Q3 2025 FirstSun Capital Bancorp Earnings Call and Business Update

Financial results at this time all participants are in listen only mode. Later, we will conduct a question and answer session. If you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star followed by the <unk> will say as a reminder, this call maybe recorded.

Operator: Bancorp and its third quarter 2025 financial results. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star followed by the number two. Also, as a reminder, this call may be recorded. I'd now like to turn the call over to Ed Jacques, Director of Investor Relations and Business Development. You may begin.

I'd now like to turn the call over to Ed <unk> director of Investor Relations and business development you may begin.

Thank you and good morning, everyone. Following the market close yesterday, we issued a joint press release to announce a merger between first son and first foundation on the call today, we will discuss the merger announcement and then we'll take some Q&A.

Ed Jacques: Thank you, and good morning, everyone. Following the market close yesterday, we issued a joint press release to announce a merger between FirstSun Capital Bancorp and First Foundation Inc. On the call today, we will discuss the merger announcement, and then we will take some Q&A. Simultaneously, we released our third quarter earnings and are happy to answer any questions on those results as well. First Foundation Inc. has also provided a summary of its third quarter earnings and expects to file a full earnings release and presentation on its scheduled release date of October 30. Today's presentation slides have been posted on each company's investor relations website. Before we begin our remarks, I want to remind you that the comments made by the management teams of both FirstSun Capital Bancorp and First Foundation Inc.

Simultaneously, we released our third quarter earnings and are happy to answer any questions on those results as well.

First Foundation has also provided a summary of its third quarter earnings and expects to file a full earnings release and presentation on its scheduled release date of October 30 <unk>.

Presentation slides have been posted on each company's investor Relations website.

Before we begin our remarks I want to remind you that the comments made by the management teams of both for Sun and first Foundation May include forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095 and are subject to the safe Harbor rules.

Ed Jacques: may include forward-looking statements within the meanings of the Private Securities Litigation Reform Act of 1995 and are subject to the Safe Harbor Rules. Please review the disclaimers and Safe Harbor language in the press release and presentation for more information about risks and uncertainties which may affect us. I will now introduce FirstSun Capital Bancorp's President and CEO, Neal Arnold.

Please review the disclaimers and Safe Harbor language in the press release and presentation for more information about risks and uncertainties, which may affect us now.

Now introduce for Sun's President and CEO Neil Arnold.

Thank you Ed and thank you all for joining this call.

Neal Arnold: start by saying we realize this is not a straightforward stock-for-stock Monday merger announcement. When you spend a moment to understand the underlying franchise and the work we are doing together to unlock this, we believe it will make more sense. We've known First Foundation Inc. for over three years. We tried to get a deal done back then and could not work it out. Since their recapitalization, we revisited this idea in April of this year. We have lots of history and have spent a considerable amount of time on both sides making sure the diligence and the structuring make sense for all parties. This was not a quick shotgun marriage.

I'd like to hit a couple of highlights from our merger announcement and introduce you to Tom Shafer, and then turn the call over to Rob <unk> our CFO.

Let me start by saying, we realize this is not a straightforward stock for stock Monday merger announcement.

But when you spend a moment to understand the underlying franchise and the work we're doing together to unlock as we believe it will make more sense.

Neal Arnold: From my<edited_transcript> Thank you, Ed, and thank you all for joining this call. I'd like to hit a couple of highlights from our merger announcement and introduce you to Tom Schaefer, and then turn the call over to Rob Cafera, our CFO. Let me start by saying we realize this is not a straightforward stock-for-stock Monday merger announcement. When you spend a moment to understand the underlying franchise and the work we are doing together to unlock this, we believe it will make more sense. We've known First Foundation Inc. for over three years. We tried to get a deal done back then and could not work it out. Since their recapitalization, we revisited this idea in April of this year. We have lots of history and have spent a considerable amount of time on both sides making sure the diligence and the structuring make sense for all parties.

We've known first foundation for over three years, we tried to get a deal back done back then and could not work it out.

Since their recapitalization, we revisited this idea in April of this year. So we have lots of history and have spent a considerable amount of time on both sides, making sure the diligence and structuring makes sense for all parties. This was not a quick shotgun marriage.

Neal Arnold: This was not a quick shotgun marriage. From my perspective, there are three compelling reasons why this deal makes sense. Number one, most of you all know we like to tackle unloved companies in this industry. Why? Because we believe there's less investment risk when you do the full due diligence. They tend to be priced at lower prices and have lower projections, which means for all of us, there's a higher probability to have upside, and I'm sure that doesn't surprise any of you who've known us over the years. We believe Southern California branch franchise network gives our team that's already on the ground here a significant opportunity and will be our largest metropolitan region team and branch network in the system. We also think that First Foundation Inc. significantly changes the profile of our fee income given their wealth management platform.

From my perspective, there are three compelling reasons why this deal makes sense.

Number one most of you all know we like to tackle unloved companies in this industry.

Why because we believe there is less investment risk when you do the full due diligence.

They tend to be priced at lower prices and they have lower projections, which means for all of us there's a higher probability to have upside and I am sure that doesn't surprise any of you knowing this over the years.

We believe southern Cal branch franchise network gives our team thats already on the ground here, a significant opportunity and will be our largest metropolitan region team and branch network in the system.

We also think that first foundation significantly changes the profile of our fee income given their wealth management platform.

Also we like their multifamily portfolio and as you know not all commercial real estate is created the same and not all multifamily is the same.

Neal Arnold: Also, we like their multifamily portfolio, and as you know, not all commercial real estate is created the same, and not all multifamily is the same. We like the workforce housing nature and rent security in these kinds of properties. Tom and his team have made considerable progress since his arrival to fix a number of their issues. We just believe that we get to accelerate that together pretty dramatically. Number two, we believe First Foundation Inc. is one of the companies in this industry who have an attractive underlying franchise that's been hidden by some poor balance sheet management decisions. What is unique here is that the fix to these issues is rather straightforward, and the ability to solve them can happen quite rapidly. One of the lessons I believe we learned in tackling these kinds of banks, and we've taken to heart, are three things.

We like the workforce housing nature, and the rent security and these kinds of properties.

Tom and his team have made considerable progress.

Since his arrival to fix a number of their issue.

Believe that we'd get to accelerate that together pretty dramatically.

So number two we believe first foundation is one of the companies in this industry, who have an attractive underlying franchise, that's been hidden by some poor balance sheet management decisions.

What is unique here is that the fix to these issues is rather straightforward and the ability to solve them can happen quite rapidly.

One of the lessons I believe we learned in tackling these kinds of banks and we have taken to heart. Our three things one we need to move quickly to transform them number two.

Neal Arnold: One, we need to move quickly to transform them. Number two, we need to make those changes quickly and significantly by and around closing. We want to be clear with everyone what we intend to do. That includes investors, our partners, regulators, and each of our teams. As you all know, we've had a team here in Southern California for the past 15 months, and our initial success in this region has really heartened our thoughts about what might be possible. I can tell you, in my 40-year career, I've never seen an LPO self-fund through the first 15 months of this kind of opportunity. With that, let me introduce Tom and have him share some of his perspective, and then I'll take it back.

We need to make those changes quickly and significantly buying around closing and we want to be clear with everyone. What we intend to do that includes investors or partners regulators and each of our teams.

As you all know we've had a team here in southern Cal for the past 15 months.

Our initial success in this region is really heartened, our thoughts about what might be possible I can tell you in my 40 year career I've never seen an LBO self fund through the first 15 months of this kind of opportunity.

So with that let me introduce Tom and have them share some of his perspective, and then I'll take it back.

Thank you.

To recap in 2024, we have been proactively reducing risk and all in all aspects of our organization, we have downsized the balance sheet and last year significantly.

