FSUN — FirstSun Capital Bancorp · 2026-09-11 · Verdict: WATCH · Conviction 2
Price $40.13 (screen row, universe_v2.csv, run dated 2026-09-11; no live price) · Mkt cap $1.88B (46,765,434 shares) · EV n/m (bank) · EV/EBIT n/m (bank) · P/TBV 1.14x · P/E 11.0x normalised · CET1 11.95% · ADV $10.9M Sources read: 10-K 2026-03-06 (Items 1, 1A, 7), 10-Q 2026-08-10 (Item 2), DEF 14A 2026-04-21, 8-Ks 2026-06-25, 2026-07-09, 2026-07-27 (Q2 release and deck), Q2 2026 earnings call transcript, Form 4 summary (12m).
Desk stats - Revenue trend. Net interest income $143.2M in Q2 2026 versus $78.5M a year earlier (+82%), noninterest income $40.9M versus $27.1M, essentially all bought: First Foundation closed 1 April 2026 and added $11.2B of assets and $8.8B of deposits (10-Q, Item 2). Core loans excluding acquired balances shrank 6% annualised in Q2; core deposits grew about 5% (Q2 call, CFO). - Normalised after-tax profit. Q2 2026 GAAP pre-tax $(27.97)M. Add merger related expenses $57.559M (10-Q non-GAAP reconciliation) and $27.4M of provision above a 45bp normalised charge-off rate (Q2 provision $40.4M; 45bp on $11.57B of loans is about $13M a quarter). Normalised pre-tax $56.99M a quarter, $227.96M annualised, taxed at 25% is $170.97M, $3.66 a share. GAAP beside it: a $(1.27)M net loss for H1 2026, versus $97.9M and $3.47 diluted for 2025 (10-K 2025, Item 7). - Multiple (bank lane; EV/EBIT not used). $40.13 / $3.66 = 11.0x normalised, and 8.0x management's ">$5.00" 2027 EPS (Q2 call, CFO). P/TBV 1.14x on TBV per share of $35.16 at 30 June 2026. - Financial-lane equivalents. ROTCE 5.86% adjusted in Q2 2026, 9.95% GAAP (10.21% adjusted) for 2025, about 10.4% normalised. Tangible BVPS growth minus 1.7% year over year ($35.16 versus $35.77), minus 7.1% since 31 December 2025. CET1 11.95%, TCE/TA 10.59%, wholesale funding 6.8%. - Is the growth sustainable? Bought, guided to low single digits through year end then mid single digits in 2027. Roughly half of normalised pre-tax profit is purchase-accounting accretion, which is finite. - What the screen got wrong. Nearly every line. It paired post-merger equity of $1.837B (CY2026Q2I) with a pre-merger share count of 27,923,333 (CY2026Q1I); actual shares are 46,765,434. Market cap is $1.88B, not $1.12B; P/TBV 1.14x, not 0.68x. The "+67.2% tangible BVPS growth" is not growth, it is equity bought by issuing 18.8M shares while TBV per share fell about 10%. The 11.4x P/E divides 2025 net income by the old share count when H1 2026 was a loss.
1. What the business actually does
FirstSun is the Denver-headquartered holding company for Sunflower Bank, N.A. (Dallas, founded 1892): a commercial bank with a heavy C&I tilt, a mortgage platform licensed in 44 states and a wealth business (10-K 2025, Item 1). It ended 2025 with $8.5B of assets across Texas, Kansas, Colorado, New Mexico, Arizona, California and Washington. First Foundation added Southern California, Florida, Nevada and Hawaii, an investment adviser and a $2.6B multifamily book. Today: $15.7B of assets, $11.6B of loans, $13.4B of deposits, 99 branches.
2. Why it is mispriced: the edge case
There is none I can defend. The optics are ugly (a GAAP loss, a 10% cut to tangible book, 1.45% annualised charge-offs) and the tidy story is that they hide a bank management says earns north of $5 a share in 2027. But the stock sits 3% off its 52-week high with a 14% six-month return (universe_v2.csv), and 1.14x tangible book on a bank earning a 10% ROTCE is a market price, not a discard. The screen's 0.68x-book bargain was an arithmetic error, not a crowd error, and no edge case caps this at WATCH.
3. Credit quality, margin and deposits
Criticized loans rose to $895.2M, 7.7% of loans, from 4.7% at year-end 2025; roughly 76-78% of the increase came from the acquired book, mostly multifamily, which alone is 40% of criticized balances at a 68% weighted LTV with guarantees on about 94% of it (10-Q, Item 2; Q2 call, CFO). Nonperforming loans went to $190.1M, 1.64% of loans, from 0.91%. Q2 charge-offs of $42.4M were 82% driven by two legacy FirstSun C&I credits: a $23.6M asset-based loan to a materials distributor the bank believes made fraudulent misrepresentations, charged off $22.0M, and a $16.0M technology loan charged off $12.9M (8-K 2026-07-09).
