FirstSun's stock down 20% since First Foundation deal announcement

FirstSun Capital Bancorp and First Foundation Inc. ranked among the worst-performing bank stocks for the week, continuing a decline in share prices that started since the companies announced their tie-up Oct. 27.

First Foundation's stock fell 5.1% between the market's close Nov. 6 to the close Nov. 13, marking the largest decline among public bank stocks during that time. Its proposed buyer, FirstSun Capital, was the third-worst performing, with its stock down 4.2% during the same period. Since the deal was announced, FirstSun Capital's stock has declined 20.1% and First Foundation's has fallen 8.8%.

While there is execution risk stemming from the balance sheet repositioning announced in conjunction with the deal and integration, the sell-off of FirstSun's stock is overdone, Piper Sandler analyst Matthew Clark wrote in a Nov. 2 research note. The analyst reiterated his "overweight" rating for the company and in another note published the same day, upgraded First Foundation to "overweight" to align with his view of FirstSun.

During the week, 49 banks posted negative stock returns. Between First Foundation and FirstSun, Hingham Institution for Savings ranked as the second worst-performing bank stock, down 4.4%.

Conversely, the bank industry as a whole outperformed the broader markets for the fourth consecutive week, as the KBW Nasdaq Bank index rose 0.6%, while the S&P 500 ticked up 0.3% between Nov. 6 and Nov. 13.

Best performers

Coming off of better-than-expected third-quarter earnings results, Southern First Bancshares Inc. and Ponce Financial Group Inc. were the top-performing bank stocks for the week.

Southern First was the best-performing bank of the week with a total return of 9.2%, while Ponce Financial was the second-best performer of the week with a total return of 8.2%. CB Financial Services Inc. rounded out the top three with a total return of 7.0%, according to an S&P Global Market Intelligence analysis.

Southern First on Oct. 28 reported earnings per share of $1.07, beating consensus estimates by 18 cents, according to Market Intelligence data. Twelve basis points of net interest margin (NIM) expansion and lower expenses drove the company's better-than-expected third-quarter results, Piper Sandler analyst Stephen Scouten wrote in a Nov. 7 note.

The analyst increased his 2026 EPS estimate for the company to $5.30 from $4.56, primarily due to increased NIM expectations.

Ponce Financial also posted stronger-than-expected third-quarter earnings results, beating consensus EPS estimates by 4 cents.

"The company remains focused on improved quarterly earnings as funding costs drop and the percentage of core franchise deposits has improved," Janney analyst Christopher Marinac wrote in a Nov. 5 note.

Ponce Financial is strategically positioned to repurchase $225 million in Emergency Capital Investment Program preferred stock at a large discount, which could take place in the third quarter of 2026 and drive roughly $8.70 in tangible book value benefit, Marinac wrote.

Investors should not overlook Ponce Financial's consistent tangible book value (TBV) per share growth over the last four years. Since late 2021, the company's TBV per share has risen 14.7% annually, Marinac added.