v3.26.1
Acquisition of First Foundation Inc.
 6 Months Ended
Jun. 30, 2026
Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract]  
Acquisition of First Foundation Inc. Acquisition of First Foundation Inc.
As described under the title “Business Combination” in Note 1 - Organization and Basis of Presentation, on April 1, 2026, the Company completed its acquisition of First Foundation, the holding company for First Foundation Bank, a California-chartered banking corporation.
Consideration
Under the terms of the Merger Agreement, at the Effective Time, each share of First Foundation common stock issued and outstanding immediately prior to the Effective Time (other than certain excluded shares specified in the Merger Agreement) became entitled to receive 0.16083 of a share of FirstSun common stock (the “exchange ratio”), with cash paid in lieu of any fractional shares. In addition, at the Effective Time, each then-outstanding share of First Foundation Series A Noncumulative Convertible Preferred Stock (the “Series A stock”) and Series C Non-Voting Common Equity Equivalent
Stock (the “Series C stock” and together with the Series A stock, the “First Foundation Preferred Stock”) was converted into the right to receive 0.16083 of a share of FirstSun common stock for each share of First Foundation common stock into which the First Foundation Preferred Stock was convertible immediately prior to the Effective Time, subject to certain exceptions. In connection with the merger, we issued approximately 16.1 million voting shares and 2.6 million non-voting shares of FirstSun common stock to stockholders of First Foundation, with the stock consideration valued at approximately $682.8 million as of March 31, 2026, the last trading day before consummation of the acquisition. In addition, we made an aggregate cash payment of $17.5 million to First Foundation warrant holders and assumed First Foundation non-vested restricted stock awards with an estimated pre-combination vesting value of $3.3 million. Total aggregate consideration paid in the First Foundation merger was $703.6 million.
Fair Value
The acquisition of First Foundation constituted a business combination in accordance with ASC Topic 805, Business Combinations. Accordingly, the Company recorded the assets acquired and liabilities assumed at fair value as of the acquisition date. The determination of estimated fair value required management to make assumptions related to discount rates, expected future cash flows, market conditions and other future events that are subjective in nature and subject to change. Accordingly, these fair value estimates related to the assets and liabilities from First Foundation are considered preliminary as of June 30, 2026, and are subject to adjustment for up to one year after the closing date of the acquisition as additional information becomes available. Valuations subject to refinement include, but are not limited to, loans, certain deposits, certain other assets, and the core deposit intangible asset.
In connection with the acquisition of First Foundation, the Company recorded preliminary goodwill of $9.1 million, allocated entirely to the Company’s Banking segment, none of which is anticipated to be deductible for tax purposes. The preliminary goodwill is primarily attributable to expected synergies, operational efficiencies, and other factors to arise from the transaction.
Estimated fair values of the assets acquired and liabilities assumed in this transaction are as follows:
April 1,
2026
Cash and cash equivalents$1,744,217 
Investment securities2,851,696 
Loans held-for-sale1,121,702 
Loans, net of allowance for credit losses4,835,795 
Premises and equipment41,292 
Bank-owned life insurance51,765 
Core deposits and other intangible assets90,214 
Accrued interest receivable38,032 
Deferred tax assets, net220,280 
Prepaid expenses and other assets189,720 
Total assets acquired11,184,713 
Deposits8,772,082 
Borrowings1,453,657 
Subordinated debt167,559 
Accrued expenses and other liabilities96,900 
Total liabilities assumed10,490,198 
Fair value of net assets acquired694,515 
Purchase price703,568 
Goodwill$9,053 
The Company assessed the fair value based on the following methods for the significant assets acquired and liabilities assumed:
Cash and cash equivalents: The fair value was determined to approximate the carrying amount based on the short-term nature of these assets.
Investment securities: The fair value of the investment portfolio was based on pricing obtained by independent pricing services and quoted market prices.
Loans held for sale (“LHFS”): Fair values for LHFS were based on quotes or bids from third parties.
Unpaid principal balancePremium/ (discount)Loans and leasesAllowance for credit lossesNet loans and leases
Loans held-for sale1,228,357 (106,655)1,121,702 — 1,121,702 
Loans held for investment (“LHFI”): Fair values for LHFI were estimated using a discounted cash flow analysis that considered factors including loan type, interest rate type, prepayment speeds, duration, and current discount rates. The discount rate was developed considering the funding costs, a market participant’s required rate of return on equity capital, plus adjustments reflecting servicing costs and a liquidity premium. Expected cash flows were derived using inputs that considered estimated credit losses and prepayments.
The following tables reconcile the par value of the First Foundation loan portfolio as of the purchase date to the fair value indicated in the table above. For purchased seasoned loans and purchased credit-deteriorated loans, an initial allowance for credit losses is measured under the Company’s CECL methodology and added to the purchase price to establish the initial
amortized cost basis (the “gross-up approach”). The remaining difference between the initial amortized cost basis and the unpaid principal balance represents the non-credit discount or premium.
