KBRA Affirms Ratings for FirstSun Capital Bancorp

KBRA affirms the senior unsecured debt rating of BBB, the subordinated debt rating of BBB-, and the short-term debt rating of K3 for Denver, Colorado-based FirstSun Capital Bancorp (NASDAQ: FSUN) (“FirstSun” or “the company”). In addition, KBRA affirms the deposit and senior unsecured debt ratings of BBB+, the subordinated debt rating of BBB, and the short-term deposit and debt ratings of K2 for its subsidiary, Sunflower Bank, National Association. The Outlook for all long-term ratings is Stable.

Key Credit Considerations

The ratings are supported by FirstSun's well-diversified franchise across business lines and geography (nearly 100 branches across 10 states), including a presence in attractive markets with favorable demographic and economic trends. Following the First Foundation, Inc. ("FFWM") merger, management believes the geographic buildout is largely complete, with significant organic growth opportunities across the existing footprint. We view this positioning favorably, particularly given the relatively modest market share in key MSAs and the demonstrated ability to attract commercial banking talent and relationships.

FSUN’s relationship-based commercial banking model is another ratings strength, with a greater emphasis on C&I lending, while the investor CRE concentration remains below average (219% of Tier 1 capital plus LLR at the bank at 2Q26). Management proactively reduced this concentration following the FFWM acquisition through loan sales and targeted runoff. Nonetheless, the remaining portfolio, largely consisting of workforce-oriented multifamily (22% of total loans), provides meaningful diversification benefits to the broader C&I-focused loan book. The multifamily credit performance has generally been favorable, supported by conservative LTVs, strong debt service coverage, and favorable housing demand dynamics in markets where affordability remains challenged.

Moreover, the C&I orientation provides ancillary benefits through commercial deposit gathering and fee-generating opportunities. Together with the sizable mortgage banking platform, this positioning supports solid revenue diversification, with fee income generally representing >20% of total revenue. Combined with a historically favorable NIM (above 4.0% in recent years, though moderating to the high-3.0% range following the acquisition), this supports comparatively strong earnings capacity, with management targeting an ROA range of 1.3%-1.4% by 2027. Importantly, the company has made progress toward this target, with core ROA exceeding 1.2% in 3Q26, supported by NIM expansion following the balance sheet repositioning and reduced higher-cost funding. However, reported profitability has been pressured by elevated M&A expenses and credit costs, with normalization of both remaining important to achieving management's earnings objectives.

Additionally, FirstSun's C&I focus has historically resulted in greater credit volatility, which has been particularly evident over the past year. The NPA ratio approached 1.8% at 3Q26, while the NCO ratio exceeded 0.7% during 9M26. That said, higher loan yields provide an important offset to credit costs. Recent losses primarily reflected two sizable, idiosyncratic C&I credits, while the acquired FFWM portfolio contributed to higher NPA and criticized and classified balances. Nonetheless, we view the risks as manageable given the portfolio granularity, healthy reserves (~1.5% of total loans at 3Q26), and meaningful collateral protection on remaining troubled loans.

While FirstSun historically reflected a solid core deposit base, the FFWM acquisition introduced higher-cost funding and a less favorable mix (NIB to total deposits fell to 21% as of 3Q26), with current deposit costs (2.19% in 3Q26) tracking moderately above peers. Nonetheless, management's proactive balance sheet repositioning materially improved the liquidity position (88% loan-to-deposit ratio at 3Q26).

Capital remains solid and supportive of the ratings (CET1 ratio of 12.0% at 3Q26) despite the decline associated with the acquisition. Management targets CET1 of at least 11% over time, with internal capital generation providing capacity for loan growth and share repurchases.

Rating Sensitivities

A rating upgrade is not expected, although successful integration of the FFWM acquisition and achievement of profitability targets, with improved asset quality, and maintenance of its strong capital position could support positive rating momentum over time. Conversely, a rating downgrade is unlikely, although continued asset quality headwinds, maintenance of below peer earnings, or a more aggressive capital management stance could potentially pressure the ratings.

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