FirstSun Capital Bancorp Q1 Earnings Call Highlights

Key Points

• First-quarter results showed strong momentum with adjusted net income $23.7M, adjusted EPS $0.84, annualized loan growth of >16%, and an expanded NIM of 4.25%, while non‑interest income made up 24.7% of revenue.
• Credit costs rose as provision expense totaled $8.3M and net charge-offs were $10.5M (driven largely by two previously-identified loans), though management said it sees no broad-based portfolio deterioration and reserves were 1.20% of loans.
• The First Foundation acquisition (closed April 1) is being actively de‑risked—about $1B of the planned $2.3B loan downsizing is complete with the remainder targeted by end‑Q2—and management expects CET1 in the low 10.7% range, mid‑2026 NIM of ~3.8% (improving to the high 3.90s by Q4) and phased cost synergies largely realized by year‑end.

FirstSun Capital Bancorp NASDAQ: FSUN highlighted strong first-quarter performance and provided an update on its recently closed acquisition of First Foundation, emphasizing ongoing balance sheet repositioning, integration progress, and expectations for 2026 profitability metrics.

First-quarter results show loan growth and margin expansion

CEO and President Neal Arnold said the company was “pleased with the momentum we saw in our business to start this year,” pointing to adjusted net income of $23.7 million, adjusted diluted EPS of $0.84, and an adjusted return on assets of 1.14%.

Arnold said FirstSun generated “very robust loan growth of over 16% annualized” in the quarter and continued to expand net interest margin to 4.25%. He also noted that non-interest income represented 24.7% of total revenue, supporting a more diversified revenue mix.

CFO Rob Cafera said loan growth was driven primarily by C&I lending, with line utilization rising 4% from year-end levels. New loan fundings totaled $528 million in the first quarter, up 47% from the fourth quarter and 32% from the first quarter of last year. Because growth was “heavier on the back end of the quarter,” Cafera said average balances grew less than period-end balances, creating what he called “a nice tailwind” for net interest income entering the second quarter.

On deposits, Cafera said balances were down slightly on both an average and period-end basis, citing typical first-quarter seasonality in certain customer segments. He added that brokered deposits declined by approximately $60 million.

Credit costs rose amid downgrades and two charge-offs

FirstSun reported higher provisioning in the quarter. Arnold attributed the increase to “a combination of factors,” including portfolio downgrades and strong loan growth. He also said the company saw “some deterioration in value realization in the event of loss.”

Cafera said provision expense was $8.3 million and allowance for credit losses was 1.20% of loans, down 7 basis points from the fourth quarter. Net charge-offs were $10.5 million, or 63 basis points annualized, driven largely by two loans:

• A charge-off on a telecom loan that had been partially reserved in the prior year
• A charge-off on an auto finance lender loan that had been fully reserved in the prior year

Cafera said both credits were part of the company’s charge-off expectations for 2026, and the two loans “drove the bulk” of net charge-offs in the quarter. He added that FirstSun was not seeing “broad-based credit issues across any particular geography” or sector, though non-performing assets have been “around 1% of the loan portfolio over the last year,” easing to 86 basis points at quarter-end.

In response to an analyst question about confidence in a lower charge-off outlook, Cafera reiterated that the company was not seeing structural problems across the portfolio and emphasized the firm’s use of a “credit-adjusted NIM” framework to evaluate risk-adjusted returns in a C&I-heavy mix. Arnold added that the lack of industry concentration makes credit harder to forecast, but the company continues to prefer C&I opportunities “because on a risk-adjusted NIM, it’s the best thing we can do.”

Acquisition integration centers on de-risking and repositioning the acquired balance sheet

The company closed its acquisition of First Foundation on April 1. Arnold said teams were seeing “great energy” and early cross-selling opportunities across branches, wealth advisory, and commercial and residential businesses. He described management’s strategy as “de-risking the acquired balance sheet through a repositioning strategy” to unlock the “core franchise,” with particular emphasis on Southern California and “deposit-rich markets of Southwest Florida.”