Tom Schaefer: Neal, thank you. Since the recap in 2024, we've been proactively reducing the risk in all aspects of our organization. We've downsized the balance sheet in the last year significantly, and the business plan that we have would continue doing that. What this merger does is allow us to dramatically accelerate the business plan that we put in place and allow us to focus on the opportunity within Southern California of accelerating some hires and focusing the organization on growth in one of the best marketplaces in the country. I come from a C&I background, and I've spent a lot of time with the FirstSun Capital Bancorp management team taking a look at their playbooks for both commercial and retail, and it's a perfect fit for what we have within Southern California and Florida.

And our.

The business plan that we have would consider would continue doing that with this merger does is allow us to dramatically accelerate the business plan that we've put in place and allow us to focus on the opportunity within southern California of accelerating some hires.

And focusing the organization on growth in one of the best marketplaces in the country I come from a C&I background I've spent a lot of time with the.

<unk> management team, taking a look at their playbooks for both commercial and retail and it's a perfect fit for what we have within southern California and Florida.

When I think about the C&I growth they have their focus on TM retail deposits.

Tom Schaefer: When I think about the C&I growth they have, their focus on treasury management, retail deposits, and fee income, adding our wealth team to that organization makes a significant organization for Southern California and Florida, which we're very excited about. The synergies that we're talking about will make this really a top-tier organization, top-quartile organization from the day we started. Our team is looking very much forward to helping and getting this started.

And see income, adding our wealth team to that to that organization.

Organization makes a significant.

Organization for Southern California, Florida, which we're very excited about.

The synergies that.

We're talking about.

We will make this a.

Really a top tier organization top quartile organization from the day, we start so our team is looking very much forward to helping in getting this started.

Thank you Tom I can tell you it's been great getting to know Tom better and our confidence is certainly impacted in this deal by having his leadership and his background. So we look forward to working together.

Neal Arnold: Thank you, Tom. I can tell you it's been great getting to know Tom better, and our confidence is certainly impacted in this deal by having his leadership and his background. We look forward to working together. I'd like to make a couple of additional points that I think matter with regard to this transaction. First of all, I'd like to say that we believe Southern California and the whole West Coast, for that matter, has a better lower-cost mix of deposits than anywhere else in the country. To us, most of you know we care a lot about the opportunity on the core deposit side. Adding Tom's branch network into our strategy here is going to be an important part of continuing to build the core franchise.

Like to make a couple of additional points that I think matter with regard to this transaction.

First of all I'd like to say that we believe southern California, and the whole west coast for that matter.

Has the better lower cost mix of deposits than anywhere else in the country and so to US most of you know we care a lot about the opportunity on the core deposit side, So adding times branch network into our strategy here is going to be an important part of <unk>.

Continuing to build the core franchise.

The next point I'd like to make is that we believe that the opportunity here is to migrate more of first foundation's balance sheet to our business model as Tom said, it's not just a strategy of clipping fair value coupons.

Neal Arnold: The next point I'd like to make is that we believe that the opportunity here is to migrate more of First Foundation Inc.'s balance sheet to our business model. As Tom said, it's not just a strategy of clipping fair value coupons. We believe that that's going to enhance the profitability profile of the entire organization. Let me highlight a couple. We believe that the deposit side mix will change markedly, and Rob will talk more about that, more from the C&I middle-market client base, but even from the multifamily treasury management opportunities. We believe we'll have significant improvement in the mix on asset yields as we migrate more and more to our kind of clients. We also have a better mix on the fee income side from a lot more expanded wealth management platform.

And we believe that that's going to enhance the profitability profile of the entire organization. Let me highlight a couple we believe that the deposit side mix will change markedly and Rob will talk more about that more from the C&I middle market client base, but even from the multifamily treasury.

Management opportunities. We believe we will have significant improvement in the mix on the asset yields as we migrate more and more to our.

Kind of clients and also we have a better mix on the fee income side from a lot more expanded wealth platform. So as Tom mentioned.

Sort of.

Neal Arnold: As Tom mentioned, sort of my final comment would be when I step back and look at this transaction, it's not often that you can double the size of your company while simultaneously reducing the credit risk profile, improving the rate sensitivity of the combined organization, and significantly reducing the liquidity risk. I'd take that as an operator anytime in a potential acquisition. I believe that this transaction does a lot for both parties. With that, I'd like to turn it over to Rob and let him walk through some of the slides and the financial pieces of the deal.

My final comment would be when I step back and look at this transaction.

It's not often that you can double the size of your company, while simultaneously simultaneously, reducing the credit risk profile.

Improving the rate sensitivity of the combined organization.

And significantly reducing the liquidity risk.

I would take that as an operator anytime in a potential acquisition. So I believe that this transaction does a lot for both parties with that I'd like to turn it over to Rob and let him walk through some of the slides.

The financial pieces of the deal.

Thank you Neil.

I think the opportunity here to further leverage our successful business model is also one of the most compelling strategic aspects to this deal Theres a terrific geographic footprint here to.

Rob Cafera: Thank you, Neal. I think the opportunity here to further leverage our successful business model is also one of the most compelling strategic aspects to this deal. There's a terrific geographic footprint here to drive organic growth. We'll be in eight of the top 10 largest MSAs in the Central and Western regions of the U.S. and in five of the top 10 fastest growing markets in the entire U.S. The deposit opportunity, gaining 30 total branches with 16 in Southern California, will provide us with even more avenues to grow deposits. We will be able to further diversify our fee business mix with a sizable wealth management platform here as well. It has a little over $5.3 billion in AUM here recently. The revenue synergies on the fee business side with treasury management and our residential mortgage expertise are very meaningful.

<unk> organic growth will be in eight of the top 10 largest msas in the central and western regions of the U S and in five of the top 10 fastest growing markets in the entire U S and the deposit opportunity gaining 30 total branches was 16 in southern California.

I will provide us with even more avenues to grow deposits.

We will we will be able to further diversify our business mix with the sizable wealth platform here as well it has a little over $5 3 billion in AUM.

Here recently and the revenue synergies on the fee business side.

Management and our residential mortgage expertise are very meaningful and we don't have anything factored into the deal economics in terms of revenue synergies.

Rob Cafera: We don't have anything factored into the deal economics in terms of revenue synergies. As Neal mentioned, it all starts with completing the play and unlocking the First Foundation Inc. franchise via the downsizing actions. We have a very detailed plan in place to accomplish this concurrent with closing of the deal. We'll cover our plan here on several of the pages in the deck, but I'll point folks to page 14 where we walk through all the pieces. It entails $3.4 billion in total downsizing focused on lowering the level of non-relationship rate-sensitive elements on both sides of the balance sheet. This plan will significantly reduce risk in three key areas: liquidity, interest rate, and credit risk. On the liquidity front, our plan will position the pro forma company at an approximate 10% wholesale funding level, which is a dramatic improvement from the historical levels at First Foundation Inc.

As Neil mentioned it all starts with completing the play and unlocking the first foundation franchise via the downsizing actions, we have a very detailed plan in place to accomplish this concurrent with closing.

Of the deal and we will cover our plan here on on several of the pages in the deck, but I'll point to folks to page 14, where we walked through all the pieces and it entails $3 4 billion in total downsizing focused on lowering the level of non relationship rate sensitive elements on both <unk>.

<unk> of the balance sheet.

This plan will significantly reduce risk in three key areas liquidity interest rate and credit risk.

On the liquidity front, our plan will position the pro forma company at an approximate 10% wholesale funding level, which is a dramatic improvement from the historical levels at first foundation.

On the interest rate front.

We improved the sensitivity profile and combined with layering in some hedging post closing, we believe we will be able to position the sensitivity profile it much closer to a neutral.

