FirstSun Capital Bancorp (FSUN) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals positive aspects such as strong noninterest revenue growth and improved TBV per share, but concerns arise from increased expenses and unclear management responses in the Q&A. The stable NIM and CET1 ratio are reassuring, yet the lack of updated guidance and potential macro pressures introduce uncertainty. These mixed signals lead to a neutral sentiment, suggesting a stock price movement within the -2% to 2% range over the next two weeks.
Key Financial Performance
Adjusted Net Income $26.9 million for the fourth quarter, representing adjusted diluted EPS of $0.95 and a 1.27% adjusted ROAA. This was driven by strong revenue growth, which was up 10.8% annualized over the last quarter, and growth in net interest margin to 4.18%.
Average Loan Growth 8.5% annualized for the fourth quarter. New loan fundings totaled approximately $350 million, up 30% over the fourth quarter of last year. Full-year net balance growth was approximately $300 million or almost 5%, primarily in the C&I portfolio.
Deposit Growth Total deposits increased over $400 million or approximately 6.5% for the full year. Growth was driven by money market, noninterest-bearing, and interest-bearing accounts, partially offset by a drop in consumer CDs.
Net Interest Margin (NIM) 4.18% for the fourth quarter, up 11 basis points from the third quarter. This was driven by improved funding costs, including a 21 bps decrease in interest-bearing deposit costs and favorable impacts from a sub-debt payoff.
Noninterest Revenue $26.7 million for the fourth quarter, up almost 24% over the fourth quarter of 2024. Full-year growth was approximately $12.1 million or 13%, driven by service fee revenues in mortgage (up 21%) and treasury management (up 18%).
Adjusted Noninterest Expense Increased by approximately $1 million in the fourth quarter compared to the third quarter, primarily due to the write-off of deferred expenses from sub-debt redemption and maintenance expenses for OREO properties. The adjusted efficiency ratio for the quarter was 63.36%.
Provision Expense $6.2 million for the fourth quarter, resulting in an ending allowance for credit loss as a percentage of loans of 1.27%, up 1 basis point from Q3. This was primarily due to net portfolio downgrades.
Charge-Off Ratio 43 basis points for the full year, with approximately 75% of charge-off dollars related to two loans in the C&I portfolio (telecom credit and cross-border credit).
Tangible Book Value (TBV) Per Share Improved by $3.89 or roughly 11.5% over 2024 year-end to $37.83.
CET1 Ratio Ended the year at 14.12%.
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Operating Highlights
Adjusted Net Income: Achieved $26.9 million in Q4 2025, with adjusted diluted EPS of $0.95 and a 1.27% adjusted ROAA.
Revenue Growth: Revenue grew 10.8% annualized over the previous quarter, with a strong net interest margin of 4.18%.
Loan Growth: Healthy average loan growth of 8.5% annualized in Q4, with $350 million in new loan fundings.
Franchise Footprint: Positioned in 7 of the 10 fastest-growing MSAs in the Southwest, with plans to grow customer base and expand in high-growth markets.
Merger with First Foundation: Progressing on integration planning and balance sheet optimization for the pending merger.
Deposit Growth: Total deposits increased by over $400 million (6.5%) in 2025, with a focus on operating and money market accounts.
Noninterest Revenue: Achieved $26.7 million in Q4 2025, up 24% YoY, driven by loan syndication, swap revenue, and treasury management services.
Efficiency Ratio: Adjusted efficiency ratio improved to 63.36% in Q4 2025, supported by net revenue growth.
Focus on Relationship-Based Banking: Continued investment in growth markets and product portfolio to support relationship-based banking model.
Credit Monitoring: Maintaining vigilance on credit conditions, with a focus on C&I portfolio quality.
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Risk or Challenges
Telecom Loan Charge-Off: The company took a charge on a telecom loan, which was partially charged off in prior quarters. This was the biggest driver of total charge-offs in the fourth quarter, indicating potential credit risk in this sector.
Credit Conditions Monitoring: While no pervasive credit issues were observed, the company continues to monitor credit conditions carefully, especially given the heavy C&I nature of its loan portfolio, which can lead to 'lumpy' credit performance.
Deposit Growth Challenges: Deposit balances were relatively flat for the fourth quarter, which was not the desired outcome. This could impact liquidity and funding costs if not addressed.
Consumer CD Decline: There was a noticeable decline in consumer CD balances, attributed to higher rates in many markets. This could affect the company's ability to attract and retain depositors.
Provisioning and Asset Quality: Provision expense for the fourth quarter was $6.2 million, driven by net portfolio downgrades. While classified and nonperforming loan balances decreased, the provisioning indicates ongoing credit risk.
Merger Integration Risks: The pending merger with First Foundation involves integration planning and balance sheet optimization, which could pose execution risks if not managed effectively.
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Guidance & Outlook
Loan Growth: For 2026, the company expects average balance growth in the mid-single-digit level for loans, with continued investment in C&I teams in higher-growth markets.
Deposit Growth: The company anticipates mid-single-digit growth in deposits on a stand-alone basis throughout 2026, focusing on operating account and money market account growth.
Net Interest Income (NII): Mid-single-digit growth in net interest income is expected for 2026, with net interest margin (NIM) remaining stable relative to 2025 performance.
