which considers expected prepayments, of each category of investment securities as of September 30, 2026:
(In thousands) One year or less One to five years Five to ten years After ten years
Carrying Amount Average Yield Carrying Amount Average Yield Carrying Amount Average Yield Carrying Amount Average Yield
Available-for-sale:
U.S. treasury $ - - % $ 33,581 1.32 % $ - - % $ - - %
U.S. agency 64 4.58 % 489 5.09 % 5,571 4.31 % - - %
Obligations of states and political subdivisions 1,953 3.77 % 1,997 3.03 % 21,981 3.25 % 2,828 2.01 %
Mortgage backed - residential 1,253 2.27 % 32,837 3.21 % 588,113 4.83 % 54,058 3.73 %
Collateralized mortgage obligations 1,742 2.95 % 284,262 4.37 % 217,502 3.90 % 178,327 4.47 %
Mortgage backed - commercial 3,957 2.52 % 93,215 2.86 % 122,514 5.05 % 165,349 5.54 %
Other debt - - % 11,331 2.63 % 4,420 4.08 % - - %
Total available-for-sale $ 8,969 2.85 % $ 457,712 3.71 % $ 960,101 4.60 % $ 400,562 4.79 %
Held-to-maturity:
Obligations of states and political subdivisions $ 325 4.00 % $ - - % $ - - % $ 25,058 3.52 %
Mortgage backed - residential 20 4.15 % 3,088 2.37 % 807 3.30 % 894 3.21 %
Collateralized mortgage obligations 180 2.32 % 1,841 2.86 % - - % - - %
Total held-to-maturity $ 525 3.43 % $ 4,929 2.55 % $ 807 3.30 % $ 25,952 3.51 %
Loans
Our loan portfolio represents a broad range of borrowers primarily in our markets in Texas, Kansas, Colorado, New Mexico, Arizona, California, Washington, Florida, Nevada and Hawaii, primarily comprised of commercial and industrial, commercial real estate, residential real estate, and public finance 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 held-for-investment, net of deferred fees, costs, premiums and discounts were $11.5 billion at September 30, 2026 and $6.7 billion at December 31, 2025, with the increase due primarily to the acquisition of First Foundation.
The following table sets forth the composition of our loan portfolio, as of:
September 30, 2026 December 31, 2025
(In thousands) Amount % of
total loans 		Amount % of
total loans
Commercial and industrial $ 3,663,661 31.9 % $ 2,937,867 44.0 %
Commercial real estate:
Non-owner occupied 1,136,193 9.9 % 742,002 11.1 %
Owner occupied 919,091 8.0 % 700,774 10.5 %
Construction and land 256,561 2.2 % 268,652 4.0 %
Multifamily 2,543,964 22.2 % 210,368 3.2 %
Total commercial real estate 4,855,809 42.3 % 1,921,796 28.8 %
Residential real estate1
1,891,223 16.5 % 1,221,086 18.3 %
Public finance 929,074 8.1 % 501,582 7.5 %
Consumer 36,815 0.3 % 32,651 0.5 %
Other 100,905 0.9 % 58,198 0.9 %
Total loans, excluding loan hedge fair value 11,477,487 100.0 % 6,673,180 100.0 %
Loan hedge fair value2
(19,596) -
Total loans $ 11,457,891 $ 6,673,180
1 Includes 1-4 family residential construction.
2 Represents fair value hedge basis adjustments related to active portfolio layer method hedges, which are not allocated to individual loans.
Commercial and industrial loans include loans to commercial customers for use in normal business operations to finance working capital needs, equipment and inventory purchases, other expansion projects and loans to non-depository financial institutions. 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.
CRE loans include owner 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, multifamily residential mortgage loans for terms up to 30 years for 5+ unit properties, and loans made for the initial development or construction of a commercial real estate project. Non-owner occupied CRE loans were 60.3% of the Company's risk-based capital, or 9.9% of total loans as of September 30, 2026. Non-owner occupied CRE loans associated with office space were $99.9 million, or 0.9% of total loans as of September 30, 2026. Owner occupied CRE loans associated with office space were $118.1 million, or 1.0% of total loans as of September 30, 2026.