Rob Cafera: On the interest rate front, we improved the sensitivity profile. Combined with layering in some hedging post-closing, we believe we'll be able to position the sensitivity profile at much closer to a neutral to slightly asset-sensitive level. Certainly, as we move forward and we're able to further remix the loan book and the deposit book, this profile will look more like FirstSun Capital Bancorp does today. On the credit front, we're focused on improving the profile through downsizing non-relationship credits, specifically in the shared national credit book, exiting primarily some larger unit complex loans on the multifamily side and reducing some of the longer-dated municipal loan book. We expect the pro forma post-closing to have a regulatory CRE concentration ratio at approximately 238%. This is a significant improvement from the level at First Foundation Inc. today and certainly a very comfortable operating level.

To slightly asset sensitive level and certainly as we move forward enable and were able to further remix the loan book and the deposit book. This profile will look more like first son does today.

And on the credit front, we're focused on improving the profile through downsizing non relationship credits specifically in the shared national credit book exiting primarily some larger unit complex loans on the multifamily side and reducing some of the longer dated municipal loan book.

We expect the pro forma post closing to have a regulatory CRE concentration ratio and approximately 238% a significant improvement from the level at first foundation today, and certainly are very comfortable operating level.

And our CET one capital level pro forma after closing is projected at a strong 10, 5% and Theres no new capital required is as part of the deal is as we outlined in the deck. We see this as a very thoughtful utilization of first Sun's capital position and further we see.

Rob Cafera: Our CET1 capital level pro forma after closing is projected at a strong 10.5%. There is no new capital required as part of the deal as we outlined in the deck. We see this as a very thoughtful utilization of FirstSun Capital Bancorp's capital position. Further, we see a significant level of ongoing flexibility on the capital side given our projected earnings levels immediately post-closing. These actions will enable us to position the pro forma to immediately grow on an organic basis post-closing. There is not an extended workout timeframe here. The key is we'll be on offense. We know this playbook and have run it successfully many times in past deals. The repositioning is going to accelerate how we remix the balance sheet. Simply put, we're going to make the First Foundation Inc. balance sheet historical look more like FirstSun Capital Bancorp.

A significant level of ongoing flexibility on the capital side, given our projected earnings levels immediately post closing.

These actions will enable us to position the pro forma to immediately grow on an organic basis post closing there is not an extended workout timeframe here. So the key is we'll be on offense.

We know this playbook and have run it successfully many times in past deals the repositioning is going to accelerate how we remixed the balance sheet simply put we're going to make the first foundation balance sheet historical look more like first son and emphasis on core funding both commercial via Treasury management emphasis.

Rob Cafera: An emphasis on core funding, both commercial via treasury management emphasis and our consumer playbook. The fee income piece, and of course, our emphasis in the C&I lending space. Page 16 of the deck highlights the resulting math behind this, between the repositioning, purchase accounting, and deploying our playbook. This is a unique opportunity to take a company with a recent run rate NIM in the 1.60% area and bring it up to a nearly 4% level in line with our NIM and driving a combined projected ROA of approximately 145 basis points as we look out to 2027, the first full year of operations. We are excited about the pro forma operating profile here, driving an approximate 30% level of accretion in 2027, and off the roughly 14% TBV dilution, we see a fully loaded TBV earnback of slightly in excess of three years.

And our consumer playbook.

Fee income piece and of course, our emphasis in the C&I space.

Page 16 of the deck highlights the resulting math behind this between the repositioning purchase accounting and deploying our playbook. This is a unique opportunity to take a company with a recent run rate NIM in the <unk> area and bring it up to a nearly 4% level in la.

<unk> with our NIM and driving a combined projected ROA of approximately 145 basis points as we look out to 2027 in the first full year of operations.

So we're excited about the pro forma operating profile here driving an approximate 30% level of accretion in 2007 and roughly.

Roughly 14% TBD dilution, we see a fully loaded TBD earned back of slight.

Slightly in excess of three years.

Page 28 in the deck provides a sort of projected performance scorecard and we love scorecards here in our bank and when you look at our performance metrics on a pro forma basis here I think the pro forma paints a pretty compelling picture in terms of profitability and mix and in terms of trading multiples.

Rob Cafera: Page 28 in the deck provides a sort of projected performance scorecard. We love scorecards here in our bank. When you look at our performance metrics on a pro forma basis here, I think the pro forma paints a pretty compelling picture in terms of profitability and mix. In terms of trading multiples, I think Neal has said it before, at a 7.7 roughly times pro forma 2027 run rate earnings, I think there's significant upside. With that, I'm going to turn it back to Neal for some final remarks, and then we'll open it up for the Q&A.

I think Neil will set it before.

Seven seven roughly times pro forma 27 run rate earnings I think there is significant upside.

With that I'm going to turn it back to Neil for some final remarks, and then we'll open it up for the Q&A.

As we said there are lots of moving parts here, but we believe that this transaction quickly reduces the risk profile of the resulting company and gives us the upside both for growth.

Neal Arnold: Thank you, Rob. As we said, there are lots of moving parts here, but we believe that this transaction quickly reduces the risk profile of the resulting company and gives us the upside both for growth and risk profile to continue to propel our franchise forward in the attractive markets of the Southwest and throughout the footprint of the combined organization. We'd be happy now to take any questions from the audience.

And risk profile to continue to propel our franchise forward.

The attractive markets of the southwest.

And throughout the footprint of the combined organization will be happy now to take any questions from the audience.

Thank you to ask a question. Please press star followed by one on your telephone keypad now.

Operator: Thank you. To ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. The first question comes from Matt Olney of Stephens. Your line is now open. Please go ahead.

If you change your mind, Please press star followed by Jay.

When comparing to ask your question. Please ensure your devices on mute locally.

The first question comes from Matt Olney of Stephens. Your line is now open. Please go ahead.

Thanks, Good morning.

A few questions on the acquisition.

[Analyst 1]: Thanks. Good morning. Just a few questions on the acquisition, specifically the repositioning plan that you outlined on slide 14. I definitely appreciate your paying down the $3.4 billion of liabilities and running off some of the assets. Can you just walk us through the mechanics of this and the timing of when you expect these to take place relative to the closing date? It just seems like there is going to be some risk in executing this. I just want to make sure I understand the mechanics behind all this. Thanks.

Specifically the repositioning plan that you outlined on slide 14.

Definitely I appreciate youre paying down the $3 $4 billion of liabilities in running off some of the assets can you just walk us through the mechanics of this and the timing.

Of when you expect these to take place relative to the closing date.

Seems like there is going to be some risks in executing this so just want to make sure I understand the mechanics behind all that thanks.

Sure Matt Thank you for joining today and.

Rob Cafera: Sure, Rob. Sure, Matt. Thank you for joining today. We're very focused on continuing the play that Tom and his team have deployed. I'd tell you on the timing side, Tom and his team already have some plans in place. We're just upsizing the overall magnitude. In Q4 and Q1, we expect some progress just based on the existing plans that Tom and his team have. Over and above that, we'll be layering on the additional activity. In terms of the mechanics, we'll be pursuing some bulk sales. We may look at securitization, but there'll be bulk activity. We expect some natural declination in the overall portfolio here as Tom and his team have looked at what opportunities they have in front of them already.

We're very focused on continuing to play that Tom and his team have done.

Deployed.

So I would tell you on the timing side.

Tom and his team.

Already have some plans in place we're just.

Upsizing the overall magnitude.

So in Q4 and Q1.

We expect.

Some progress just based on the existing plans that Tom and his team have.

And then over and above that will be layering on the additional activity. So.

In terms of the mechanics.

We will be pursuing some bulk sales.

We may look at securitization, but there'll be bulk activity.

We expect some just some natural declination in the overall portfolio here is again as Tom and his team have looked at what opportunities they have in front of them already.

But we expect for the entire repositioning to be accomplished.

Rob Cafera: We expect for the entire repositioning to be accomplished right around closing, shortly after closing, but certainly well in advance of the first reporting point that we would have post-closing. We're projecting an early Q2 closing date here.

