Firstsun Capital Bancorp(FSUN) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted net income for Q4 was $26.9 million, with adjusted diluted EPS of $0.95 and adjusted ROA of 1.27% [5] - Revenue growth was up 10.8% annualized over the previous quarter, with a net interest margin of 4.18%, marking the 13th consecutive quarter above 4% [5][12] - Total deposits increased by over $400 million, or approximately 6.5%, for the full year, with a loan-to-deposit ratio of approximately 93.9% [11][12] Business Line Data and Key Metrics Changes - Average loan growth was 8.5% annualized, with new loan fundings totaling approximately $350 million in Q4, up 30% from the previous year [9][10] - Non-interest income accounted for 24.3% of total revenue, with service fee revenue for Q4 totaling $26.7 million, up almost 24% year-over-year [5][14] - Adjusted non-interest expense in Q4 was up approximately $1 million from Q3, with an adjusted efficiency ratio of 63.36% [15] Market Data and Key Metrics Changes - The company operates in 7 of the 10 fastest-growing MSAs in the Southwest, indicating strong growth potential across all markets [8] - The company noted a decline in consumer CD balances, while money market accounts showed growth [11] Company Strategy and Development Direction - The company plans to continue investing in growth markets and expanding its portfolio of products and services to support a relationship-based banking model [7] - The pending merger with First Foundation is expected to enhance integration planning and balance sheet optimization [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's performance and emphasized a focus on driving healthy returns for shareholders despite some credit challenges [7] - The company expects mid-single digit growth in net interest income for 2026, with stable net interest margins [13] Other Important Information - The company reported a provision expense of $6.2 million for Q4, with an ending allowance for credit losses as a percentage of loans at 1.27% [16] - The tangible book value per share improved by $3.89, or roughly 11.5%, over the previous year [17] Q&A Session Summary Question: Insights on deposit costs and pricing strategy - Management noted a decrease in interest-bearing costs by about 21 basis points and acknowledged the competitive environment for deposit pricing [22][23] Question: Commentary on expenses and investments in the West Coast - Management indicated plans to add to the sales force in Texas and Southern California, with infrastructure needs considered in synergy disclosures [24][26] Question: Drivers behind the increase in special mentions - Management attributed the increase to macro interest rate pressures, with no pervasive themes in the increase [27][29] Question: Loan pricing and competition - Management reported that credit spreads have been holding steady, with no material changes in trends [36][37] Question: Impact of interest rate cuts on the pending acquisition - Management remains optimistic about the merger's prospects and does not foresee any changes in expectations due to recent rate cuts [39][40] Question: Trajectory of net interest margin - Management expects net interest margin to remain stable, with some tightening in deposit pricing anticipated [44][45] Question: Opportunities in Texas and Southern California - Management highlighted increased opportunities in Texas due to M&A activity and emphasized the robust deposit opportunity in Southern California [46][49]