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Merger with Pioneer Bancshares, Inc. | 9 Months Ended
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Sep. 30, 2023
Business Combination and Asset Acquisition [Abstract] |
Merger with Pioneer Bancshares, Inc. | Merger with Pioneer Bancshares, Inc. As described under the title “Business Combination” in Note 1 - Organization and Basis of Presentation, we completed our acquisition of Pioneer on April 1, 2022. We accounted for the Pioneer merger under the acquisition method in accordance with ASC Topic 805, Business Combinations. Accordingly, the purchase price was allocated to the fair value of the assets acquired, including identifiable intangible assets, and the liabilities assumed as of the closing date of the merger. Goodwill resulting from the difference between the fair value of the assets acquired and the fair value of the liabilities assumed is not amortizable for book or tax purposes. This goodwill resulted from the combination of expected operational synergies, the increase in our market share in Texas and other factors. Although the merger was nontaxable, the merger gave rise to certain temporary differences for which deferred taxes have been recognized. The results of operations for the Pioneer acquisition have been included in our consolidated financial results beginning on the April 1, 2022 closing date. Consideration Under the terms of the merger agreement, each outstanding share of Pioneer common stock was converted into 1.0443 shares of FirstSun common stock (except for shareholders who properly exercised their dissenters’ rights) with cash paid in lieu of fractional shares. Accordingly, we issued 6,467,466 shares of our common stock to Pioneer shareholders in the merger valued at $230,760 based on a third-party valuation of our common stock in accordance with ASC Topic 820, Fair Value Measurements as of the closing date. We also converted Pioneer stock options into 431,645 options to purchase shares of FirstSun common stock. This conversion was valued at $5,334. We also paid cash to certain Pioneer shareholders of $4,736. Total aggregate consideration paid in the Pioneer merger was $240,830. Fair Value We recorded the estimated fair value of assets acquired and liabilities assumed based on valuations at April 1, 2022. The determination of estimated fair value required management to make assumptions related to discount rates, expected future cash flows, market conditions and other future events that are subjective in nature. Estimated fair values of the assets acquired and liabilities assumed in this transaction are as follows:
| April 1, 2022
Cash and cash equivalents | $ | 449,278 |
Investment securities | 157,859 |
Loans held-for-sale | 2,923 |
Loans | 811,300 |
Premises and equipment | 39,935 |
Bank-owned life insurance | 21,382 |
Restricted equity securities | 9,320 |
Core deposits and other intangible assets | 11,771 |
Accrued interest receivable | 3,947 |
Deferred tax assets | 19,752 |
Prepaid expenses and other assets | 7,317 |
Total assets acquired | 1,534,784 |
Deposits | 1,192,081 |
Federal Home Loan Bank advances | 159,924 |
Accrued interest payable | 407 |
Accrued expenses and other liabilities | 1,975 |
Total liabilities assumed | 1,354,387 |
Fair value of net assets acquired | 180,397 |
Purchase price | 240,830 |
Goodwill | $ | 60,433 |
Acquired loans and purchased credit impaired loans Acquired loans were recorded at fair value based on a discounted cash flow valuation methodology that considered, among other things, projected default rates, loss given default rates and recovery rates. No allowance for credit losses was carried over from Pioneer. We identified certain acquired loans as purchased credit impaired (PCI). PCI loan identification considered payment history and past due status, debt service coverage, loan grading, collateral values and other factors that may be an indication of a deterioration of credit quality since origination. Although we identified certain acquired loans as PCI, the amount was determined to be insignificant. The following table discloses the fair value and contractual value of loans acquired from Pioneer on April 1, 2022.
| Acquired Loans |  | Contractual Principal Balance
Commercial and industrial | $ | 98,351 |  |  | $ | 98,752 |
Commercial real estate | 509,173 |  |  | 516,341 |
Residential real estate | 173,094 |  |  | 174,763 |
Consumer | 30,682 |  |  | 31,982 |
Total fair value | $ | 811,300 |  |  | $ | 821,838 |
Supplemental pro forma information The following unaudited pro forma summary presents consolidated information of FirstSun as if the business combination had occurred on January 1, 2022.
|  |  | (Unaudited) Pro forma for the nine months ended September 30,
|  |  | 2022
Net interest income |  |  | $ | 178,507 |
Provision for loan losses |  |  | 11,600 |
Net interest income after provision for loan losses |  |  | 166,907 |
Noninterest income |  |  | 72,375 |
Noninterest expenses |  |  | 173,864 |
Income before income taxes |  |  | 65,418 |
Provision for income taxes |  |  | 13,227 |
Net income |  |  | $ | 52,191 |
Earnings per share: |  |  |
Net income available to common stockholders |  |  | $ | 52,191 |
Basic |  |  | $ | 2.30 |
Diluted |  |  | $ | 2.24 |
The unaudited pro forma amounts for these periods includes adjustments for interest income on loans and investment securities acquired, amortization of intangibles arising from the transaction, adjustments for interest expense on deposits and Federal Home Loan bank advances acquired, adjustments for merger related expenses incurred, and the related income tax effects of all these items and the income tax costs or benefits derived from the income or loss before taxes of Pioneer. The unaudited pro forma amounts are not necessarily indicative of the results of operations that would have occurred had the transaction been effected on the assumed date.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 805 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479907/805-20-50-5 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent + Details
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