Around closing shortly after closing, but certainly well in advance of.

The first reporting point that we would have those closing and were projecting in early Q2.

Loathing date here.

And I would just add Matt.

Our hedges put in place with regard to the market risk on the execution as well.

Neal Arnold: I would just add, Matt, that there are hedges that are put in place with regard to the market risk on the execution as well.

Okay, great appreciate that and it sounds like.

[Analyst 1]: Okay. Great. Appreciate that. It sounds like even beyond the repositioning that you guys highlight, it seems like there could be more of this in the future. In other words, more remixing, repositioning, even beyond the $3.4 billion. Can you just kind of provide some commentary about other opportunities beyond the $3.4 billion that we could see following closing in the coming months after the deal closing?

Even beyond that the repositioning that you guys highlight it seems like there could be.

More of this in the future in other words more remixing and repositioning even beyond the $3 4 billion can you just kind of.

Can you provide some commentary about other opportunities.

Beyond the three or four that we could see.

Following closing in the coming months after the deal closing.

Yeah I think.

One of the last couple of slides that we talk about is a little bit of our history on repositioning.

Neal Arnold: Yeah. I think one of the last couple of slides that we talk about is a little bit of our history on repositioning that's happened on deals historically. I would just say our thought process will continue to migrate to higher yields on the asset side and to more core deposits. I wish I could wave a magic wand, but I would tell you the core deposit piece I would expect to happen over the next four to six quarters where you'll see a much better mix around it. We're seeing that already in these markets. I would expect that's going to continue to happen just quite naturally, but we'll be comfortably in our risk profile, as Rob pointed out.

It happened.

On deals.

Historically, so I would just say.

Our thought process will continue to migrate to higher yields on the asset side and to more core deposits.

Actually I could wave a magic one, but I would tell you.

Core deposit piece I would expect to happen over the mix.

Four to six quarters, where you'll see a much better mix around it we're seeing that already in these markets. So yes, I would expect that's going to continue to happen.

Just quite naturally, but we will be comfortably in our risk profile as Rob pointed out.

And I think Neil also.

In terms of the remix part of this is.

Rob Cafera: I think, Neal, also, in terms of the remix, part of this is our plan to be offensive in terms of bringing in some additional C&I-focused teams, certainly in the Southern California market, but honestly, in some of our other markets as well. There is some natural scheduled repricing within the First Foundation Inc. portfolio, and that's part of the remix that will also be occurring here on the asset side.

Our planned it to be offensive in terms of bringing in some additional C&I focused teams certainly in the southern California market, but honestly in some of our other markets as well.

And so there is some natural scheduled repricing within the.

First foundation portfolio and so that's part of the remix that will that will also be occurring here on the asset side.

Okay.

Okay. That's helpful. If I could just sneak one more question on capital it looks like we're closing with a CET one ratio around 10, 5%, but.

[Analyst 1]: Okay. That's helpful. If I could just sneak one more question on capital, it looks like we're closing with a CET1 ratio around 10.5%. Based off some of the projections, it's going to build pretty quickly. I think the 2027 projections call for that to be around 12.7%. Can you just speak to the normalized level of capital you see at the bank kind of longer term and how you expect to manage that? Thanks.

Based on the projections, it's going to build pretty quickly I think the 2027 projections call for that to be around 12, 7%.

Can you just speak to the normalized level of capital.

You see at the bank kind of longer term and how you expect to manage that.

Yes, absolutely.

And thank you for the questions Matt.

Rob Cafera: Yeah, absolutely. Thank you for the questions, Matt. We've talked in the past about our capital strategy. I'd maybe just start off there by saying we've always had a very intentional approach as it relates to capital. That starts with, we have operating thresholds that we want to operate above. We're always very focused on supporting the organic growth opportunities in the business. That will continue. That's the first threshold. Of course, we always look at opportunities on the M&A side, and we want to be able to support those, hence the deal we're talking about today, right? Our expectation, as you noted appropriately, is that we expect to be accreting a significant amount of capital. That's going to provide us a lot of flexibility. You were referencing the view in the IR deck that tracks our projections on a CET1 level.

We've talked in the past about kind of our.

Capital.

Strategy.

Maybe just start off there by saying.

We've always had a very intentional approach as it relates to capital and that starts with we have we have operating thresholds that we want to operate above.

We're always very focused on supporting the organic growth opportunities in the business.

That will continue.

The first threshold.

We always look at opportunities on the M&A side, and we want to be able to support those hence the deal we're talking about today right.

Our expectation as you noted appropriately is that we expect to be accretive a significant amount of capital and thats going to provide us a lot of flexibility.

You were referencing the view in the IR deck.

<unk>.

It kind of tracks our projections on our CET one level.

<unk>.

And we do expect to see CET, one leveling off.

Rob Cafera: We do expect to see CET1 leveling off as you get out beyond 2027. That translates to, we do expect some future capital management strategies being employed that we haven't historically employed at FirstSun Capital Bancorp.

As you get out beyond 2027, so we do.

That translates to we do expect some future capital management strategies being employed that we haven't historically employed at first son.

Okay, great. Thanks for taking my questions and congrats on the deal.

[Analyst 1]: Okay. Great. Thanks for today, my questions, and congrats on the deal.

Thank you.

Thank you. The next question comes from Woody lay with <unk>. Your line is now open. Please go ahead.

Rob Cafera: Thank you.

Neal Arnold: Thanks.

Operator: Thank you. The next question comes from Woody Ley of KBW. Your line is now open. Please go ahead.

Hey, good morning, guys.

Good morning.

[Analyst 2]: Hey, good morning, guys.

I wanted to.

Rob Cafera: Morning.

I wanted to start on.

[Analyst 2]: I wanted to start on assumptions behind the EPS accretion. It looks like internal projections were used for both companies. I was just wondering if you could give any visibility on how those projections compared to street estimates for both companies, and you know, is there a potential upside you see to consensus?

Assumptions behind the EPS accretion it looked like internal projections were used for both companies and I was just wondering if you could give any visibility on how those projection compared to street estimates for both companies and is there potential upside you see.

Take consensus.

Yes, absolutely.

Rob Cafera: Yeah, absolutely. I'll kick it off there. We did kind of walk through some waterfall thoughts in the deck in terms of how we see the pieces. I'll start on the First Foundation Inc. side and maybe just start from a Q3 2025 perspective, just from a run rate standpoint. I think it's actually page 16 in the IR deck that shows trailing 12 months is roughly at about $10 million. Q3 of 2025 is roughly at a flat level. As you cast forward to 2026, we see some major shifts in the First Foundation Inc. business. On the NII side, we see improvement of, I'd call it, low teens in NII, and that's going to be driven on the funding side. Our rate curve assumption that both companies have been operating with, that wasn't fully reflected in recent consensus estimates, was for a down additional 100 basis points.

I'll kick it off there so.

We did kind of walk through some waterfall.

<unk>.

Fox in the deck in terms of how we see the pieces I'll start on the first foundation side and maybe just kind of start from our Q3 25 perspective, just from a run rate standpoint.

And I think it's actually page 16 in the IR deck.

Sure.

That shows trailing 12 months is roughly at about a $10 million in Q3 of 25 is.

Roughly it at a.

Flat level and so as you cast forward to 'twenty six.

We see some major shifts in the first foundation business.

The NII side.

We see improvement of I call it low teens in NII and thats going to be driven on the funding side.

Right.

Of assumption that both companies have been operating with.

That werent fully reflected in recent emphasis.

Census, estimates was for a down additional 100 basis points and so that's going to driven given the liability sensitivity on the first foundation side a lot of.

