DEFM14A: FirstSun, First Foundation Announce Merger to Form $17B Bank

FirstSun Capital Bancorp and First Foundation Inc. plan to merge, creating a premier Southwest bank with approximately $17 billion in assets and projecting significant EPS accretion by 2027.

Summary

• First Foundation Inc. will merge with and into FirstSun Capital Bancorp, with FirstSun as the surviving corporation.
• First Foundation Bank will merge into Sunflower Bank, National Association, a wholly-owned subsidiary of FirstSun.
• Each outstanding share of First Foundation common stock will convert into 0.16083 shares of FirstSun common stock, plus cash in lieu of fractional shares.
• First Foundation preferred stock will convert into FirstSun common stock at a rate of 0.16083 shares of FirstSun common stock for every 1,000 shares of First Foundation common stock into which the preferred stock was convertible.
• Outstanding First Foundation warrants will be exercised on a cashless basis immediately prior to the merger, with holders receiving First Foundation Series C Non-Voting Common Equity Equivalent Stock and a pro rata share of an aggregate cash payment of approximately $17.5 million.
• Legacy FirstSun stockholders are expected to own approximately 59.5% and legacy First Foundation stockholders approximately 40.5% of the combined company's common stock immediately following the merger.
• The merger is intended to qualify as a tax-free reorganization under Section 368(a) of the Internal Revenue Code.
• The combined company is projected to have approximately $17 billion in assets.
• FirstSun will implement a comprehensive balance sheet repositioning plan post-merger, involving the sale, securitization, or run-off of select First Foundation loans and a reduction in higher-cost funding sources.
• The FirstSun board of directors will increase to 13 members, with 8 from FirstSun and 5 from First Foundation.

Sentiment

Score: 8

Explanation: The filing outlines a strategically compelling merger with strong projected financial benefits, including significant EPS accretion and IRR, and a clear plan for balance sheet repositioning. While integration risks and executive interests are noted, the overall tone and detailed financial projections indicate a highly positive outlook for the combined entity.

Positives

• The merger is strategically compelling, creating a stronger company with elevated growth and meaningful long-term value for First Foundation stockholders.
• The combined company will have an expanded presence in large and fast-growing markets in the United States.
• The transaction is expected to provide economies of scale, enhanced ability to invest in technology and innovation, expanded product offerings, improved efficiencies, and reduced costs.
• The combined entity will benefit from complementary lending expertise, combining FirstSun's commercial and industrial lending with First Foundation's multi-family lending platform.
• The merger will strengthen the wealth management platform through immediate growth in assets under management and the addition of private banking services.
• The combined company is expected to deliver compelling operating and return metrics by 2027, including EPS accretion of 30%+ and an Internal Rate of Return (IRR) exceeding 20%.
• Pro forma financial metrics include a tangible common equity to tangible assets ratio of 11.5%, a Common Equity Tier 1 (CET1) capital ratio of approximately 12.7%, a return on average assets of 1.45%, a return on average tangible common equity of 13.3%, and a net interest margin of approximately 3.99%.
• Estimated pre-tax cost savings for the transaction are approximately 35% of First Foundation's run-rate expense base.
• The transaction is generally tax-free for U.S. federal income tax purposes for First Foundation stockholders receiving FirstSun common stock.

Negatives

• The market value of the merger consideration will fluctuate with FirstSun's stock price, as the exchange ratio is fixed.
• Fairness opinions obtained by the boards do not reflect changes in circumstances after their respective dates (October 27, 2025 for Stephens, October 26, 2025 for KBW, October 25, 2025 for Jefferies).
• Combining the companies and executing the balance sheet repositioning may be more difficult, costly, or time-consuming than expected.
• There is a risk that the anticipated benefits and cost savings of the merger may not be fully realized or may take longer than expected.
• Integration efforts could result in the loss of key employees, disruption of ongoing businesses, or inconsistencies in standards, controls, procedures, and policies.
• Substantial expenses related to the merger and integration are expected, which could exceed anticipated savings, particularly in the near term.
• Regulatory approvals may be delayed or impose conditions that are not presently anticipated or could have an adverse effect on the combined company.
• The unaudited pro forma combined financial information is preliminary and actual financial condition and results may differ materially.
• First Foundation's directors and executive officers have interests in the merger that differ from general stockholders, including severance payments and accelerated equity vesting.
• Stockholder litigation could prevent or delay the completion of the merger or negatively impact business operations.
• Termination of the merger agreement under certain circumstances could result in significant termination fees ($31.39 million for First Foundation, $45.089 million for FirstSun).
• FirstSun will assume First Foundation's outstanding debt obligations, which could affect the combined company's capital position.
• First Foundation will be subject to business uncertainties and contractual restrictions while the merger is pending.
• The merger agreement contains provisions that may discourage other companies from trying to acquire either First Foundation or FirstSun.
• First Foundation stockholders will have a reduced ownership and voting interest in the combined company.
• There may continue to be a limited trading market for FirstSun common stock, and no public trading market is expected for FirstSun non-voting common stock, limiting liquidity.

