FirstSun Capital Bancorp Earnings Call Shows Resilient Growth

FirstSun Capital Bancorp ((FSUN)) has held its Q4 earnings call. Read on for the main highlights of the call.

FirstSun Capital Bancorp Delivers Strong Quarter Despite Credit Bumps

FirstSun Capital Bancorp’s latest earnings call struck a broadly positive tone, emphasizing resilient profitability, stable margins, and a strengthened capital base, even as management acknowledged some concentrated credit issues and persistent competition for deposits. Robust earnings, expanding revenue, and solid fee income growth were positioned as more than offsetting the impact of a handful of problematic commercial loans and flat year-end loan and deposit balances.

Strong Quarterly Profitability

Management led with earnings strength: adjusted net income reached $26.9 million in the fourth quarter, translating to adjusted diluted EPS of $0.95 and an adjusted return on average assets (ROAA) of 1.27%. These figures underscore continued solid profitability, especially notable against a still-challenging rate backdrop and sector-wide credit concerns. The firm’s ability to sustain a return profile above 1% ROAA puts it in a relatively attractive position versus many regional peers, supporting investor confidence in the core earnings power of the franchise.

Revenue and Margin Expansion

Revenue momentum was another highlight, with quarterly revenue growing at an annualized rate of 10.8% versus the prior quarter. Net interest margin (NIM) reached 4.18% in Q4, up 11 basis points from Q3 and above 4.00% for the 13th consecutive quarter. Maintaining a margin north of 4% for such an extended period is noteworthy in a higher-for-longer rate environment where many banks are experiencing compression. Management framed this as evidence of disciplined balance sheet management and pricing, offering a key differentiator for investors tracking earnings sensitivity to interest rates.

Loan Growth and Originations

The bank’s lending engine remains active. Average loans grew at an 8.5% annualized pace in Q4, supported by approximately $350 million of new loan fundings in the quarter—around 30% higher than the same period a year earlier. For the full year, net loan growth was roughly $300 million, or about 5% year over year, driven largely by commercial and industrial (C&I) lending. This C&I focus is helping fuel revenue growth but also plays into the lumpier credit outcomes highlighted later in the call.

Noninterest Revenue Strength

Fee income was a clear bright spot. Noninterest revenue in Q4 totaled $26.7 million, modestly above Q3 and up around 24% versus the same quarter last year. For the full year, noninterest revenue increased by about $12.1 million, roughly 13% year over year. Mortgage and treasury management businesses were singled out as growth engines, rising 21% and 18%, respectively. This expanding, diversified fee base provides a valuable offset to potential future pressure on spread income, appealing to investors who prize recurring, non-spread revenue streams.

Positive Operating Leverage

FirstSun continued to generate positive operating leverage, meaning revenues are growing faster than expenses. On an adjusted basis, full-year positive operating leverage totaled $11.5 million. The adjusted efficiency ratio for the quarter came in at 63.36%, slightly better than the prior period thanks to higher net revenue. While that efficiency level leaves room for further improvement relative to the most efficient peers, the direction of travel remains favorable and reinforces management’s emphasis on disciplined cost control.

Deposit and Funding Cost Improvement

On the funding side, the bank reported tangible progress in managing costs. Interest-bearing deposit costs fell by about 21 basis points during Q4, and the total cost of deposits was approximately 1.98% for the quarter, improving further to about 1.90% at the end of December. Wholesale funding costs were also favorably affected by the early payoff of subordinated debt. These moves helped support the stronger NIM and signal ongoing efforts to optimize the funding mix as price competition for deposits remains intense.

Capital and Tangible Book Value Strength

Capital and tangible book value showed significant improvement, reinforcing the balance sheet’s resilience. Tangible book value per share rose by $3.89, or about 11.5% year over year, to $37.83. The common equity Tier 1 (CET1) ratio ended the year at a robust 14.12%. These metrics give FirstSun substantial flexibility to absorb credit volatility, support loan growth, and pursue strategic initiatives, which should be reassuring to equity holders focused on downside protection.

Concentrated Credit Charge-offs

The main blemish on the quarter and full year came from credit costs, which were heavily concentrated in a few names. The full-year net charge-off ratio was about 43 basis points, with roughly 75% of charge-off dollars tied to just two C&I loans—one in the telecom sector and another cross-border credit. Q4 included an additional charge related to the telecom loan, which had already been partially charged off in prior periods. Management emphasized that these were idiosyncratic, but investors will note the heightened risk that can accompany concentrated C&I portfolios.