Management calls both isolated; the filings argue the other way on trend. Net charge-offs were 0.13% in 2023, 0.32% in 2024 and 0.43% in 2025, the last also "elevated primarily due to write-downs of two customer relationships in our C&I loan portfolio" (10-K 2025, Item 7), and are guided to the high 50s in basis points for 2026. Four straight years of rising C&I losses, each called idiosyncratic. Asked directly, the CEO said the bank is "more of a C&I lender than a lot of peers, so our performance is going to be lumpier," and no third-party review beyond merger diligence has been commissioned (Q2 call).
NIM was 3.58%, but that includes 68bp, or $27.2M, of purchase-accounting discount accretion, so core NIM is nearer 2.90%. The remaining net discount was $307M at 30 June, with guided accretion of $70-75M in 2026 and $85-90M in 2027 (Q2 deck). Noninterest-bearing deposits fell to 18.1% of total from 23.1%, largely because acquired balances classed as noninterest-bearing but carrying an economic cost in customer service expense were exited (Q2 call, CFO).
4. Balance sheet and capital allocation
CET1 11.95% against an 11% operating target, total capital 14.13%, tier 1 leverage 9.47%, $6.7B of borrowing availability (Q2 deck). A $150M buyback was authorised 24 July 2026 over four quarters, about 8% of the market cap at 1.14x tangible book. Insider ownership is real: directors and officers hold 10.49% of voting shares, Mollie Carter 5.80%, JLL/FCH 7.94%, Wellington 6.78%, Benjamin Mackovak of Strategic Value Bank Partners 2.61% (DEF 14A). No open-market insider buys or sales in twelve months, so no signal either way (Form 4 summary).
5. Management: said versus did
The repositioning was promised for Q2 and delivered, closing $890M of multifamily and $336M of municipal loan sales in June (8-K 2026-06-25). Cost saves were promised to overachieve, and by Q2 a run-rate near 65% of the $68M target was realised ahead of schedule; TBV dilution landed near 10% against 14% guided. Against that, the credit guide has been reset twice inside a year, and the 2023 LTIP paid on TBV-per-share growth of 12.7% versus a 13.1% target while revenue-per-share growth of 8.0% missed an 11.1% target (DEF 14A).
6. Valuation
Base: 2027 EPS $4.50, haircutting management's $5.00 for charge-offs at 35-40bp rather than the low-20s assumed, at 10x gives $45, about 1.15x a 2027 tangible book near $39. Bear: credit is a pattern not an event, 2027 charge-offs 80bp ($93M), accretion fading faster than core NIM builds, EPS $3.00 at 8.5x or 0.85x tangible book gives $26-30. Bull: cost saves land, adjusted efficiency high 50s, NIM high 3.80s, charge-offs 30bp, buyback completes, EPS $5.50 at 11x gives $60. Weighted 45/30/25 is about $43, 7% above $40.13, not enough for the risk. Reverse DCF: at 1.14x tangible book, with an 11% cost of equity and 4% growth, the price implies a sustainable ROTCE near 12%, above anything FirstSun has produced since 2023 and equal to the 2027 plan including accretion.
7. Catalysts and timeline
Core system conversion late September 2026; Q3 print late October with a fuller cost-save phase-in; Q4 2026 print late January 2027, the first clean quarter and the test of the mid-3.80s NIM and low-60s efficiency guides; buyback execution into mid-2027.
8. Risks and pre-registered kill criteria
- Criticized loans still above 7.7% of total loans, or NPLs above 1.64%, at 31 December 2026 or 31 March 2027: no improvement two quarters after the acquired book was regraded.
- Net charge-offs above 30bp annualised in any quarter of 2027, against a normalised expectation of Q4 2026's low-20s.
- NIM below 3.75% in Q4 2026 (guide mid-3.80s), or adjusted efficiency above 62% in Q1 2027 (guide high-50s to low-60s).
- Shares outstanding at 31 December 2026 not below 46.77M, meaning the $150M buyback has not started in earnest.
9. Verdict and summary
WATCH, conviction 2. FirstSun reached this desk only because the screen divided post-merger equity by a pre-merger share count: the real stock is $1.88B at 1.14x tangible book and 11x normalised earnings, and tangible book per share fell about 10% this year rather than rising 67%. What remains is a decent Southwest C&I franchise that has doubled itself with First Foundation, delivered the repositioning and cost saves it promised, and is buying back 8% of itself, carrying two live problems: a fourth consecutive year of rising C&I charge-offs each called idiosyncratic, with criticized loans at 7.7% and a new $2.6B multifamily book, and roughly half of normalised pre-tax profit coming from finite purchase-accounting accretion. At $40.13 the price already implies a sustainable 12% ROTCE, better than this bank has managed since 2023. Wait for the Q4 2026 print after the September conversion: a mid-3.80s margin, low-60s efficiency and charge-offs back in the twenties make 8x a $5 number interesting; criticized balances still climbing mean this was never cheap.
Research for discussion, not investment advice. Positions and sizing are the reader's decision.