Risks

• The market value of the merger consideration is uncertain due to the fixed exchange ratio and fluctuating FirstSun common stock price.
• Fairness opinions do not reflect changes in circumstances after their respective dates.
• The success of the merger and bank merger depends on numerous uncertain factors, including regulatory approvals and integration.
• Combining FirstSun and First Foundation and the balance sheet repositioning may be more difficult, costly, or time-consuming than expected, potentially failing to realize anticipated benefits.
• Inability to retain First Foundation personnel successfully after the merger is completed.
• The combined company expects to incur substantial expenses related to the merger and integration.
• Regulatory approvals may not be received, may take longer than expected, or may impose materially burdensome conditions.
• The unaudited pro forma combined financial information is preliminary and actual financial results may differ materially.
• Inability to accomplish the contemplated balance sheet repositioning could have a material adverse effect on results of operations or financial condition.
• Certain First Foundation directors and executive officers may have interests in the merger that differ from general stockholders.
• Stockholder litigation could prevent or delay the completion of the merger.
• The merger agreement may be terminated, potentially requiring payment of a termination fee.
• FirstSun will assume First Foundation's outstanding debt obligations, which could affect the combined company's ability to manage its capital position.
• First Foundation will be subject to business uncertainties and contractual restrictions while the merger is pending.
• The merger agreement may discourage other acquisition proposals for either company.
• Shares of FirstSun common stock received by First Foundation stockholders will have different rights.
• First Foundation stockholders will have a reduced ownership and voting interest in the combined company.
• Certain holders may receive non-voting common stock or modified warrant terms, affecting voting rights and potential returns.
• There may continue to be a limited trading market for FirstSun common stock, and no public trading market is expected for FirstSun non-voting common stock.
• Issuance of new FirstSun common stock may adversely affect its market price due to dilution.

Future Outlook

The merger is expected to create a premier bank in the Southwest with approximately $17 billion in assets. FirstSun plans to immediately implement a comprehensive balance sheet repositioning plan to strengthen the combined company's capital position, enhance its credit profile, improve liquidity, and support a more diversified, relationship-focused business model. The transaction is projected to be accretive to earnings per share by over 30% by 2027 and achieve an Internal Rate of Return exceeding 20%.

Management Comments

• Neal E. Arnold, Chief Executive Officer and President of FirstSun Capital Bancorp, and Thomas C. Shafer, Chief Executive Officer of First Foundation Inc., expressed their support for the merger.
• FirstSun's board of directors unanimously determined that the merger agreement and transactions are advisable and in the best interests of FirstSun and its stockholders.
• First Foundation's board of directors unanimously determined that the merger agreement and transactions are advisable and in the best interests of First Foundation and its stockholders.

Industry Context

This merger creates a larger, more diversified regional bank in the Southwest, addressing industry challenges such as competitive pressures, credit quality, and the need for scale. The combined entity aims to leverage an expanded branch footprint in Southern California and enhance wealth management services, positioning itself for growth in attractive markets.

Comparison to Industry Standards

• The pro forma combined company is expected to achieve a tangible common equity to tangible assets ratio of 11.5%, a Common Equity Tier 1 (CET1) capital ratio of approximately 12.7%, a return on average assets of 1.45%, and a return on average tangible common equity of 13.3% by 2027, which are stated to be well above peer levels.
• The pro forma net interest margin is projected at approximately 3.99% by 2027.
• The pro forma ratio of Commercial Real Estate (CRE) to total risk-based capital is expected to be 206% by 2027, and 238% at closing, indicating a managed concentration.
• First Foundation's LTM Core Return on Average Assets was (0.05%) as of June 30, 2025, and (1.31%) as of September 30, 2025, significantly below the median of selected comparable companies (0.42%).
• First Foundation's Price/Tangible Book Value Per Share was 0.55x, below the median of selected comparable companies (0.81x).
• FirstSun's LTM Core Return on Average Assets was 1.22% as of June 30, 2025, and 1.23% as of September 30, 2025, which is above the median of its selected comparable companies (1.05%).
• FirstSun's Price/Tangible Book Value Per Share was 1.10x, below the median of its selected comparable companies (1.38x).
• The implied transaction value for First Foundation of 0.80x Tangible Book Value (at Sep 30, 2025) is below the median of relevant nationwide low-profitability transactions (1.30x) and all-stock transactions (1.35x).
• The implied transaction value for First Foundation of 32.5x 2026 Estimated Earnings is significantly higher than the median of relevant nationwide low-profitability transactions (14.9x) and all-stock transactions (11.4x), reflecting First Foundation's lower standalone earnings projections.

