FirstSun Capital Bancorp Shines Despite Challenging Q2 Earnings
Despite reporting a net loss of $23 million for the second quarter, FirstSun Capital Bancorp is looking forward to a bright future thanks to its acquisition of First Foundation.
The company's Director of Investor Relations and Business Development, Ed Jacks, believes that the expanded footprint in Southern California markets and the premier wealth management platform acquired with First Foundation will strengthen their franchise and position them for future success. "I would argue that Southern California is the best core deposit market in the United States," Jacks stated.
The acquisition also adds Southwest Florida markets to FirstSun's existing deposit markets across Texas, Kansas, New Mexico, Colorado, and Arizona, providing a solid foundation for future growth. "We're very excited about all the growth opportunities in front of us with this acquisition," Jacks said.
However, the bottom line performance was mixed, with significant merger-related expenses and credit loss provisioning contributing to the net loss. The company reported $44 million in after-tax merger-related expenses and $30 million in after-tax credit loss provisioning.
Despite the challenges, FirstSun made significant progress in several areas. The balance sheet repositioning strategy executed upon acquisition was a key strategic step in reducing risk and strengthening their capital profile. "We believe we have a strong balance sheet with less concentration risk, less liquidity risk, less interest rate sensitivity, and a stronger capital profile as a result of these repositioning actions," Jacks noted.
The company also saw adjusted annualized growth of approximately 5% in deposits, excluding the impact of acquired First Foundation deposits net of downsizing. Deposit growth in Southern California drove this growth, with service fee revenue performance strong at 22% of revenues for the quarter.
FirstSun's cost save realization was significant, and they are pleased to note that tangible book value dilution related to the acquisition is less than their original estimate, coming in at approximately 10%. The company also announced a share repurchase program totaling up to $150 million, with repurchases targeted over the next four quarters.
On the asset quality side, FirstSun saw elevated levels of losses in the second quarter due to two larger loan charge-offs totaling $35 million pre-tax. However, these losses were driven by borrower-specific situations rather than broad-based significant loss content across their portfolio.