Noninterest Revenue: The company projects noninterest revenue percentage growth in the low double-digit to low teens range for 2026, driven by service fee revenues in mortgage and treasury management lines of business.
Noninterest Expense: Adjusted noninterest expense percentage growth is expected in the mid- to high single-digit range for 2026.
Asset Quality: Allowance for credit losses to loans is expected to stay in the mid- to high 120s in basis points, with a net charge-off ratio in the mid- to high 20s in basis points for 2026.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What is the deposit pricing strategy for the quarter and expectations for deposit betas?
A:The deposit pricing strategy involved moving rates in line with macro rate changes, focusing on operating account growth through C&I business development and consumer money market account growth. Deposit betas are expected to track slightly lighter than historical levels due to competition, but not significantly below the 40%+ historical levels.
Q:What level of investment in the West Coast is included in the stand-alone expense guide, and what incremental expenses are expected post-deal closure?
A:The expense guide includes infrastructure needs for the combined company, with no additional infrastructure expenses expected. Investments are focused on adding to the sales force in Texas and Southern California, particularly in new markets brought by First Foundation.
Q:What drove the special mention increase in the quarter?
A:The increase was attributed to macro interest rate pressures reverberating through the portfolio, with no pervasive themes. It was primarily due to one particular name, and the pressure is expected to abate as interest rates have come down.
Q:What is the commentary on loan pricing and C&I spreads?
A:Loan pricing and C&I spreads have remained consistent with no material changes. Credit spreads vary slightly across markets but have held steady in the focused areas.
Q:What is the impact of recent interest rate cuts on the pending acquisition and financial metrics?
A:Recent rate cuts have not caused any changes in expectations for the acquisition. Balance sheet repositioning and integration planning are on schedule, and macro rate changes have not significantly impacted the financial metrics.
Q:What is the trajectory of the net interest margin (NIM) and its drivers?
A:NIM is expected to remain stable, supported by contributions from both deposit pricing and asset sides. Two rate cuts are factored into expectations, and deposit pricing competition is anticipated to influence NIM directionally.
Q:What is the opportunity in the Southern California and Texas markets, and how does it relate to expenses?
A:Southern California remains a priority with robust deposit opportunities and treasury management potential. Texas has shown more opportunities than initially expected due to M&A activity, leading to opportunistic hiring. Expense increases are attributed to inflationary aspects and incremental hiring in these regions.
Q:How will the loan-to-deposit ratio and deposit strategy evolve post-deal closure?
A:The loan-to-deposit ratio is expected to decrease to the mid-80s range, providing flexibility to let go of higher-cost deposits. The focus will remain on building relationships and leveraging retail strategies in Southern California for deposit growth.
Q:What is the spot rate on deposits at the end of December, and what is the current money market offering?
A:The spot rate on deposits at the end of December was approximately 1.90%. The money market offering is competitive, with promotional rates around the 4% handle for top-tier balances.
Q:Are there any updates on pro forma guidance relative to the time of deal announcement?
A:There are no updates on pro forma guidance at this time. The company remains optimistic about the prospects and continues to align with expectations outlined in the investor relations deck.
Q:Review of Unclear Management Responses
A:Management avoided providing direct answers or lacked clarity on the following: 1. Specific details on the incremental expense investment needed post-deal closure. 2. Precise impact of recent interest rate cuts on financial metrics of the acquisition. 3. Updates on pro forma guidance relative to the time of deal announcement, as no new information was provided.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Bancorp Full
CEO President
CI nature
COO Director
Cafera Chief
Conference Instructions
Development remark
Development today
Director result
FirstSun Foundation
Form SEC
Foundation connection
Foundation progress
Foundation stockholder
Full Conference
Information person
Instructions reminder
Jacques FirstSun
MSAs Southwest
President COO
President Cafera
ROAA interest
Reform Director
SEC Information
SEC filing
SEC participant
Southwest customer
addition focus
appendix
merger Foundation
proxy statement
statement prospectus
FSUN Transcript
FirstSun Capital Bancorp (FSUN) Q4 2025 Earnings Call Transcript
Unknown1-27
The earnings call reveals positive aspects such as strong noninterest revenue growth and improved TBV per share, but concerns arise from increased expenses and unclear management responses in the Q&A. The stable NIM and CET1 ratio are reassuring, yet the lack of updated guidance and potential macro pressures introduce uncertainty. These mixed signals lead to a neutral sentiment, suggesting a stock price movement within the -2% to 2% range over the next two weeks.
Earnings call transcript: FirstSun Capital Bancorp Q1 2025 misses EPS forecast, stock dips
Unknown4-29
The earnings call presents a mixed outlook. Financial performance shows moderate growth in net income and EPS, but guidance is weak with macroeconomic uncertainties and regulatory concerns. The positive aspects include loan and deposit growth and improved capital ratios. However, non-accrual loans, competitive pressures, and cautious M&A stance temper optimism. The Q&A reveals management's cautious tone, especially on M&A, and no clear catalysts for strong stock movement. Given the balanced positives and negatives, a neutral stock price movement is expected.
FSUN Slides
FSUN Report
Frequently Asked Questions
Where does this earnings call transcript come from?
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