Management Changes

Corporate Governance

Legal Proceedings

• Stockholder litigation against either party or their directors/officers relating to the merger is a potential risk, which could delay or prevent completion and incur significant costs.
• No specific pending or threatened legal, administrative, arbitral, or other proceedings, claims, actions, or governmental/regulatory investigations against First Foundation or its Subsidiaries that would reasonably be expected to have a Material Adverse Effect are disclosed, except as noted in the First Foundation Disclosure Schedule.
• No specific pending or threatened legal, administrative, arbitral, or other proceedings, claims, actions, or governmental/regulatory investigations against FirstSun or its Subsidiaries that would reasonably be expected to have a Material Adverse Effect are disclosed, except as noted in the FirstSun Disclosure Schedule.

Related Party Transactions

• No transactions or series of related transactions, agreements, arrangements, or understandings between First Foundation or its Subsidiaries and any current or former director or executive officer or 5% beneficial owner (or their family/affiliates) of the type required to be reported in any First Foundation Report pursuant to Item 404 of Regulation S-K that have not been so reported, except as set forth in First Foundation Reports since January 1, 2025.
• No transactions or series of related transactions, agreements, arrangements, or understandings between FirstSun or its Subsidiaries and any current or former director or executive officer or 5% beneficial owner (or their family/affiliates) of the type required to be reported in any FirstSun Report pursuant to Item 404 of Regulation S-K that have not been so reported, except as set forth in FirstSun Reports.

Stakeholder Impact

• **Shareholders (First Foundation):** Will receive FirstSun common stock, potentially non-voting common stock, and cash for fractional shares. Their ownership and voting interest in the combined company will be reduced. Certain significant stockholders are subject to lock-up agreements for 24 months post-merger.
• **Shareholders (FirstSun):** Will continue to own their shares, but will experience dilution due to the issuance of new shares to First Foundation stockholders.
• **Employees (First Foundation):** Continuing employees will receive base salary/wage no less than prior to merger, target annual cash bonus opportunities no less favorable than similarly situated FirstSun employees, and employee benefits no less favorable in aggregate. Severance benefits are provided for qualifying terminations. First Foundation's 401(k) plan may be terminated, with employees eligible to roll over to FirstSun's plan.
• **Customers:** Potential adverse reactions or changes to business or employee relationships are a risk. The balance sheet repositioning aims to focus on relationship-based lending and funding, potentially impacting certain customer segments.
• **Creditors:** FirstSun will assume First Foundation's outstanding debt obligations, which could affect the combined company's ability to manage its capital position.
• **Regulatory Authorities:** The merger requires multiple regulatory approvals, and conditions imposed by regulators could impact the combined company's operations.

Next Steps

• FirstSun and First Foundation stockholders to vote on the merger agreement and related proposals at special meetings on February 27, 2026.
• Obtain all required regulatory approvals from the Federal Reserve Board, OCC, and other state authorities.
• FirstSun to file a post-effective amendment to Form S-4 or an effective registration statement on Form S-8 for converted equity awards.
• FirstSun to implement a comprehensive balance sheet repositioning plan immediately following the merger closing.
• FirstSun to file a shelf registration statement for the resale of shares received by former First Foundation stockholders post-merger.

Key Dates

Recommendation

The merger presents a compelling strategic combination, creating a larger, more diversified financial institution with significant projected financial upside. The anticipated EPS accretion of over 30% by 2027 and an Internal Rate of Return exceeding 20% indicate substantial value creation for shareholders. The planned balance sheet repositioning is a proactive measure to strengthen the combined entity's financial health. While integration risks and executive interests exist, the unanimous board approvals and strong financial projections suggest a high probability of successful value realization, making it an attractive investment opportunity.

Keywords

Bank Merger, Financial Services, FirstSun Capital Bancorp, First Foundation Inc., SEC Filing, Proxy Statement, Acquisition, Stock Exchange, Balance Sheet Repositioning, Corporate Governance, Risk Management, Shareholder Vote, Financial Performance, Regulatory Approval, Investment Banking, Wealth Management, Commercial Banking