KBRA Affirms Ratings for FirstSun Capital Bancorp and First Foundation Inc. Following Acquisition Announcement; Outlook for First Foundation Inc. Revised to Stable
31 Oct 2025 | New York
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”) following the recently proposed merger announcement with Dallas, Texas-based First Foundation Inc. (NYSE: FFWM) (“First Foundation”). 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.
KBRA also affirms the senior unsecured debt rating of BBB, the subordinated debt rating of BBB-, and the short-term debt rating of K3 for First Foundation Inc. 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 the bank subsidiary, First Foundation Bank. The Outlook for all long-term ratings is revised to Stable from Negative.
Key Credit Considerations
On October 27, 2025, FirstSun Capital Bancorp and First Foundation Inc. announced that they have entered into a definitive agreement under which FirstSun will acquire First Foundation in an all-stock merger valued at approximately $785 million or ~0.80x P/TBV. The combined company will form a regional bank with approximately $17 billion in assets, nearly $7 billion in assets under management, and a fairly diversified revenue base with fee income representing roughly 20% of total revenue. In terms of pro forma ownership, FirstSun and First Foundation shareholders are expected to comprise ~60% and ~40% of the combined institution, respectively. The company’s leadership and board of directors will include First Foundation's CEO Tom Shafer becoming vice-chairman and the combined company’s board of directors will consist of 13 members — 8 directors from FirstSun and 5 directors from First Foundation. The executive leadership of the combined entity will largely remain from FSUN.
KBRA views the transaction favorably as the pro forma institution will operate across several of the nation’s most dynamic growth markets with a combination of ~100 total branches, notably enhancing FirstSun’s presence in Southern California, where First Foundation maintains a 16-branch network. The proposed merger meaningfully advances FSUN's strategic expansion westward and strengthens its position in major markets including Dallas, Houston, Phoenix, Denver, Los Angeles, and San Diego. The company also plans to restructure and de-risk the balance sheet that will include ~$3.4 billion in asset sales (spread across multifamily, SNC loans, municipal loans, and bonds), which will significantly reduce the wholesale funding reliance to below 10% of total funding, which FFWM had utilized to fund its loan growth beyond its organic deposit gathering platform. The restructuring will also reduce the combined loan-to-deposit ratio to 85%. FSUN also expects a solid enhancement to its earnings power following the full integration of First Foundation and restructuring with an anticipated 1.45% ROA. The proposed merger provides FirstSun with a significant jump over the $10 billion regulatory threshold and positions the company with a solid earning asset base to absorb any lost Durbin Amendment interchange fee revenues.
A less favorable characteristic of the proposed deal, in our view, includes the expected decline in FirstSun’s core capital (forecasted pro forma CET ratio of 10.5% at close vs. 13.8% as of 3Q25). FSUN’s core capital levels have been more recently elevated relative to historical periods as the company raised common equity as part of their terminated merger with HomeStreet, Inc. to support the transaction. Management had been clear that the capital would support organic and inorganic growth opportunities going forward. KBRA positively views the earnings power of the combined entity and FSUN’s track record of rebuilding capital following a merger transaction. We expect that FirstSun will quickly rebuild capital to levels over 11% in the short term and maintain levels more consistent with historical levels over the medium term.
Rating Sensitivities
The affirmation of FirstSun’s ratings and maintenance of the Stable Outlook reflects our continued favorable opinion of the company’s earnings performance, credit quality, and funding profile. Any positive rating developments would require a successful integration of First Foundation and the establishment of a solid track record operating as a larger institution while maintaining key financial ratios in line with the higher rating category, specifically capital measures. Significant challenges with integration or unexpected credit deterioration resulting in credit losses negatively impacting the company’s earnings performance would also be viewed negatively.
The revision of First Foundations’ Outlook to Stable from Negative assumes that the transaction receives the required regulatory, shareholder, and other approvals to close in a timely manner, and recognizes that First Foundation will have a stronger credit profile upon closing of the merger. KBRA would likely revisit First Foundation's ratings and Outlook if the transaction were to be terminated.
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