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 lease financing receivables and loans for agricultural production.
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 September 30, 2026:
(In thousands) One year
or less 		After one
through
five years 		After five
through
15 years 		After 15
years 		Total
Commercial and industrial $ 809,705 $ 2,650,383 $ 178,945 $ 24,628 $ 3,663,661
Commercial real estate 588,793 1,575,219 664,550 2,027,247 4,855,809
Residential real estate 96,793 25,774 64,947 1,703,709 1,891,223
Public finance 18,400 183,875 426,061 300,738 929,074
Consumer 18,376 9,328 8,896 215 36,815
Other 17,191 58,143 21,287 4,284 100,905
Total loans $ 1,549,258 $ 4,502,722 $ 1,364,686 $ 4,060,821 $ 11,477,487
(In thousands) One year
or less 		After one
through
five years 		After five
through
15 years 		After 15
years 		Total Total Loans Maturing After 1 Year
Loans maturing with:
Fixed interest rates
Commercial and industrial $ 48,679 $ 271,835 $ 79,152 $ 1,142 $ 400,808 $ 352,129
Commercial real estate 246,087 713,183 378,034 6,376 1,343,680 1,097,593
Residential real estate 84,675 24,032 48,043 340,449 497,199 412,524
Public finance 18,400 183,078 421,902 300,738 924,118 905,718
Consumer 6,010 7,870 8,805 - 22,685 16,675
Other 13,209 52,113 17,447 4,284 87,053 73,844
Total fixed interest rate loans $ 417,060 $ 1,252,111 $ 953,383 $ 652,989 $ 3,275,543 $ 2,858,483
Floating or adjustable interest rates
Commercial and industrial $ 761,026 $ 2,378,548 $ 99,793 $ 23,486 $ 3,262,853 $ 2,501,827
Commercial real estate 342,706 862,036 286,516 2,020,871 3,512,129 3,169,423
Residential real estate 12,118 1,742 16,904 1,363,260 1,394,024 1,381,906
Public finance - 797 4,159 - 4,956 4,956
Consumer 12,366 1,458 91 215 14,130 1,764
Other 3,982 6,030 3,840 - 13,852 9,870
Total floating or adjustable interest rate loans $ 1,132,198 $ 3,250,611 $ 411,303 $ 3,407,832 $ 8,201,944 $ 7,069,746
Total loans $ 1,549,258 $ 4,502,722 $ 1,364,686 $ 4,060,821 $ 11,477,487 $ 9,928,229
Allowance for Credit Losses
At September 30, 2026, our allowance for credit losses was $174.6 million, compared to $85.0 million at December 31, 2025. The increase in the allowance for credit losses was primarily attributable to the acquisition of First Foundation, including $92.5 million of allowance for credit losses recognized on acquired loans as of the acquisition date.
We maintain the allowance for credit losses at a level we believe is sufficient to absorb expected losses in our loan portfolio given the conditions at the time and our estimates of future economic conditions. 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 credit losses charged to earnings, which increases the allowance.
In determining the provision for credit 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.
