425: FirstSun & First Foundation Merge to Create $17B Bank

FirstSun Capital Bancorp and First Foundation Inc. announce an all-stock merger to form a premier $17 billion bank, aiming for top-tier performance and significant balance sheet re-positioning.

Summary

• FirstSun Capital Bancorp (FSUN) and First Foundation Inc. (FFWM) have entered into an Agreement and Plan of Merger, dated October 27, 2025.
• First Foundation will merge into FirstSun, with FirstSun continuing as the surviving corporation.
• Immediately following the merger, First Foundation Bank will merge into Sunflower Bank, N.A., with Sunflower Bank as the surviving bank.
• The transaction is an all-stock merger, where FFWM common and preferred stockholders will receive 0.16083 shares of FSUN common stock for each FFWM share on a fully converted basis.
• FFWM warrant holders will exercise their warrants early, receive FirstSun common stock, and an additional cash consideration totaling $17.5 million in the aggregate.
• The aggregate transaction value is estimated at $785 million, based on FirstSun's closing stock price of $40.44 on October 24, 2025.
• FirstSun stockholders will own 59.5% and First Foundation stockholders will own 40.5% of the combined company following the merger.
• A significant balance sheet re-positioning plan involves approximately $3.4 billion planned down-size of non-core assets and high-cost funding.
• The combined entity is projected to have approximately $17 billion in total assets and $6.8 billion in Assets Under Management (AUM).
• The merger is expected to achieve 30%+ accretion to FirstSun's 2027 estimated EPS.
• The parties anticipate the merger will close in the second quarter of 2026, subject to requisite regulatory and stockholder approvals.

Sentiment

Score: 8

Explanation: The merger presents a strong strategic rationale with significant projected financial benefits, including substantial EPS accretion and improved profitability metrics. The planned balance sheet re-positioning and cost synergies are positive, though the initial TBV dilution and earnback period, along with increased regulatory CRE concentration, introduce some moderate risks. The overall outlook is highly positive for long-term value creation.

Positives

• The merger creates a premier $17 billion bank with a powerful footprint across some of the best growth markets in the United States.
• The transaction materially accelerates FirstSun's current expansion strategy in the highly attractive Southern California marketplace, leveraging an 18-branch network.
• A significant balance sheet re-positioning plan (approximately $3.4 billion down-size) is expected to unlock First Foundation's core franchise and dramatically reduce its risk profile.
• The combined entity is projected to achieve top-tier pro forma profitability margins by 2027, including ~1.45% Return on Average Assets (ROAA) and ~13.3% Return on Average Tangible Common Equity (ROATCE).
• The merger is expected to deliver 30%+ accretion to FirstSun's 2027 estimated EPS.
• The combined company is projected to have a high level of diverse fee income, with a ~20% fee income-to-total revenue ratio.
• The management team has proven expertise and a track record in executing balance sheet re-positioning and M&A integration.
• Significant pro forma insider and affiliate ownership is estimated at 48%, aligning interests.
• The re-positioning plan is expected to improve earnings via loan back book re-pricing and shorter duration, higher beta liabilities repricing down.
• Pre-tax cost savings of $68.8 million are anticipated, representing 35.0% of First Foundation's expense base.
• The interest rate mark-to-market is expected to improve First Foundation's standalone Net Interest Margin (NIM) by over 100 basis points.
• There is a significant opportunity to scale up First Foundation's branches to market averages and grow core deposit accounts using FirstSun's organic growth playbook.
• First Foundation Advisors (FFA) is a sizable and profitable platform, with opportunities to overlay its products and capabilities onto FirstSun's middle market and high net worth customer base.
• First Foundation's multi-family lending has a well-established track record with pristine credit quality.
• The pro forma combined company is positioned in 8 of the top 10 largest MSAs in the Central & Western U.S. and operates in 5 of the top 10 fastest-growing large MSAs.
• Thoughtful capital utilization is planned, with immediate and significant ongoing capital flexibility and robust TCE/TA ratios projected throughout the time horizon.
• FirstSun has a demonstrated playbook for successfully down-sizing Commercial Real Estate (CRE) concentration in acquired banks and integrating M&A deals.
• The combined loan portfolio will be highly diversified, with FirstSun's commercial & industrial exposure reduced from 42% to 29% pro forma, and First Foundation's multi-family exposure reduced from 47% to 22% pro forma.
• The combined deposit base will be well-balanced and diverse, with limited reliance on wholesale funding and a pro forma beta of ~50.1%.
• FirstSun has historically grown revenue and EPS materially faster than peers while protecting and growing tangible book value per share.

Negatives

• The transaction is expected to result in a Tangible Book Value (TBV) dilution of 14% at closing.
• The estimated TBV earnback period is 3.3 years.
• No credit mark accretion is factored into the financial modeling.
• No revenue enhancements are factored into the financial modeling, despite identified opportunities.
• The pro forma Net Interest Income (NII) sensitivity shifts from more asset sensitive to more liability sensitive in an unhedged scenario.
• The pro forma Regulatory Commercial Real Estate (CRE) to Total Risk-Based Capital (TRBC) ratio at close is 238%, which is higher than FirstSun's standalone 115%.
• The combined company may be subject to additional regulatory requirements as a result of the merger or expansion of its business operations.
• There is a possibility of dilution to existing stockholders resulting from the issuance of additional shares in connection with the proposed transaction.

