FirstSun Capital Bancorp reported a $21M core profit, beating Piper Sandler's $0.12 estimate, as the bank's post-merger downsizing cut costs and TBV dilution.
FIRSTSUN CAPITAL BANCORP currently carries an Alpha Score of n/a, giving AlphaScala's model a neutral read on the setup.
FirstSun Capital Bancorp posted a $22.9 million second-quarter net loss, weighed down by two previously disclosed loan charge-offs. The headline number masked a core result that blew past analyst expectations.
After stripping out one-time merger costs and an elevated loan-loss provision, the Denver-based bank reported adjusted net income of $21 million, or $0.45 a share. Piper Sandler analyst Matthew Clark had forecast a core profit of $0.12. Clark attributed the upside to lower operating expenses and stronger spread and fee income.
Shares jumped 13% to $39.34 on Tuesday.
The $22.9 million loss included a $22 million charge-off on a loan to a materials distributor that FirstSun says provided fraudulent accounts-receivable reports. The annualized net charge-off ratio hit 1.45% of average loans, up from 0.63% in the first quarter.
FirstSun completed its $785 million all-stock acquisition of Dallas-based First Foundation Inc. on April 1. In June, it sold an $890 million portfolio of First Foundation-originated multifamily loans. The sale was part of a broader plan to shed $5 billion in high-cost deposits and borrowings along with another $5 billion in risky or low-yielding loans.
By the end of the second quarter, FirstSun had cut $3.9 billion of loans, $2.5 billion of deposits and $1.4 billion of Federal Home Loan Bank borrowings. Chief Financial Officer Rob Cafera told analysts on a conference call that the downsizing was on track. “All the balance-sheet repositioning that we targeted for the second quarter was completed,” Cafera said. “This was certainly one of our highest strategic priorities immediately following the closing of the transaction. We can now shift our focus to leveraging our business model across our expanded geography.”
The bank shrank its balance sheet by 5% during the quarter, to $15.7 billion in assets.
Progress on the balance-sheet remix, along with lower-than-projected merger expenses, prompted FirstSun to cut its estimate of tangible-book-value dilution from the First Foundation deal to 10%, down from the 14% figure disclosed when the transaction was announced in October.
Criticized loans jumped to $895 million at June 30 from $296 million three months earlier. Cafera attributed about 76% of the increase to the acquired First Foundation credits. The charge-offs drew scrutiny from analysts.
Raymond James analyst Michael Rose noted that FirstSun’s loan losses have been higher than many peers “the past couple years.” He asked how investors should feel comfortable that underwriting is under control.
Chief Executive Neal Arnold defended the bank’s credit culture. He said the emphasis on commercial-and-industrial lending can produce uneven, “lumpy” results. “It’s hard to forecast when an operator tips over,” Arnold said. “We don’t like losing money any better than anyone else. The reality is we have no loans anywhere close to our legal lending limit, and we take concentration seriously.”
Cafera predicted credit would improve. He forecast the net charge-off ratio would drop into the “mid-teens” of basis points in the second half of 2026. “We believe we will return to a more normalized level of charge-offs to average loans looking forward into 2027,” the CFO said.
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