The following table presents, by loan type, the changes in the allowance for credit losses:
For the three months ended
September 30,
For the nine months ended
September 30,
(In thousands) 2026 2025 2026 2025
Balance, beginning of period $ 173,551 $ 82,993 $ 85,016 $ 88,221
Acquisition of First Foundation Inc. - - 92,500 -
Loan charge-offs:
Commercial and industrial (2,389) (9,025) (53,342) (20,757)
Commercial real estate (773) - (2,773) -
Residential real estate (10) (66) (188) (66)
Public finance - (242) - (1,922)
Consumer (17) (97) (107) (351)
Other (404) - (404) (743)
Total loan charge-offs (3,593) (9,430) (56,814) (23,839)
Recoveries of loans previously charged-off:
Commercial and industrial 7 260 228 381
Commercial real estate 201 11 204 11
Residential real estate - 51 - 74
Consumer 13 55 45 142
Other 59 - 59 -
Total loan recoveries 280 377 536 608
Net loan charge-offs (3,313) (9,053) (56,278) (23,231)
Provision for credit losses1
4,400 10,100 53,400 19,050
Balance, end of period $ 174,638 $ 84,040 $ 174,638 $ 84,040
Allowance for credit losses to total loans 1.52 % 1.26 % 1.52 % 1.26 %
Ratio of net charge-offs to average loans outstanding 0.11 % 0.55 % 0.75 % 0.48 %
1 For the three months ended September 30, 2026 and 2025 we did not record a provision for credit losses on unfunded commitments. For the nine months ended September 30, 2026 and 2025, we recorded a benefit for credit losses on unfunded commitments of $350 and $650, respectively. For further information, see Note 4 - Loans.
The following table presents net charge-offs to average loans outstanding by loan category:
For the three months ended
September 30,
For the nine months ended
September 30,
(In thousands) 2026 2025 2026 2025
Commercial and industrial 0.25 % 1.09 % 2.01 % 0.87 %
Commercial real estate 0.05 % - % 0.09 % - %
Residential real estate - % 0.01 % 0.02 % - %
Public finance - % 0.18 % - % 0.48 %
Consumer 0.04 % 0.41 % 0.22 % 0.71 %
Other 1.28 % - % 0.50 % 1.98 %
Allocation of Allowance for Credit Losses
The following table presents the allocation of the allowance for credit losses by category and the percentage of loans by category to total loans as of:
September 30, 2026 December 31, 2025
(In thousands) Allowance
Amount 		% of loans in
each category to
total loans 		Allowance
Amount 		% of loans in
each category to
total loans
Commercial and industrial $ 56,590 31.9 % $ 42,902 44.0 %
Commercial real estate 84,511 42.3 % 24,408 28.8 %
Residential real estate 22,396 16.5 % 13,323 18.3 %
Public finance 8,673 8.1 % 2,942 7.5 %
Consumer 793 0.3 % 721 0.5 %
Other 1,675 0.9 % 720 0.9 %
Total $ 174,638 100.0 % $ 85,016 100.0 %
Criticized and 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 expected 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.
Criticized loans consist of loans for which management has identified elevated credit risk through its ongoing credit administration and risk rating processes. These loans include credits classified as special mention, substandard, doubtful, or loss based on an evaluation of the borrower's financial condition, repayment capacity, collateral support, guarantor strength, and other relevant factors. Criticized loans are monitored closely by management and are subject to enhanced review procedures. Changes in criticized loan balances may result from the migration of loans between risk rating categories, changes in credit quality, portfolio acquisitions, loan payoffs, charge-offs, or other portfolio management activities.
Nonperforming assets include all loans categorized as nonaccrual, accrual loans greater than 90 days past due, and 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.
Criticized loans increased to $831.4 million, or 7.3% of total loans, at September 30, 2026, compared to $311.7 million, or 4.7% of total loans, at December 31, 2025. Approximately 80% of the increase was attributable to loans acquired from First Foundation, primarily in the multifamily real estate portfolio, included within commercial real estate. As part of the First Foundation acquisition, we performed a comprehensive credit review of the acquired loans, including the assignment of risk ratings under our credit grading methodologies, and loans were recorded at their amortized cost basis, which reflects their acquisition date fair value plus the initial allowance for expected credit losses recognized at acquisition.
Including the impact of the acquisition of First Foundation, the increase in criticized loans was concentrated in a limited number of industry segments, primarily multifamily real estate, included in commercial real estate, which represented approximately 63% of the total increase in criticized balances from December 31, 2025 and approximately 42% of total criticized loans at September 30, 2026. Management believes the underlying collateral positions remain supportive of carrying values, as criticized loans had a weighted-average loan-to-value ratio of approximately 74% at quarter end.