Rob Cafera: That's going to drive, given the liability sensitivity on the First Foundation Inc. side, a lot of accretion opportunity for them on the NII side. We see in 2026 relative to where they are in recent run rate, roughly a 13% improvement in NII, and that's going to be driven mostly on funding costs. There's a little bit of asset repricing in there, but it's driven by funding. We think that alone will drive NIM up 20-ish basis points. We also see expense improvement, call it mid-high single digits from recent run rates on the expense side, and that's going to be driven by customer service expenses. Customer service expenses are another type of deposit interest cost for them. We don't have those at FirstSun Capital Bancorp, as you all know, but the customer service costs, again, another type of deposit interest cost, that's actually down in operating expenses.

Accretion opportunity for them on the NII side, So we see in 'twenty six relative to.

Where they are and recent run rate roughly a 13% improvement in NII and thats going to be driven mostly on funding cost there is a little bit of asset repricing in there, but it's driven by funding.

We think that alone will drive NIM up 20 ish basis points.

We also see expense improvement.

Call. It mid high single digits from recent run rate on the expense side and thats going to be driven by customer service.

Expenses.

Customer service expenses or another type of a deposit interest costs for them. We don't have those at first Sun as you all know.

But the customer service costs again another.

Type of deposit interest cost that's actually down in operating expenses and so based on some actions that first foundation have already taken with regard to some of what used to be historical customers in that set those costs are coming down.

Rob Cafera: Based on some actions that First Foundation Inc. have already taken with regard to some of what used to be historical customers in that set, those costs are coming down. We expect improvement on the expense side, driven by customer service costs and some reduction in professional expenses. Between expenses and NII, that's roughly an improvement from the break-even level of Q3 of 2025 to roughly about $28 million. That's pre-loan loss provision. Loan loss provision, that's about $23 million all in. That's kind of the improvement that we see, recent run rate into 2026. In 2027, it's just going to continue in terms of NII improvement, again, driven by funding cost improvement. Some scheduled asset repricing within mostly the multifamily book is driving some further NIM improvement, anywhere from that 20, you know, mid-20s in terms of basis points and NIM improvement.

So we expect improvement on the expense side drew.

Driven by customer service cost some reduction in professional expenses.

And so between expenses and NII.

That's roughly an improvement from the breakeven level of Q3.

<unk> 25 to roughly about $28 million.

That's pre loan loss provision loan loss provision that's about $23 million all in so that's kind of the improvement that we see.

The recent run rate into 26 and 27, it's just going to continue.

In terms of NII improvement again, driven by funding cost improvement again, some scheduled asset repricing within mostly.

Mostly the multifamily book driving some further NIM improvement.

Again anywhere from that 20 mid <unk> in terms of basis points in NIM improvements and then in 2007, we actually see.

Rob Cafera: In 2027, we actually see also fee income improvement, particularly in the expansion that we would anticipate in the wealth business. Conservatively, we didn't build as much into 2026 on the wealth side, but we see, you know, the sky's the limit on that in terms of integration within not only the existing customer base on the First Foundation Inc. side, but also the FirstSun Capital Bancorp side. That's how we see that legacy run rate on First Foundation Inc. extending into our pro forma company.

Also fee income improvement.

Particularly in the expansion that we would anticipate in the wealth business.

Conservatively, we didn't build as much into 26 on the wealth side, but we see.

The sky's the limit on that in terms of integration within.

Not only the existing customer base on the first foundation side, but also the first Sun side. So that's how we see.

That legacy run rate on first foundation extending into our pro forma.

I might just add.

Because of the amount of balance sheet.

Neal Arnold: I might just add, you know, because of the amount of balance sheet restructure here, we built the First Foundation Inc. P&L from the bottoms up to get our arms around what we thought was the go-forward run rate. It was not based off of the general ledger, if you will. I'd also say we made a very conscious decision to reduce risk, not just carry a bigger balance sheet. We think that positions the company to play better offense, not just limp. We've seen too many companies in some of these kinds of transactions just not really drive good organic earnings growth going forward. To us, we've positioned the company in the balance sheet to do that.

Restructure here, we built the first one ambition.

Well from a bottoms up.

To get our arms around what we thought was the go forward run rate.

It was not based off of a general ledger, if you will.

But I'd also say, we made a very conscious decision to reduce risk not just carry a bigger balance sheet and we think that positions. The company to play better offense, not just limp we've seen too many companies.

Some of these kinds of transactions just not really drive good organic earnings growth going forward and so to US we have positioned the company and the balance sheet to do that.

That's really helpful color.

I appreciate that maybe on the on the Derisking part.

[Analyst 2]: That's really helpful. I appreciate that. Maybe on the de-risking part, you went through a similar type announced transaction over a year ago, went through the regulatory process, and ultimately terminated that transaction. It feels like there were some lessons learned on the way this deal is structured. What gives you the confidence on the regulatory side this go-round?

You went through.

A similar type announced transaction over a year ago went through the regulatory process.

And ultimately terminated that transaction.

It feels like there was some lesson lessons learned on the way the deal is structured but what gives you the confidence on the regulatory side. This go round.

Yes, certainly a fair question.

Yes, I'd say two things.

Neal Arnold: Yeah, certainly a fair question. I'd say two things. We've noticed Washington's a little different today. We've had extensive conversations with both the OCC and the Fed with regard to this transaction. I think we took to heart some of the lessons such as, as I said at the outset, our restructuring of this balance sheet is bigger, faster, clearer. That's been our biggest lesson. We walked through that with the regulators. We're well inside the CRE. We're well above the capital ratios. I think all the touchpoints, in addition to the magnitude of the risk reduction on asset quality, liquidity, and interest rate sensitivity, have all positioned this to go well. We're highly confident that it will. They see this the way we'd hoped they would in the past. We've tried to take to heart all those conversations. They have to do their process. We certainly respect that.

We've noticed Washington is a little different today.

But I'd say, we've had extensive conversations with both the OCC and the fed with regard to this transaction.

I think we took to heart some of the lessons such as as I said at the outset.

Our restructuring of this balance sheet is bigger faster clear that's been our biggest lesson and we work through that with the regulators, we're well inside the CRE were well above the capital ratios. So I think all the touch points. In addition to the magnitude.

The risk reduction.

On asset quality liquidity and interest rate sensitivity have all positioned this to go well.

And we're highly confident that it will.

They see this the way we'd hoped they would in the past, but we've tried to take to heart all those conversations they have to do their process.

We certainly respect that but we've been very clear and they have been very clear back to us.

Neal Arnold: We've been very clear, and they have been very clear back to us.

Yeah.

Yes.

<unk>.

Maybe just last for me looking at.

[Analyst 2]: Maybe just the last for me, looking at legacy FirstSun's third quarter, was just hopeful to get any color on sort of the moving pieces on the credit side and sort of expectations for charge-offs going forward.

Well I guess the first on third quarter I was just hoping to get any color on sort of the moving pieces on the credit side and sort of.

Spectation for charge offs going forward.

Sure absolutely.

We had.

Rob Cafera: Sure, absolutely. We had about a $10 million provision expense in the third quarter. That included a specific reserve related to a C&I loan in the auto finance industry. Our provisioning was also driven by 11% loan growth, which is going to drive provisioning. We were very strong on that side. We had some net downgrades. We did charge off two C&I loans, and that represented the bulk of the $9 million charge-offs that we had in Q3. That translates to about 55 basis points in charge-off ratio. Those charge-off balances were fully reserved for prior to Q3. The largest of those two was the loan with cross-border exposure that we've talked about in prior quarters, and it's been in non-performing status, actually dating back to 2024. Classified loan balances were down about 5%.

<unk> had about a $10 million provision expense in <unk>.

In the third quarter.

<unk>.

That included specific reserve related to a C&I loan and the auto finance industry.

Our provisioning was also driven by we had 11% loan growth.

So that of course is kind of drive provisioning.

So we were very strong on that side, we had some net net downgrades, we did charge off to C&I loans.

