Southwestern Deposits And Sun Belt Lending Will Fuel Bank Expansion

Key Takeaways

• Expansion in Southwestern and California markets, paired with strong deposit and loan growth, positions the bank to capitalize on favorable demographic and economic trends.
  
• Emphasis on relationship banking, fee-based services, and operational efficiency supports higher non-interest income, improved profitability, and long-term scalable growth.
  
• Geographic concentration, volatile deposits and loans, fee income headwinds, and reliance on branches amid digital disruption pose risks to revenue stability and long-term profitability.

Catalysts

Operates as the bank holding company for Sunflower Bank, National Association that provides commercial and consumer banking and financial services to small and medium-sized companies in Texas, Kansas, Colorado, New Mexico, Arizona, California, and Washington.

• FirstSun's robust deposit growth across both consumer and business segments, especially in high-growth Southwestern and newly entered California markets, positions the bank to capitalize on urban migration trends and expanding local economies, supporting future revenue and net interest income expansion.
  
• The bank's commitment to a relationship-driven business model and ongoing enhancement of fee-based service offerings (with fee income now exceeding 25% of total revenues) enables FirstSun to leverage rising demand among younger demographics for innovative, convenient banking solutions-supporting higher non-interest income and improved net margins.
  
• Consistent double-digit growth in new loan originations, particularly in vibrant Sun Belt regions, aligns the company to benefit from generational wealth transfer and increased financial activity from Millennials and Gen Z, underpinning long-term loan growth and earnings increases.
  
• Strategic focus on operational efficiency-with a stable or improving efficiency ratio and realization of positive operating leverage-positions FirstSun to enhance profitability as technological advancements and digital transformation opportunities scale, lowering costs and supporting net margin resilience.
  
• Strong capital and liquidity ratios combined with an opportunistic approach toward organic growth and selective M&A provide FirstSun with flexibility to pursue expansion and deepen market presence, setting the stage for scalable revenue growth and long-term earnings accretion.

FirstSun Capital Bancorp Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming FirstSun Capital Bancorp's revenue will grow by 10.5% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 23.3% today to 22.2% in 3 years time.
• Analysts expect earnings to reach $113.8 million (and earnings per share of $3.94) by about August 2028, up from $88.7 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 12.9x on those 2028 earnings, up from 11.4x today. This future PE is greater than the current PE for the US Banks industry at 11.6x.
• Analysts expect the number of shares outstanding to grow by 0.71% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.

FirstSun Capital Bancorp Future Earnings Per Share Growth

Risks

• Exposure to episodic or temporary deposit inflows, particularly notable in recent quarters, raises the risk of future deposit runoff or stagnation, which could compress net interest income and pressure revenue stability.
  
• Elevated charge-offs in the C&I loan segment, especially related to industry
• or borrower-specific issues (e.g., telecom and public finance), alongside increased market price deterioration, signal potential for ongoing asset quality volatility, which may erode net margins and elevate credit costs.
  
• Sustaining growth in noninterest and fee income-especially mortgage banking-faces headwinds from potential market normalization and seasonality, risking revenue volatility and diminished earnings consistency if origination or transaction volumes decline.
  
• The bank's expansion strategy into new markets like Southern California, while producing rapid initial growth, concentrates risk geographically and operationally, making the company more vulnerable to localized economic downturns or integration inefficiencies, which could dampen overall profitability and revenue growth.
  
• Reliance on an extensive relationship banking model and physical branch network in an environment of increasing digitization exposes FirstSun to risk from fintech competitors and changing customer preferences, threatening long-term deposit growth, cost efficiency, and market share-factors that may weigh on future earnings and margins.

Valuation

• The analysts have a consensus price target of $43.25 for FirstSun Capital Bancorp based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $512.8 million, earnings will come to $113.8 million, and it would be trading on a PE ratio of 12.9x, assuming you use a discount rate of 6.8%.
• Given the current share price of $36.31, the analyst price target of $43.25 is 16.0% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.