The following table sets forth our criticized loans by portfolio type as of:
Commercial
and
Industrial 		Commercial
Real
Estate 		Residential
Real
Estate 		Public
Finance 		Consumer Other Total
September 30, 2026
Special Mention $ 107,385 $ 247,554 $ 3,650 $ - $ 999 $ 981 $ 360,569
Substandard - Accruing 60,279 190,785 3,758 13,220 - 59 268,101
Substandard - Nonaccrual 56,122 73,402 31,439 - 15 - 160,978
Doubtful 26,456 15,338 - - - - 41,794
Total criticized loans $ 250,242 $ 527,079 $ 38,847 $ 13,220 $ 1,014 $ 1,040 $ 831,442
December 31, 2025
Special Mention $ 93,167 $ 62,501 $ 3,272 $ - $ - $ - $ 158,940
Substandard - Accruing 71,507 21,154 49 - - - 92,710
Substandard - Nonaccrual 32,342 5,199 21,126 - 46 - 58,713
Doubtful 1,368 - - - - - 1,368
Total criticized loans $ 198,384 $ 88,854 $ 24,447 $ - $ 46 $ - $ 311,731
Nonperforming loans increased to $202.9 million, or 1.8% of total loans at September 30, 2026, compared to $60.8 million, or 0.9% at December 31, 2025, and included $42.0 million of loans acquired from First Foundation. The increase was primarily concentrated in a limited number of larger credit relationships across multifamily real estate, included in commercial real estate, certain commercial and industrial borrowers, and residential mortgage loans. We do not believe they reflect broad-based or systemic credit deterioration across our loan portfolio.
The following table sets forth our nonperforming assets as of:
(In thousands) September 30,
2026 		December 31,
2025
Nonaccrual loans:
Commercial and industrial $ 82,578 $ 33,710
Commercial real estate 88,740 5,199
Residential real estate 31,439 21,126
Consumer 15 46
Total nonaccrual loans 202,772 60,081
Accrual loans greater than 90 days past due 79 690
Total nonperforming loans 202,851 60,771
Other real estate owned and foreclosed assets, net 20,502 11,514
Total nonperforming assets $ 223,353 $ 72,285
Nonaccrual loans to total loans 1.77 % 0.90 %
Nonperforming loans to total loans 1.77 % 0.91 %
Nonperforming assets to total assets 1.46 % 0.85 %
Allowance for credit losses to nonaccrual loans 86.13 % 141.50 %
Deposits
Deposits represent our primary source of funds. Total deposits were $13.0 billion at September 30, 2026 and $7.1 billion at December 31, 2025, with the increase due primarily to the acquisition of First Foundation.
We are focused on growing our core deposits through relationship-based banking with our business and consumer clients.
The following table presents our deposits by customer type as of:
($ in thousands) September 30,
2026 		December 31,
2025
Consumer
Noninterest-bearing deposit accounts $ 1,093,197 $ 404,666
Interest-bearing deposit accounts:
Demand and NOW 1,048,086 590,535
Savings 1,233,040 308,655
Money market 2,144,717 1,400,593
Certificates of deposit 938,097 809,401
Total interest-bearing deposit accounts 5,363,940 3,109,184
Total consumer deposits $ 6,457,137 $ 3,513,850
Business
Noninterest-bearing deposit accounts $ 1,577,869 $ 1,246,707
Interest-bearing deposit accounts:
Demand and NOW 2,133,750 893,306
Savings 478,534 69,976
Money market 1,291,645 901,244
Certificates of deposit 126,640 57,349
Total interest-bearing deposit accounts 4,030,569 1,921,875
Total business deposits $ 5,608,438 $ 3,168,582
Wholesale deposits1
$ 905,383 $ 424,924
Total deposits $ 12,970,958 $ 7,107,356
1 Wholesale deposits primarily consist of brokered deposits included in our consolidated balance sheets within certificates of deposit.