Risks

• Failure to obtain necessary regulatory approvals when expected or at all, or the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the proposed transaction.
• Failure of First Foundation or FirstSun to obtain the required stockholder approval, or the failure of either party to satisfy any of the other closing conditions on a timely basis or at all.
• The occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement.
• The possibility that the proposed transaction, including the re-positioning strategy, will not be completed as planned, including the anticipated benefits of the proposed transaction.
• Changes in global financial markets and economies and general market conditions, such as interest rates, foreign exchange rates, or stock, commodity, credit or asset valuations or volatility.
• Diversion of management's attention from ongoing business operations and opportunities.
• Potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the proposed transaction.
• The outcome of any legal proceedings that may be instituted against FirstSun or First Foundation.
• The risk that the cost savings and synergies expected from the proposed transaction may not be realized or may take longer than anticipated to be realized.
• The risk that integration of FirstSun's and First Foundation's respective businesses may be materially delayed or more costly or difficult than expected, including as a result of unexpected factors or events.
• Changes to tax legislation and their potential effects on the accounting for the merger.
• The possibility of dilution to existing stockholders resulting from the issuance of additional shares in connection with the proposed transaction.
• The possibility that the combined company may be subject to additional regulatory requirements as a result of the merger or expansion of its business operations.
• Other factors that may affect future results of FirstSun or First Foundation, including changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates and capital markets; inflation; customer borrowing, repayment, investment and deposit practices; the impact, extent and timing of technological changes; capital management activities; and actions of the Federal Reserve Board and legislative and regulatory actions and reforms.
• Shared National Credits (SNCs) are non-relationship loans, and First Foundation's Non-Deposit Funding Institution (NDFI) loans at 11% of its overall portfolio are above FirstSun's desired risk threshold, though these will be mitigated via run-off and sales.

Future Outlook

The combined company anticipates achieving top-tier performance metrics by 2027, including over 30% EPS accretion for FirstSun, a 1.45% ROAA, and a 13.3% ROATCE, driven by a significant balance sheet re-positioning and cost synergies. The merger is expected to close in Q2 2026, subject to regulatory and stockholder approvals, and will position the entity for sustained organic growth in key U.S. markets.

Management Comments

• "We are thrilled to welcome the customers and team members of First Foundation to the FirstSun and Sunflower Bank family. This merger represents an exciting opportunity to strengthen our platform for long-term, sustainable growth, expand our earnings power, and drive greater value for our stockholders." Mollie Hale Carter, Executive Chairman of FirstSun and Sunflower Bank.
• "Both organizations have a strong presence in large, vibrant markets, including the highly attractive Southern California region, which remains a key focus for our ongoing growth strategy. Together, FirstSun and First Foundation will form a premier regional bank with a powerful footprint across some of the most dynamic markets in the country." Mollie Hale Carter.
• "This combination allows us to leverage FirstSun's proven deposit and C&I-focused growth strategy at a larger scale. We're enthusiastic about the opportunities this merger unlocks to enhance performance and deepen our specialty business capabilities. We believe this combination fits well with the company's strategic objectives to enhance value for clients, employees, and stockholders over time." Neal Arnold, CEO, President & Director of FirstSun.
• "Joining forces with FirstSun marks an exciting new chapter for First Foundation. This merger strengthens our ability to deliver exceptional financial services and expands our reach across key markets. Our employees continue to be the driving force behind our success, and their commitment to excellence makes this next chapter possible." Tom Shafer, CEO of First Foundation.
• "We are particularly excited to accelerate the business plan of First Foundation Advisors, our private wealth management platform, with respect to further growing lending and deposits within the existing customer base as well as providing more firepower to grow that business throughout the combined organization's expansive footprint." Tom Shafer.

Industry Context

The merger creates a larger regional bank in a consolidating industry, particularly in the highly attractive Southern California market which has seen significant consolidation since the Global Financial Crisis and lacks core middle-market commercial banks. The combined entity aims to leverage FirstSun's proven organic growth playbook and focus on core deposits and Commercial & Industrial (C&I) lending to capitalize on growth opportunities in top-tier U.S. markets. The re-positioning strategy addresses current market conditions by reducing high-cost funding and higher-risk assets, aligning with broader industry trends towards stronger balance sheets and diversified revenue streams.