Unpaid principal balancePremium/ (discount)Loans and leasesAllowance for credit lossesNet loans and leases
Purchased Seasoned Loans4,750,339 (261,778)4,488,561 (55,136)4,433,425 
Purchased Credit Deteriorated512,035 (72,301)439,734 (37,364)402,370 
Total5,262,374 (334,079)4,928,295 (92,500)4,835,795 
Premises and equipment: The fair value of bank premises and equipment held for use was valued by obtaining recent market data for similar property types with adjustments for characteristics of individual properties.
Bank owned life insurance (“BOLI”): The fair value of BOLI is carried at its current cash surrender value, which is a reasonable estimate of fair value.
Core deposit intangible (“CDI”) and customer relationship intangible: CDI represents the future economic benefit of acquired customer deposits. The fair value of the CDI asset was estimated based on a discounted cash flow methodology that incorporated expected customer attrition rates, cost of deposit base, net maintenance cost associated with customer deposits, and the cost for alternative funding sources. The discount rates used were based on market rates. Customer relationship intangible assets represent the value associated with customer relationships related to the wealth management business that was acquired.
Deferred taxes: Deferred tax assets and liabilities were recognized for the estimated future tax consequences of temporary differences between the acquisition-date financial statement carrying amounts of the assets acquired and liabilities assumed and their respective tax bases, using enacted federal and state income tax rates expected to apply when those temporary differences reverse. The Company evaluated the realizability of the acquired deferred tax assets in accordance with ASC Topic 740 based on all available positive and negative evidence, including the expected future taxable income of the combined company, and recorded a valuation allowance to the extent it was more likely than not that any portion of the acquired deferred tax assets would not be realized.
Restricted stock: The carrying value approximates the fair value.
Lease Right of Use (“ROU”) assets and lease liabilities: The fair value of the lease ROU assets was measured at an amount equal to the lease liability and evaluated for favorable or unfavorable lease terms when compared with market terms on a lease-by-lease basis.
Deposits: The fair value of interest-bearing and non-interest-bearing deposits is the amount payable on demand at the acquisition date. The fair value of time deposits was estimated using a discounted cash flow calculation that includes a market rate analysis of the current rates offered by market participants for certificates of deposits that mature in the same period.
Borrowings: Acquired borrowings consist of $1.0 billion in Federal Home Loan Bank (“FHLB”) putable advances and $400 million in FHLB term advances. The fair value of FHLB advances was estimated based on the prepayment penalties incurred upon extinguishment of the borrowings on April 1, 2026.
Subordinated debt: The fair value of the subordinated debt was estimated using a discounted cash flow analysis, factoring in market terms and the structural terms of the borrowings.
Merger Related Expenses
Merger related expenses were $57.6 million and $0.3 million, for the three months ended June 30, 2026 and 2025 and were $60.2 million and $0.3 million for the six months ended June 30, 2026 and 2025, respectively, and are recorded in “Merger related expenses” on the Company’s Consolidated Statements of Income and have been expensed as incurred. Such costs included employee severance, other employee related costs, contract termination expenses, professional fees, and facilities related costs. On a net-of-tax basis, merger related expenses were $43.9 million and $0.2 million for the three months
ended June 30, 2026 and 2025 and were $46.0 million and $0.2 million for the six months ended June 30, 2026 and 2025, respectively.
Pro Forma Financial Information
The following table presents for illustrative purposes only certain pro forma financial information as if the Company had acquired First Foundation on January 1, 2025. These results combine the historical results of First Foundation with the Company's historical consolidated results and while certain adjustments were made for the estimated impact of certain fair value adjustments and other acquisition-related activity, they are not indicative of what would have occurred had the acquisition taken place on January 1, 2025. No adjustments have been made to the pro forma results regarding possible revenue enhancements, provision for credit losses, or expense efficiencies. Pro forma adjustments below include the net impact of First Foundation’s accretion and the elimination of merger-related costs, as disclosed below. The Company expects to achieve further operating cost savings and other business synergies, as a result of the acquisition, which are not reflected in the pro forma amounts below (dollars in thousands):
Pro formaPro forma
Three months ended June 30,
Six months ended June 30,
2026202520262025
(unaudited)(unaudited)(unaudited)(unaudited)
Total revenues$270,964 $260,515 $512,641 $517,331 
Net income available to common shareholders21,470 40,147 47,176 81,433 
The Company’s operating results for the three and six months ended June 30, 2026 include the operating results of the acquired assets and assumed liabilities of First Foundation subsequent to the acquisition on April 1, 2026. Disclosure of the revenue and earnings of First Foundation since the acquisition date, as would otherwise be required by ASC 805-10-50-2(h), is impracticable. The Company has not converted First Foundation’s general ledger, deposit, loan servicing, and other operating systems onto the Company’s platforms, and this conversion is not expected to occur until late in the third quarter of 2026. As a result, First Foundation’s post-acquisition results are not separately captured in the Company’s financial reporting systems and cannot be reliably disaggregated from the combined operating results without unreasonable effort and expense.