The following table sets forth the average balance amounts and the average rates paid on deposits held by us:
For the three months ended September 30,
For the nine months ended September 30,
2026 2025 2026 2025
(Dollars in thousands) Average
Balance 		Average
Rate Paid 		Average
Balance 		Average
Rate Paid 		Average
Balance 		Average
Rate Paid 		Average
Balance 		Average
Rate Paid
Noninterest-bearing deposit accounts $ 2,665,398 - % $ 1,642,346 - % $ 2,307,562 - % $ 1,587,670 - %
Interest-bearing deposit accounts:
Demand and NOW 2,782,453 2.05 % 1,437,298 1.89 % 2,445,045 1.98 % 1,475,608 3.25 %
Savings 1,917,139 2.82 % 391,444 0.59 % 1,410,811 2.62 % 397,745 0.58 %
Money market 3,896,991 2.90 % 2,211,754 3.28 % 3,443,184 2.88 % 1,947,606 2.41 %
Certificates of deposit 1,935,244 3.37 % 1,397,371 3.64 % 1,982,827 3.35 % 1,482,529 3.77 %
Total interest-bearing deposit accounts 10,531,827 2.75 % 5,437,867 2.81 % 9,281,867 2.70 % 5,303,488 2.78 %
Total deposits $ 13,197,225 2.19 % $ 7,080,213 2.16 % $ 11,589,429 2.16 % $ 6,891,158 2.14 %
As of September 30, 2026 and December 31, 2025, approximately $4.3 billion or 33.2% and $2.6 billion or 36.6%, respectively, of our deposit portfolio was uninsured. As of September 30, 2026 and December 31, 2025, approximately $3.3 billion or 25.8% and $2.1 billion or 29.0%, respectively, of our deposit portfolio was uninsured and uncollateralized. The uninsured, and uninsured and uncollateralized amounts are estimates based on the methodologies and assumptions used for the Bank's regulatory reporting requirements.
We actively participate in the IntraFi Cash Service ("ICS") / Certificate of Deposit Account Registry Service ("CDARS") program which provides FDIC insurance coverage for clients that maintain larger deposit balances. Deposits in the ICS /
CDARS program totaled $1.1 billion, or 8.2% of all deposits as of September 30, 2026, and $0.9 billion, or 12.2% of all deposits as of December 31, 2025.
The following table sets forth the portion of the Bank's time deposits, by account, that are in excess of the FDIC insurance limit, by remaining time until maturity, as of September 30,:
(In thousands) 2026
Three months or less $ 126,162
Over three months through six months 105,962
Over six months through twelve months 25,623
Over twelve months through three years 2,902
Over three years 792
Total $ 261,441
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.
FirstSun (Parent Company)
FirstSun has routine funding requirements consisting primarily of operating expenses, debt service, share repurchases, and funds used for acquisitions. FirstSun can obtain funding to meet its obligations from dividends collected from its subsidiaries, primarily the Bank, and through the issuance of varying forms of debt. At September 30, 2026, FirstSun had available cash and cash equivalents of $52.4 million and debt outstanding of $213.1 million. Management believes FirstSun has the ability to generate and obtain adequate amounts of liquidity to meet its requirements in the short-term and the long-term.
Federal banking laws regulate the amount of dividends that may be paid by banking subsidiaries without prior approval. The Bank may declare dividends without prior regulatory approval that do not exceed the total of retained net income for the current year combined with its retained net income for the preceding two years, subject to maintenance of minimum capital requirements. Prior regulatory approval to pay dividends was not required in 2025 and is not currently required. At September 30, 2026, the Bank could pay dividends to FirstSun of approximately $167.5 million without prior regulatory approval. During the three months ended September 30, 2026, the Bank paid dividends totaling $53.8 million to FirstSun. During the nine months ended September 30, 2026, the Bank paid dividends totaling $78.8 million to FirstSun.