Comparison to Industry Standards

• The pro forma 2027E Return on Average Tangible Common Equity (ROATCE) of 13.3% is projected to be in the top quartile of $13-$30 billion nationwide peers (median 12.7%, top quartile 13.5%).
• The pro forma 2027E Return on Average Assets (ROAA) of 1.45% is projected to be in the top quartile of $13-$30 billion nationwide peers (median 1.09%, top quartile 1.25%).
• The pro forma 2027E Efficiency Ratio of 58% is projected to be better than the median of $13-$30 billion nationwide peers (median 55%, top quartile 53%).
• The pro forma 2027E Fee Income / Revenue of 20.4% is projected to be better than the median of $13-$30 billion nationwide peers (median 17.8%, top quartile 18.2%).
• The pro forma 2027E Net Interest Margin (NIM) of 3.99% is projected to be better than the median of $13-$30 billion nationwide peers (median 3.38%, top quartile 3.75%).
• The pro forma Loans / Deposits of 85% is comparable to the median of $13-$30 billion nationwide peers (median 86%, top quartile 83%).
• The pro forma Common Equity Tier 1 (CET1) ratio of 10.5% is below the median of $13-$30 billion nationwide peers (median 12.6%, top quartile 13.5%).
• FirstSun's historical per share compounding CAGRs for revenue, EPS, and tangible book value have been best-in-class compared to $1-$10 billion sized banks in 2018.
• The Southern California market is identified as the 17th largest economy in the world and the #2 region by total GDP, with $743 billion annual middle market revenue and $900 billion in market deposits, offering unparalleled size and density for growth.
• Southern California banks' average yield on loans (6.41%) and cost of deposits (1.59%) are comparable to FirstSun's overall average (6.43% and 2.15% respectively), indicating a similar operating environment and potential for FirstSun's playbook to succeed.

Management Changes

Corporate Governance

Legal Proceedings

• The outcome of any legal proceedings that may be instituted against FirstSun or First Foundation is identified as a risk factor for the proposed transaction.

Related Party Transactions

• Information regarding certain relationships and related party transactions can be found in FirstSun's and First Foundation's definitive proxy statements for their 2025 annual meetings.

Stakeholder Impact

• **Shareholders:** FirstSun shareholders will own 59.5% of the combined company, while First Foundation shareholders will own 40.5%. First Foundation shareholders will receive 0.16083 shares of FirstSun common stock for each of their shares. FirstSun shareholders are projected to see 30%+ EPS accretion by 2027, though there is an initial 14% Tangible Book Value dilution with a 3.3-year earnback period.
• **Employees:** The merger will integrate teams, with First Foundation employees joining the FirstSun/Sunflower Bank family. Potential adverse reactions or changes to business or employee relationships are identified as a risk.
• **Customers:** The merger aims to strengthen the platform for long-term growth and enhance financial services, expanding reach across key markets. First Foundation Advisors' private wealth management platform will be accelerated to grow lending and deposits within the existing customer base.
• **Warrant Holders:** First Foundation warrant holders will exercise their warrants early, receive FirstSun common stock, and an additional $17.5 million in cash consideration.
• **Regulatory Authorities:** The merger is subject to requisite regulatory approvals, which may impose conditions that could adversely affect the combined company or the expected benefits of the transaction.

Next Steps

• Obtain requisite regulatory approvals for the merger.
• Obtain stockholder approvals from both FirstSun and First Foundation.
• Complete the merger in the second quarter of 2026.
• FirstSun will file a registration statement on Form S-4 with the SEC to register shares for First Foundation stockholders.
• A joint proxy statement/prospectus will be sent to stockholders of FirstSun and First Foundation.
• Implement a post-close hedging strategy to mitigate pro forma Net Interest Income (NII) sensitivity.
• Execute the ~$3.4 billion balance sheet re-positioning plan concurrent with closing.
• Integrate FirstSun's playbook into First Foundation's branches to grow core deposits and expand mortgage banking expertise in Southern California.
• Overlay First Foundation Advisors' products and capabilities onto FirstSun's middle market and high net worth customer base.
• Shift First Foundation's multi-family business into a heavier flow sales model and overlay FirstSun's Treasury Management capabilities.
• Hold a joint conference call on October 28, 2025, at 10:00 a.m. ET to discuss the proposed merger.

Key Dates

Recommendation

The all-stock merger between FirstSun and First Foundation is strategically compelling, creating a larger, more diversified regional bank with a strong presence in high-growth markets, particularly Southern California. The projected 30%+ EPS accretion for FirstSun by 2027, coupled with top-tier ROAA (~1.45%) and ROATCE (~13.3%) metrics, indicates significant future profitability. While there is an initial 14% TBV dilution, the 3.3-year earnback period is acceptable given the substantial long-term value creation potential from the $3.4 billion balance sheet re-positioning and $68.8 million in cost synergies. The proven M&A integration track record of FirstSun's management team further de-risks the execution. The combination is expected to lead to a re-rating of the pro forma valuation, aligning it with high-performing peers, suggesting material upside for investors.

Keywords

FirstSun Capital Bancorp, First Foundation Inc., Merger, Acquisition, Banking, Financial Services, Sunflower Bank, Southern California, Balance Sheet Re-positioning, EPS Accretion, ROAA, ROATCE, Wealth Management, Commercial Banking, M&A, Bank Merger