And that represented the bulk of the $9 million charge offs that we had in Q3. It translates to about 55 basis points and charge off ratio those charge off balances were fully reserved for.

Prior to Q3.

The largest of those two was the loan with cross border exposure that we've talked about in prior quarters and it's been in nonperforming status actually dating back to 'twenty four.

And so classified loan balances were down about 5% nonperforming balances.

Did.

Rob Cafera: Non-performing balances did track back up in the third quarter or at about 104 basis points, which, with the exception of Q2, we've been operating with non-performing loan balances in that 1%, very low 1% neighborhood for most of this year and the last year. That's an overview of some of the moving pieces there. I think we've said in the earnings deck that we expect charge-offs to be in the low 40s in terms of basis points for 2025. We have seen some general deterioration in the market from a valuation and pricing standpoint that has resulted in some additional loss to us on some of the credits that we've been exiting.

Track back up in the third quarter, we're at about 104 basis points, which with.

The exception of Q2, we've been operating in but nonperforming loan balances in that 1% very low 1% neighborhood for most of this year in the last year. So.

Yes.

Yes.

An overview of some of the moving pieces. There I think we've said that in the earnings deck that we expect charge offs to be in the low <unk> in terms of basis points.

425 here.

And we have seen some general deterioration in the market from a valuation and pricing standpoint.

That has resulted in some additional loss to us on some of the credits that we have been exiting.

Yes, the only thing I would add is we never like.

Neal Arnold: Yeah, the only thing I would add is we never liked losing money on credit. I promise you, we look hard at it. We've said all along, C&I credit is lumpy, and you can't predict it. We're very careful with our concentration limits across the organization. I'd say generally, in talking with our clients, their balance sheets are still healthy. They still have very strong profit margins, maybe better than I've seen in many decades. The challenge has been just some of the disruption and higher debt financing costs have impacted it. I do think it's mitigating. The hard thing is we can't predict one-off sort of losses. I wish that were possible. We'd certainly do things to avoid it. We still very seriously evaluate our portfolio with a lot of rigor. Those that know us know that. I'd just say we still don't take lightly credit losses.

<unk> money on credit.

And I promise you, we look hard at it but we've said all along.

Ni credit is lumpy and you can't predict it.

Careful with our concentration limits across the organization.

And I'd say generally in talking with our clients their balance sheets are still healthy they still have very strong profit margins.

Maybe better than I've seen in many decades.

The challenge has been.

Just some of the disruption and higher debt financing costs have impacted but I do think it's mitigating but.

The hard thing is we can't predict one off.

Losses.

I wish that were possible, we'd certainly do things to avoid it but.

We still very seriously evaluate our portfolio with a lot of rigor those that know us know that but.

So.

We still don't take lightly.

Credit losses.

Got it well I appreciate it.

All of the answers thanks for taking my questions.

[Analyst 2]: Got it. I appreciate all the answers. Thanks for taking my questions.

Thank you.

Okay.

Rob Cafera: Absolutely. Thank you.

Thank you. The next question comes from Michael Rose of Raymond James Your line is now open. Please go ahead.

Operator: Thank you. The next question comes from Michael Rose of Raymond James. Your line is now open. Please go ahead.

Hey, good morning, guys. Thanks for taking my questions just a couple of follow good morning.

[Analyst 1]: Hey, good morning, guys. Thanks for taking my questions. Just a couple of follow-ups here.

Good morning.

Slide deck talked about just some of the significant.

Rob Cafera: Good morning.

[Analyst 1]: The slide deck talks about just some of the significant revenue synergies that are out there. Just trying to better appreciate what is going to be kind of the nearer-term focus versus what could take maybe a little bit longer. Do you kind of have a target fee versus spread revenue mix? Also, kind of related, you also talk about the $3 billion plus deposit growth opportunity. What does that involve to get there? Is it hiring more people? Is it different products and services? Just trying to get a better understanding there. Thanks.

Revenue synergies that are out there just just trying to better.

Appreciate what is going to be kind of a near term focus versus what could take maybe a little bit longer.

And then do you kind of have a target fee versus spread revenue mix and then just separately also kind of related you also talk about the $3 billion plus deposit growth opportunity.

What does that involve to kind of get there is a hiring more people is it different.

Different products and services, just trying to get better understanding there.

Yes.

Thanks, Michael and funny headline thank you.

Neal Arnold: Thanks, Michael. Funny headline. Thank you. The thing I would say is, from our perspective, retail branch running our playbook on the retail side, I wish it could happen overnight, but that's probably an 18-month to 2-year transition. Our team is good at that. We've done that in the past. I'm highly confident that that play will transform it. That's the longest tail, if you will. I think the rest of the sort of asset remix will continue to tackle. If you look at our history in Pioneer, you look at our history in SGB, we had higher CRE. We believe if you look at the core run rate of originations in that business, they're much better even on a risk-adjusted basis in C&I. We'll continue to work on that.

Yeah.

The thing I would say is.

From our perspective.

Retail branch running our playbook on the retail side.

I wish it could happen overnight, but that's probably 18 months to.

Two year transition, but our team is good at that we've done that in the past.

So I'm highly confident that.

That play will trend.

Transform it and that's the longest tail. If you will I think the rest of the sort of asset remix will continue to tackle if you look at our history and pioneer you look at our history and FCB, we had higher CRE.

And we believe if you look at the core run rate of originations in that business.

Much better.

Even on a risk adjusted basis in C&I. So we will continue to work on that I would say.

No.

Neal Arnold: I would say the speed by which this operation on a combined basis will look like the history of FirstSun Capital Bancorp is nothing I've ever seen. I didn't go into it expecting how quickly we thought we could transform this. It helps to have a team already on the ground here in Southern California. We don't have to wait till integration, then begin hiring, going through a process. We, in essence, are two years ahead of time by already having a team on the ground. Our goal is to leverage that and really improve that piece of the puzzle. I'll let Rob add any color if you want.

Speed by which.

This operation on a combined basis will look like the history of first one.

There is nothing that I've ever seen.

And didn't go into it expecting how quickly we thought we could transform this.

So it helps to have a team already on the ground here in southern Cal We don't have to wait until integration then begin hiring going through a process. We in essence are two years ahead of time by already having a team on the ground. So our goal is to lever.

That and really improve that piece of the puzzle.

I'll, let rob add any color.

Yes, absolutely.

I think our business mix also Michael gives us.

Rob Cafera: Yeah, absolutely. I think our business mix also, Michael, gives us some added flexibility. We see the branch footprint, particularly in Southern California on the First Foundation Inc. side, as being underutilized. We have more flexibility than they've been able to operate with. What I mean by that is, given the mix of our business, we've got a higher margin. We're certainly on the higher side than most. That gives us some flexibility in terms of how we run some of the plays. As Neal mentioned, this is a daily business for us on the branch side. It's a maniacal managerial approach to daily activity. We mix in, I think, a pretty darn good product set, promotions that we can bring to bear, again, given the flexibility that we have with margin and that we can do with rate side.

Some added flexibility.

We see the branch footprint, particularly in southern California, The first foundation side as.

Being underutilized.

And we have more flexibility than they've been able to operate with so and what I mean by that is given the mix of our business, we've got a higher margin.

Certainly on the higher side than most that gives us some flexibility in terms of how we run some of the plays so as Neil mentioned this is a daily business for us on the branch side.

It's a maniacal managerial approach to daily activity.

But we mix in I think a pretty darn good product set.

Motion that that we can bring to bear again, given the flexibility that we have with margin and that we can do with rate side. So we feel really good about being able to rollout our playbook there.

Rob Cafera: We feel really good about being able to roll out our playbook there with the branch side. As we look at our success here over a longer time horizon in 2025, I think year-to-date deposits are up about 9% for us in total. I think that's probably on the higher side than most. We talk about this internally in the halls of FirstSun Capital Bancorp every day. Deposits are critical. Everybody knows it, and that's not changing.