Bank
As more fully discussed in our 2025 Annual Report, we regularly monitor our liquidity position and make adjustments to the balance between sources and uses of funds as we deem appropriate. At September 30, 2026, our liquid assets, which consist of unrestricted cash and amounts due from banks and interest-bearing deposits in other financial institutions, amounted to $714.7 million, or 4.7% of total assets, compared to $642.2 million, or 7.6% of total assets, at December 31, 2025. The increase in our liquid assets was primarily due to an increase in cash held at the Federal Reserve. At September 30, 2026, securities with a carrying value of $1.2 billion, or approximately 64% of our $1.9 billion investment securities portfolio, were pledged to secure public deposits, securities sold under agreements to repurchase, and borrowed funds. Our unencumbered securities at September 30, 2026 were approximately $674.4 million, or 4.4% of total assets, compared to $140.9 million, or 1.7% of total assets, at December 31, 2025.
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 sizable source of relatively stable and low-cost funds. At September 30, 2026, loans as a percentage of customer deposits were 88.3%, compared with 93.9% at December 31, 2025. For additional information related to our deposits, see "Deposits" section above. We are also a member of the FHLB and FRB, from which we can borrow for leverage or liquidity purposes. The FHLB and FRB require that securities and qualifying loans be pledged to secure any advances. Liquidity sources available to us for immediate funding at September 30, 2026, are as follows:
(In thousands)
FHLB borrowings available $ 3,708,539
Fed Funds lines 2,131,227
Unused lines with other financial institutions 250,000
Immediate funding availability $ 6,089,766
Management believes the Bank has the ability to generate and obtain adequate amounts of liquidity to meet its requirements in the short-term and the long-term.
Capital
Stockholders' equity was $1.8 billion at September 30, 2026 and $1.2 billion at December 31, 2025, an increase of $657.2 million, or 57.0%. The increase in stockholders' equity was primarily attributable to the issuance of approximately $686 million of equity consideration in connection with the acquisition of First Foundation, partially offset by the repurchase of 1,245,224 shares of common stock during the third quarter of 2026.
We did not pay a dividend to our common stockholders for the three or nine months ended September 30, 2026 and 2025.
Capital Adequacy
We are subject to various regulatory capital requirements administered by the federal banking agencies. Management routinely analyzes our capital to seek to ensure an optimized capital structure. For further information on capital adequacy see Note 13 - Regulatory Capital Matters to the consolidated financial statements.
Material Contractual Obligations, Commitments, and Contingent Liabilities
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 material contractual obligations as of September 30, 2026. Further discussion of each obligation or commitment is included in the referenced note to the consolidated financial statements.
(In thousands) Note
Reference 		Total Less than
1 Year 		1 - 3
Years 		3 - 5
Years 		More than
5 Years
Deposits:
Deposits without a stated maturity
8
$ 11,036,502 $ 11,036,502 $ - $ - $ -
Certificates of deposit
8
1,934,456 1,596,224 333,197 3,091 1,944
Securities sold under agreements to repurchase 18,687 18,687 - - -
Long-term debt:
Subordinated debt
9
213,084 - - 24,165 188,919
Operating leases
17
56,141 18,265 24,209 6,526 7,141
We are party to various derivative contracts as a means to manage the balance sheet and our related exposure to changes in interest rates, to manage our residential real estate loan origination and sale activity, and to provide derivative contracts to our clients. Since the derivative liabilities recorded on the balance sheet change frequently and do not represent the amounts that may ultimately be paid under these contracts, these liabilities are not included in the table of contractual obligations presented above. Further discussion of derivative instruments is included in Note 7 - Derivative Financial Instruments to the consolidated financial statements.
In the normal course of business, various legal actions and proceedings are pending against us and our affiliates which are incidental to the business in which they are engaged. Further discussion of contingent liabilities is included in Note 16 - Commitments and Contingencies to the consolidated financial statements.
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. Further discussion of contingent liabilities is included in Note 16 - Commitments and Contingencies to the consolidated financial statements.
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