FirstSun Capital Bancorp (NASDAQ:FSUN) executives said the company finished 2025 with what management described as strong operating momentum, highlighted by fourth-quarter revenue growth, an expanding net interest margin, and higher fee income, while continuing to monitor “lumpy” credit performance typical of a commercial and industrial (C&I)-heavy loan book.
Fourth-quarter performance and operating leverage
Chief Executive Officer and President Neal Arnold said the company delivered adjusted net income of $26.9 million in the fourth quarter, translating to adjusted diluted EPS of $0.95. Arnold also cited an adjusted return on assets of 1.27%.
Chief Financial Officer Rob Cafera said adjusted diluted EPS in the fourth quarter was the company’s best quarter of the year. He also said FirstSun generated $11.5 million of positive adjusted operating leverage for the full year, reflecting the company’s efforts to reinvest in the franchise while maintaining profitability.
Loan and deposit trends
Cafera said FirstSun posted average loan growth of 8.5% annualized in the fourth quarter, with approximately $350 million in new loan fundings. While the fourth quarter is typically seasonally slower for new fundings, Cafera said the year-over-year level was up 30% from the fourth quarter of 2024.
Despite average balance growth, he noted period-end loan balances were flat due to late-quarter paydowns and a 3 percentage point drop in overall line utilization. For the full year, net loan growth was about $300 million, or nearly 5%, with most of that growth in C&I lending. Management said it plans to continue investing in the franchise, including adding to C&I teams in higher-growth markets during 2026.
On deposits, Cafera said balances were “relatively flat” in the fourth quarter on both an average and period-end basis. While he said that was not the company’s desired outcome, management emphasized a continued focus on deposit mix. Cafera cited average balance growth in transaction products and period-end growth in money market accounts, along with a “noticeable decline” in consumer CD balances.
For the full year, Cafera said total deposits increased more than $400 million, or approximately 6.5%, led by growth in money market, non-interest-bearing, and interest-bearing accounts, partly offset by lower consumer CDs. The company ended the year with a loan-to-deposit ratio of about 93.9%, a slight improvement from the third quarter.
Looking ahead on a standalone basis, Cafera said FirstSun’s expectations for 2026 loan and deposit growth are “much the same,” with mid-single-digit average balance growth on a ratable basis throughout the year.
Margin drivers and 2026 outlook
Cafera said the fourth-quarter NIM of 4.18% was up 11 basis points from the third quarter and marked the 13th consecutive quarter above 4%. He attributed the quarter’s net interest income and margin trend largely to lower funding costs, including a 21 basis point decline in interest-bearing deposit costs and lower wholesale borrowing costs following a subordinated debt payoff completed at the beginning of the quarter.
For 2026, Cafera said FirstSun expects mid-single-digit growth in net interest income, with NIM “remaining stable” relative to full-year 2025 performance. In response to analyst questions, management said its outlook assumes two rate cuts, and Cafera cautioned that deposit pricing competition remains intense.
On deposit pricing, Cafera said FirstSun moved rates when macro rates moved and will continue to do so, while maintaining a focus on operating account growth and money market growth rather than competing aggressively in CDs. In response to questions about betas, he said the company expects deposit beta to track “a little lighter” than historically due to competition and suggested it would likely be below the “40%+ betas” the company enjoyed in the past.
Cafera also provided end-of-period pricing color, saying the total cost of deposits was around 198 basis points for the quarter and “closer to 190” at the end of December. He also said the company’s promotional money market offering on the consumer side was “around the 3.45 handle,” with balance qualifiers.
Fee income, expenses, and credit
Non-interest revenue totaled $26.7 million in the fourth quarter, according to Cafera, about $400,000 higher than the third quarter and nearly 24% above the fourth quarter of 2024. He said the sequential increase was driven primarily by loan syndication and swap revenues, partially offset by a “nominal decline” in mortgage revenue. Treasury management and interchange revenues also increased during the quarter.
For the full year, Cafera said non-interest revenue increased about $12.1 million, or roughly 13%, led by service fee growth in mortgage and treasury management, which were up 21% and 18%, respectively. For 2026, he said the company expects non-interest revenue growth in the “low double-digit to low teens range.”
On expenses, Cafera said adjusted non-interest expense in the fourth quarter (excluding merger-related expenses) increased by about $1 million from the third quarter, primarily due to other non-interest expenses. He attributed the increase largely to writing off remaining deferred expenses tied to the early-quarter subordinated debt redemption, as well as some real property maintenance costs. The adjusted efficiency ratio improved modestly to 63.36% due to revenue growth.
Cafera guided to mid- to high-single-digit adjusted non-interest expense growth in 2026. When asked about hiring and investment plans, Arnold said the company expects to add to C&I teams in both Texas and Southern California, noting increased opportunity to hire bankers in Texas amid heightened M&A activity there.
On credit, Arnold said the fourth quarter included a charge on a telecom loan that had been partially charged off in prior quarters and was the largest driver of total charge-offs for the quarter. He said management has not seen “pervasive credit issues” across sectors or geographies, but continues to monitor conditions closely.
Cafera said fourth-quarter provision expense was $6.2 million, bringing the allowance for credit losses to 1.27% of loans, up one basis point from the third quarter, with provisioning driven primarily by net portfolio downgrades. He said classified loans declined about 5% from the prior quarter and non-performing loans decreased about 13%.
For the full year, Cafera said the net charge-off ratio was about 43 basis points, with roughly 75% of charge-off dollars tied to two C&I loans: the telecom credit and a cross-border credit referenced earlier in the year. For 2026, he said management expects the allowance to remain in the “mid to high 120s” basis points, with a net charge-off ratio in the “mid to high 20s” basis points.
In response to a question about higher special mention loans, Arnold and Chief Credit Officer Jennifer Norris said the trend reflected pressure from macro interest rates, and Norris added there were no pervasive themes, describing it as “lumpy” and tied primarily to one name.
Capital position and First Foundation merger planning
Cafera said tangible book value per share increased $3.89, or about 11.5%, from year-end 2024 to $37.83, and the company ended the year with a common equity tier 1 ratio of 14.12%.
Management also discussed the pending merger with First Foundation, emphasizing ongoing integration planning and balance sheet optimization efforts. Cafera said that when he referenced 2026 outlook items on the call, those comments were on a standalone basis and did not reflect the proposed merger’s impact. He said the company remains encouraged by progress on integration and balance sheet repositioning and is “right on schedule” for its execution plan despite interest rate changes.
When asked about post-close deposit and funding flexibility, Cafera said the combined company would remain focused on repositioning and reducing higher-cost funding as term funding matures, while maintaining a relationship-led strategy. Arnold added that FirstSun anticipates opportunities to apply its retail deposit strategy in Southern California branches and sees potential treasury management opportunities tied to First Foundation’s multifamily client base.
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.
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