With.

With with the branch side and as we look at.

Our success here over a longer time horizon in 2025, I mean, I think year to date deposits are up about 9% for us in total, yes, I think thats, probably on the higher side and then than most so its just this is we talk about this internally in the halls. The first son everyday deposits are critical.

Everybody knows it.

And that's not changing I might let Tom thumb.

Tom to share.

Neal Arnold: I might let Tom or ask Tom to share, you know, being a Michigan C&I banker, having spent a year here in Southern California, seeing the opportunity in middle market out here. Maybe you want to share some of your perspective as you looked at this market.

Being a Michigan C&I banker, having spent a year here in southern Cal and seeing the opportunity in middle market out here, maybe you want to share some of your perspective as you looked at this market. So this creates a moment, where we can get really excited because we can lean forward in doing this we do get.

[Analyst 2]: Yeah, this creates a moment where we can get really excited because we can lean forward in doing this. We've got good distribution. The scale of the market is shocking. I spent the vast majority of my career in the Midwest, kind of, you know, no growth, limited growth marketplaces that's filled with industrial complexes. My happy findings when I got here was the depth and breadth and diversification of the Southern California economy is staggering. The jobs that we have here, the value of the jobs, the diversification of the industries that we have, and the resiliency of this economy is far greater than I ever expected. That's one of the real bright spots, many bright spots, but that's one of the bright spots of operating in this marketplace.

Good distribution, but.

The scale of the market is shocking I spent my.

The vast majority of my career in the Midwest kind of.

No growth limited growth marketplaces, that's filled with.

Industrial complexes my my.

Happy findings when I got here was the depth and breadth and diversification of the southern California economy is staggering and the jobs that we have here is the value of the jobs. The diversification of the industries that we have and the resiliency of this economy is.

Far greater than I ever expected and so that's one of the real bright spots.

<unk>, but that's one of the bright spots of operating in this marketplace.

The only thing I would add is.

Neal Arnold: Yeah. The only thing I would add is disruption in this market has been much greater than I ever expected. Sometimes you win because of great markets. Sometimes you win because the other guy has issues going on or their own merger activity. We've always had an opportunity in those kind of markets throughout our footprint. To us, that's an element I really under-anticipated as we started to build teams, went out and called on clients. People don't love large banks in middle market. They feel like they're ignored. They don't tend to get that personal touch. To us, we believe the best franchise in banking is still in middle-market clients who need good bankers. We're in that business.

Disruption in this market has been much greater than I ever expected, sometimes you win because great market, sometimes we win because the other guy has issues going on in or their own merger activity and so we've always had an opportunity in those kind of markets throughout our footprint.

<unk>.

So to us that's an element I really under anticipated as we started to build teams went out and called on clients people don't love large banks in middle market.

They feel like they are ignored.

<unk> tend to get the personal touch and so to US we believe the best franchise in banking.

And middle market clients, who need good bankers.

We're in that business and.

And Michael you asked about revenue synergies there as well.

Rob Cafera: Michael, you asked about revenue synergies there as well. I think all three of us have mentioned the wealth opportunity here. I'd probably put that at the top of the list. It's a wonderful opportunity, certainly across the FirstSun Capital Bancorp middle-market client base. I believe Tom has always seen the opportunity within his own First Foundation Inc. legacy business. I think it's a wonderful opportunity for expansion on the wealth side. Treasury management on the commercial side is always a big emphasis for us. We see a real nice opportunity not only with the existing base, but again, the opportunity in Southern California with the expanded reach that we will soon have is wonderful. That extends onto the residential mortgage side with the branch footprint coming online for us.

We've I think all three of US have mentioned the wealth opportunity here.

Probably put that at the top of the list. It's a wonderful opportunity certainly across the first son middle market client base, but I believe Tom has always seen the opportunity within his own first foundation legacy business. So.

Wonderful opportunity for expansion on the wealth side Treasury management.

On the commercial side is always a big emphasis for us.

So we see a real nice opportunity.

Not only with the existing base, but again the opportunity in southern California with the expanded reach that we will soon have is wonderful and that extends onto the residential mortgage side with the branch footprint coming online for us.

As Neal mentioned in terms of a major metro.

Rob Cafera: As Neal mentioned, in terms of a major metro, it'll be our biggest branch footprint. It's a wonderful opportunity to deploy our residential mortgage playbook into the market here. We have a very successful franchise on the residential side, and we're really excited about being able to roll that out across Southern California here. Of course, we've talked about just the overall remixing within the loan and the deposit base. There is inherent opportunity on that side. I think even in the multifamily book, we've talked about some enhancement to the multifamily strategy with some flow sale aspect layering on. Our emphasis there tends to be more off balance sheet than on balance sheet, and that's another opportunity for us. We see a lot of opportunities.

It will be our biggest branch footprint, so wonderful opportunity to deploy our resi mortgage playbook into the market here.

We have a very successful franchise on the resi side and so we're really excited about being able to roll that out.

Across southern California here and of course, we've talked about just the overall remixing.

The loan and the deposit base I mean, there is Jeff.

There is inherent opportunity on that.

That side and I think even in the multifamily book I'll talk about some enhancement to the multifamily strategy with some flow sale aspect layering on so.

<unk>, there tends to be more off balance sheet than on balance sheet.

And so that's another opportunity for us so we see a lot of opportunities.

I would just add that in the multifamily space most of you know.

Neal Arnold: Yeah, I would just add that in the multifamily space, most of you know, I've not been a current new construction multifamily throughout our footprint. That's not the product I tend to care about because it tends to have higher risk, lower value, and less deposits. When you look in this market, a lot of our even new FirstSun clients have significant personal investment portfolios in the multifamily space. They aren't just developers. They have some real broad-based portfolios with great treasury management. To me, the multifamily expansion in this way is intriguing to us. I've always liked workforce housing.

Been a current new construction multifamily.

Throughout our footprint, that's not the product I tend to care about because.

Tend to have higher risk lower value less deposits, but when you look in this market a lot of or even new for some.

Clients.

Have significant personal investment portfolios in the multifamily space. They arent just developers they have some real.

Broad based portfolios with great Treasury management, so to me the multifamily expansion.

In this way is intriguing to us and I've always liked workforce.

Okay.

Yeah.

I appreciate all the color to my five part question there.

[Analyst 2]: I appreciate all the color to my five-part question there. Maybe just one quick follow-up. I think one of the pushbacks I got last night is just on the price paid. If I look at slide 47, it's way in the back, but the adjusted First Foundation tangible equity is $606 million. Given the purchase price, it's about 125% of tangible. What would you guys say to that? I think there is a lot of strategic merits here, but that is one of the pushbacks I got last night. Thanks.

Maybe just one quick follow up I think one of the push backs I got last night is just on the on the price paid if I if I look at slide.

47 weigh in the back but the adjusted first foundation tangible equity of 606, given the purchase price is about 125 and tangible.

What would you guys say to that.

Because I think theres a lot of strategic merits here, but that is one of the push backs I got left side. Thanks.

No certainly fair.

Here's what I'd say.

Neal Arnold: No, certainly fair. Here's what I'd say. There aren't as many properties. I think we're all seeing the opportunity set shrink. I would always be willing to pay less. Sometimes in these negotiations, we look at the opportunity to have the franchise in the biggest middle-market client base as a unique one. As we spent time getting to know the potential properties here, we felt like this was the right one for us. We think that, like I said, we could show better numbers by carrying a bigger balance sheet. We made a conscious decision to reduce risk because we think it does two things. It positions us better for solid organic growth, not just carry. I would say if you have a client, that's one thing. If you have a wholesale balance sheet structure, we made a decision to try to reduce it as much as possible.

Arent as many properties I think we're all seeing the opportunity set shrink.

I would always be willing to pay less.

But sometimes in these negotiations.