Cafera provided details on repositioning efforts, saying First Foundation had already reduced loans by approximately $1 billion—about 44% of the planned $2.3 billion total downsizing—prior to closing. FirstSun is working on the remaining $1.3 billion and expects to complete it by the end of the second quarter.

He added that even after the second-quarter actions are completed, the company expects continued remixing of the acquired loan portfolio, including reductions in multifamily exposure as loans reach scheduled repricing dates. Cafera cited approximately $310 million in scheduled repricing in the acquired multifamily portfolio over the remainder of 2026 and another approximately $400 million in 2027.

Cafera said the company expects to bring investor CRE concentration to below 250% of capital by the end of the second quarter, noting that while legacy FirstSun’s investor CRE concentration was under 120% at the end of the first quarter, the acquired First Foundation loans increased the combined level post-acquisition.

On the funding side, Cafera said that in April the company completed downsizing of the acquired securities portfolio and exited higher-cost funding, including all acquired FHLB term advances totaling $1.4 billion. He said proceeds from remaining second-quarter repositioning activities will be used to reduce targeted funding, including initial brokered deposit exits, with further reductions expected as maturities occur in future quarters. He said the company expects wholesale funding to decline to approximately 10% by the end of the second quarter, compared with roughly 6% at legacy FirstSun prior to the acquisition.

Cost synergies, system conversions, and updated 2026 outlook

Cafera said FirstSun has already begun realizing cost synergies and expects to be “roughly 65% phased in” by the end of the second quarter. Full realization is expected by year-end, driven by the timing of major system conversions: the most significant application conversion is scheduled for late September, followed by a wealth-platform conversion in the fourth quarter. Cafera said the company believes it could “overachieve a bit on the cost save side” once fully phased.

On purchase accounting, Cafera said preliminary work suggests fair value marks “may come down a bit” relative to expectations at the deal’s October announcement. He said this could mean “lesser level of TBV dilution” but also “a lesser level of interest rate market accretion” in future earnings.

Cafera also said FirstSun expects a slightly higher CET1 ratio than initially anticipated and indicated potential capacity for near-term share repurchases. He cited an expectation for CET1 in the “10.70s range post repositioning,” compared with 10.5% referenced at announcement. In the Q&A, Cafera said management has targeted an 11% CET1 level in internal discussions with the board.

Discussing the company’s updated 2026 outlook, Cafera said loan and deposit balances are expected to be “relatively stable” through the end of the year after repositioning and purchase accounting marks, with a return to “a balanced growth mode” thereafter. He said full-year 2026 net interest margin is expected to be in the mid-3.80% range, with a near-term drop during the second-quarter downsizing and further remixing in the third quarter before improving to the “390s” in the fourth quarter. Asked about the effect of a Fed rate cut on margin guidance, Cafera said it would have a “nominal impact,” estimating one to two basis points.

For revenue mix, Cafera said non-interest income as a percentage of total revenue is expected to decline into the lower-20% range. The adjusted efficiency ratio (excluding merger-related expenses) is expected to run in the “mid to lower 60s” for the next few quarters and reach approximately 60% in the fourth quarter. Net charge-offs are expected to end the year in the mid-20s basis points on a higher average balance base post-acquisition.

In closing remarks, Arnold said the company’s near-term focus remains on executing acquisition-related activities, completing balance sheet repositioning, successfully converting systems, and realizing cost synergies, adding that management believes these efforts will drive improved profitability and a stronger funding profile over time.

About FirstSun Capital Bancorp NASDAQ: FSUN

FirstSun Capital Bancorp engages in the provision of commercial banking services. It operates through the following segments: Banking, Mortgage Operations, and Corporate. The Banking segment consists of loans and provides deposits and fee-based services to consumer, business, and mortgage lending customers. The Mortgage Operations segment originates, sells, services, and manages market risk from changes in interest rates on one-to-four family residential mortgage loans to sell and hold. The company is founded on November 9, 1981 headquartered in Denver, CO.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.