Provisioning and Allowance Movement

Provisioning remained elevated as the bank continued to build and adjust reserves. Provision expense in Q4 was $6.2 million, and the allowance for credit losses to loans ended the quarter at 1.27%, up one basis point from Q3. The increase was driven by net downgrades in the portfolio rather than broad-based deterioration, reflecting a cautious stance amid a still-challenging credit environment. The modest upward move in reserves suggests management is trying to stay ahead of potential issues while recognizing that recent charge-offs have been largely concentrated.

Flat Period-End Loan Balances

Despite solid average loan growth, period-end balances told a more subdued story. Loans finished Q4 essentially flat, as late-quarter paydowns and a roughly three-percentage-point drop in line utilization offset new originations. This dynamic highlights how timing and utilization can mask underlying demand trends. While not the preferred outcome, management framed the flat ending balances as more of a timing issue than a sign of waning loan demand.

Deposit Growth and Competitive Pressure

Deposits also ended the quarter relatively flat on both an average and period-end basis, falling short of internal ambitions. Consumer CDs declined, and management pointed to persistently high CD rates in many of its markets, intensifying competition for deposit funding. Looking ahead, the team expects deposit pricing competition to remain strong and believes deposit betas—how much deposit costs move relative to rates—will be higher and less favorable than historical levels of roughly 40% or more. This sets a cautious tone around funding costs even as the bank works to defend its margin.

Special Mention and Net Downgrade Trends

Credit quality indicators showed some pressure through increased special mention classifications and broader net downgrades. Management stressed that a portion of the special mention uptick stemmed from lumpy, idiosyncratic cases, including one particularly notable borrower, while a broader trend reflected the strain of higher interest expenses on certain borrowers during the year. Although these developments have been largely contained so far, investors will be watching closely to see whether these early warning signals translate into more material losses over time.

Quarterly Expense Drivers

On the expense side, adjusted noninterest costs rose by roughly $1 million compared with Q3. The increase was driven mainly by the write-off of deferred expenses related to the redemption of subordinated debt and by other real estate owned (OREO) maintenance costs. These items contributed to a modestly worse sequential adjusted efficiency ratio of 63.36%, though the move was more noise than trend. Management continued to emphasize its commitment to maintaining positive operating leverage over the longer term.

Concentration of Credit Risk in C&I

Management was candid about the inherent volatility stemming from the bank’s heavy C&I exposure. They reiterated that this concentration can produce “lumpy” credit outcomes, including episodic charge-offs and rating downgrades, as seen during the year. While this mix supports higher yields and strong NIM, it also raises the stakes on underwriting and monitoring. For investors, the message is clear: elevated earnings power comes with a degree of credit cyclicality that must be actively managed.

Forward-Looking Guidance and Strategic Focus

Looking ahead, FirstSun’s stand-alone 2026 guidance points to steady, if unspectacular, growth underpinned by margin stability and continued operating discipline. The bank is targeting mid-single-digit average balance loan growth and mid-single-digit net interest income growth, with NIM roughly stable versus 2025 and incorporating expectations for two rate cuts. Noninterest revenue is projected to grow in the low double digits to low teens, while adjusted noninterest expense is slated to rise in the mid- to high-single-digit range—indicating management expects to preserve positive operating leverage. On credit, guidance calls for an allowance for credit losses in the mid- to high-120s basis points and net charge-offs in the mid- to high-20s basis points, a marked improvement from the roughly 43 basis points seen in 2025, which was skewed by two problem loans. Deposit conditions are expected to remain competitive, with betas still elevated but likely lighter than past cycle levels, and loan and deposit growth to be managed in a balanced, “rational” manner through the year. Guidance is strictly on a stand-alone basis and reflects a strategic focus on margin defense, operating efficiency, and ongoing balance sheet repositioning.

In sum, FirstSun Capital Bancorp’s earnings call painted the picture of a bank with strong core profitability, resilient margins, and robust capital, counterbalanced by a candid acknowledgment of concentrated credit events and persistent deposit competition. Investors following the name will likely come away encouraged by the durability of earnings and fee income growth, while keeping a close eye on how the C&I book and funding costs evolve in the coming quarters.