We look at the opportunity to have.

The franchise in the biggest miss.

Our middle market client base.

<unk> a unique one.

And as we spend time getting to know the potential.

Producer, we felt like this was.

The right one for us.

And we think.

We can show better numbers by carrying a bigger balance sheet, we made a conscious decision to reduce risk because we think it does two things it positions us better for solid organic growth not just carry.

I would say if you have a client that's one thing if you have a wholesale.

Balance sheet structure.

We made a decision to try to reduce it as much as possible and that was a decision both sides landed on.

Neal Arnold: That was a decision both sides landed on. I do think that we're going to be in a better position than most who tackle some of these kind of properties to really move forward with our organic playbook. That's what we care about.

So I do think that we're going to be in a better position than most to tackle some of these kind of properties to really move forward with our organic playbook and that's what we care about.

Alright, Thanks for taking all my questions I'll step back.

[Analyst 2]: All right. Thanks for taking all my questions. I'll step back.

Thank you.

Thank you. The next question comes from Matthew Clark of Piper Sandler. Your line is now open. Please go ahead.

Rob Cafera: Thank you.

Operator: Thank you. The next question comes from Matthew Clark of Piper Sandler. Your line is now open. Please go ahead.

Hi.

Hey, good morning, Thanks for the questions.

Good morning.

[Analyst 1]: Hey, good morning. Thanks for the questions.

Good morning, just to clarify the $3 $4 billion of repositioning is that all expected to get done.

Rob Cafera: Good morning.

[Analyst 1]: Morning. Just to clarify, the $3.4 billion of repositioning, is that all expected to get done by the time the deal closes? Just because it looks like on the funding side, there's some tail. There's some tail to reducing the wholesale funding. I wasn't sure if that was part of the $3 billion or if that was on top of the $3.4 billion.

By the time the deal closes just because it looks like.

On the funding side there is some tail.

<unk>, reducing the wholesale funding so I wasn't sure if that was part of the $3 billion or that was on top of a $3 4 billion.

Yes, so we do expect raw.

Rob Cafera: Yeah. We do expect, you know, roughly concurrent with closing to have the full play completed. We're estimating, you know, early Q2 for, you know, a closing timeframe. That would be our expectations. There is some, you're right on the wholesale funding side, particularly wholesale deposits. There are some term maturities built into that book, and we won't be able to roll those down until we hit some of those maturities. There is some extended, and that's part of the remix, you know, that we have been referring to on the funding side that will continue to occur post-closing. That's over and above, excuse me, that $3.4 billion of total funding paydown concurrent with close.

Roughly concurrent with closing to have the full play completed and were.

Estimating early Q2 four.

At closing time frame, so that would be our expectation there is some.

And Youre right on the wholesale funding side, particularly wholesale deposits. There are some term maturities built into that book and so we won't be able to roll those down until we hit some of those those maturities. So there is some extended and that's part of the remix.

We have been referring to.

On the funding side that will continue to occur post closing, but that's over and above.

<unk> me that $3 4 billion of total.

Funding paydown concurrent with close.

Okay.

Got it okay.

And then just on the 35% cost saves.

[Analyst 1]: Got it. Okay. On the 35% cost saves, can you give us a sense for where you expect that to come from? There is some limited overlap. You have a small presence in Southern California, and Florida is new. Just the source of the cost saves and the confidence in being able to achieve that number.

Can you give us a sense for where you expect that to come from just because there is some.

Limited overlap.

And you have a small presence in socal and.

Florida is new.

Sure the source of the cost saves and the confidence in being able to achieve that number.

Yes, we feel pretty good.

And about the opportunity on the cost save side.

Rob Cafera: Yeah, we feel pretty good about the opportunity on the cost save side. I think probably 70% of that will be on the people side. There's some FDIC element here that actually is going to be a bigger piece. I'll just put it under the header of professional services as a bigger piece. Across those three are the biggest opportunities on the cost save side. Certainly, we expect some, I'll call it, non-customer-facing back office facility opportunities. There's always opportunities like that in deals that'll fill out some of the cost save equation. Those would be the categories where we see the biggest opportunity. I think we also think there's probably even a little bit more upside there on the cost saves, but feel very comfortable with the level that we've indicated.

I think probably 70% of that will be on the people side.

There is there is some FDIC.

Element here that actually is going to be a bigger piece.

And professional.

I'll just put it under the header of professional services.

Is is a bigger piece so.

Those three.

Kind of are the biggest opportunities on the cost save side, certainly we expect some I'll call it.

Non customer facing back office facility opportunities.

As always opportunities like that in deals.

That will fill out some of the cost save equation, but those would be the categories, where we see the biggest opportunity.

And I think we also think there is probably even a little bit more upside there.

On the cost saves, but feel very comfortable with.

The level that we've indicated.

Yeah, and I'd say there are whole groups that will be.

Neal Arnold: Yeah, I'd say there are whole groups that will be impacted, you know, certainly the branches, the wealth management. We're going to see that as leveraging the business, dramatically. You know, cost saves are a part of any of these kinds of transactions. We tend not to be overly optimistic on our projections. Our goal is to always overachieve.

Impact certainly the branches the wealth management.

We're going to see that as a.

Leveraging the business dramatically, but.

Cost saves are part of any of these kinds of transactions, we tend not to be overly optimistic on our projections. So our goal is to always overachieve.

Okay. Thanks, and then just last one for me on the <unk> exposure. It looks like that's going to be part of the $3 4 billion that youre going to reduce.

[Analyst 1]: Okay, thanks. Just last one for me on the NDFI exposure. It looks like that's going to be part of the $3.4 billion that you're going to reduce. Can you let us know what's going to be left in terms of the subsegments? You know, how much of that might be mortgage warehouse and capital call lines relative to maybe some of the perceived riskier areas like private credit?

You just.

Let us know what what's going to be left in terms of the sub segments, how much of that might be mortgage warehouse and capital call lines relative to maybe some of the <unk>.

Received riskier areas like private credit.

Yeah.

Yes, I think Youre right I think we've identified in the Snick book somewhere around 450 $460 million that fits in the <unk> space.

Rob Cafera: Yeah, I think you're right. I think we've identified in the SNCC book somewhere around $450 million, $460 million that fits in the NDFI space. I think First Foundation starting point is somewhere around 11% of the book. You know, our book is less than 6%. I think on a combined basis, you know, we would expect to be, you know, down in that, you know, 5%, 6%-ish area on a combined basis. That's our overall expectation on that side. The composition is going to be in the buckets, consumer credit, there will be some mortgage credit, business credit intermediaries. It'll be spread out pretty evenly across those buckets.

I think.

I think first foundation.

Starting point is somewhere around 11% of the book.

We're our book is is.

Less than 6% I think on a combined basis, we would expect to be down in that five six ish area on a combined basis.

So that's.

Excuse me our overall expectation.

On on that side and the composition is going to be.

<unk>.

In the buckets consumer credits.

There will be some mortgage credit business credit and intercompany area, so it'll be spread out pretty evenly across.

Those buckets.

Okay. Thanks again.

Yes.

[Analyst 1]: Okay, thanks again.

Absolutely. Thank you.

Neal Arnold: Yes.

We currently have no further questions I'd like to have back to Neil Arnold for any closing remarks.

Rob Cafera: Absolutely. Thank you.

Operator: We currently have no further questions. I'd like to hand back to Neal Arnold for any closing remarks.

Thank you. We appreciate all of you joining us happy to answer any follow up to the extent that you have them.

Neal Arnold: Thank you. We appreciate all of you joining us. Happy to answer any follow-up to the extent that you have them. We look forward to getting to work. Thank you all.

We look forward to getting to work. So thank you will.

This concludes today's call. Thank you all for joining you may now disconnect your lines.

Operator: This concludes today's call. Thank you all for joining. You may now disconnect your lines.