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Also, as a reminder, this call may be recorded. I'd now like to turn the call over to Ed Jacks, Director of Investor Relations and Business Development. You may begin.

Thank you, and good morning. I'm joined today by Neal Arnold, our Chief Executive Officer and President, Rob Cafera, our Chief Financial Officer, and Jennifer Norris, our Chief Credit Officer. We will start the call with some brief remarks to highlight commentary around our first quarter results and recent First Foundation acquisition before moving into questions. Our comments will reference the earnings release and earnings presentation, which you will find on our website under the Investor Relations section. During this call, we will comment on our financial performance using both GAAP metrics and non-GAAP financial measures. Important information about these non-GAAP financial measures, including reconciliations to comparable GAAP measures, is included in the appendix to our earnings presentation and in our earnings release.

During this call, we will also make remarks about future expectations, plans, and prospects for the company that constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors. Please refer to our earnings presentation as well as our annual report on Form 10-K and our other SEC filings for a further discussion of the company's risk factors and other important information regarding our forward-looking statements. We undertake no obligation to publicly revise or update any forward-looking statement except as required by law. I will now turn the call over to Neal Arnold.

Thank you, Ed, and good morning. Thank you for joining us. It's a busy time right now at the FirstSun as we've just recently closed the acquisition of First Foundation. All of our teams are hard at work with the integration of these businesses. We're seeing some great examples of teamwork throughout our business lines on the sales side as well as across our staff teams. I'm very encouraged by the progress we've made so far, and Rob will talk about that. I'd like to start with some comments on our performance for the first quarter before circling back to some comments with regard to the First Foundation acquisition. You know, we're pleased with the momentum we saw in our business to start this year.

We believe our relationship-focused, diversified business model and being in some of the largest fast-growing markets in the country continues to be an important driver to our overall performance. For the quarter, we had adjusted net income of $23.7 million, representing an adjusted diluted earnings per share of $0.84 and an adjusted ROA of 1.14%. We saw very robust loan growth of over 16% annualized in the quarter, as well as continued expansion of our Net Interest Margin to a strong 4.25%. We also saw solid revenue mix on the non-interest income side, representing 24.7% of total revenue. On the asset quality side, we had higher provision, as I'm sure you all saw, in the quarter due to a combination of factors. First of all, some portfolio downgrades as well as strong loan growth.

Loan balances increased by approximately $267 million in the first quarter. We did see two loan charge-offs, and we're seeing some deterioration in value realization in the event of loss. The significant loan growth we saw in the first quarter materially impacted our higher provision expense. As we've noted before, in addition to traditional return measurements, part of our recurring performance monitoring focus on what we call our credit-adjusted NIM. We believe our performance there continues to remain strong. Turning to our recently completed First Foundation acquisition. As I mentioned, we're seeing some great energy across the teams since the deal closed on April 1st. The sharing of information and knowledge across the combined branch teams, across the legacy First Foundation wealth advisory business, and our commercial and residential teams is already driving new business opportunity.

I believe this teamwork will drive even greater long-term benefits to our future performance. As I've said from the beginning of this transaction, our focus is on de-risking the acquired balance sheet through a repositioning strategy that will allow us to unlock the core franchise and capitalize on the great market opportunities in the new acquired footprint, particularly in Southern California and in the deposit-rich markets of Southwest Florida. Our second quarter emphasis is on completing the post-acquisition balance sheet repositioning, and we believe we're well underway in execution. I'll let Rob cover some of the details there. Our third quarter emphasis is on completing our main application system conversions and unlocking the rest of the additional cost synergies that are included in that.

We believe the acquisition represents a significant step forward in the continued growth and evolution of this franchise. The combination enhances our presence in great, attractive high-growth markets, and it further expands our regional footprint and gives us greater scale across our core businesses. Strategically, the expanded branch network will strengthen our ability to serve clients locally while enhancing our deposit gathering capabilities and overall re-relationship density. In addition, the transaction significantly expands our wealth platform, which will allow us to deliver a more comprehensive suite of advisory and investment solutions to a broader client base. Taken together, we believe these benefits enhance our long-term growth profile and improve the revenue diversification and strengthen the durability of this franchise so that we drive sustainable long-term value for shareholders.

Our near-term focus remains on disciplined execution of our acquisition-related activities, in completing the balance sheet repositioning we talked about, successfully executing our system conversion, and realizing the identified cost synergies. As we move through this year, we are confident our execution will drive improved profitability, a stronger funding portfolio, and great long-term shareholder value. Overall, I'm really proud of the hard work all of the teams have been underway on and excited by the momentum across our extended footprint and the opportunities that lie ahead. I'll now pass the call over to Rob for some further color on our financial results, as well as some of the integration activities underway.

Thank you, Neal. Starting with our first quarter performance. On the balance sheet side for the first quarter and on a spot end balance basis, we achieved healthy loan growth of over 16% annualized. Growth was primarily in the C&I portfolio as we continued to see success across the high-growth markets in our footprint. We saw our line utilization increase by 4% from the end of last year. Just as a reminder, recall that our line utilization was down 3% at the end of last year. That piece is really just a function of timing. New loan fundings totaled $528 million in the first quarter, up 47% from the fourth quarter and 32% from the first quarter of last year.

Loan growth was heavier on the back end of the quarter, so while average balances in Q1 saw a lesser growth rate, we see a nice tailwind here heading into Q2 from an NII perspective. I would also note that our pipelines remain pretty robust as we begin to move through the second quarter. On the deposit side, on both an average balance and period end basis, our overall deposit balances were down slightly. Aside from general seasonality pressure that exists in the first quarter every year within a few segments in our deposit customer base, one specific component driving the decline in deposits was on the broker deposit side, where balances declined by approximately $60 million.

From a product mix perspective, you'll see the negative influence to balances from the decline in brokered within the CD category, as balances were down there in total, mitigated somewhat by average balance growth and interest-bearing demand now and money market accounts. Turning to the P&L side, we're quite pleased with the first quarter net interest margin, which ended at a strong 4.25%, up 7 basis points from the fourth quarter. This is now 14 consecutive quarters we've enjoyed a net interest margin above 4%. The NIM expansion was largely driven by improved funding costs, with interest-bearing deposit costs down 14 basis points compared to the prior quarter. All in all, we are very pleased with our margin performance and the corresponding 11% year-over-year net interest income growth.

We believe this is a testament to our continued focus on relationship depth across our client base. On the service fee revenue side, we saw a really nice start to the year with non-interest income to total revenue of 24.7%. While non-interest income in total was up slightly compared to Q4, we saw approximately 25% growth over the first quarter of last year, with continued strong performance in our mortgage business. We also saw continued growth in our treasury management service fee revenues in Q1, which continued to be a growth engine for us. Our total adjusted non-interest expense in the first quarter that excludes merger-related expenses was up from the fourth quarter by approximately $2.8 million, primarily related to increases in salary and employee benefits.

Our employee base increased in the first quarter as we continued to invest in our sales force. We do continue to see great opportunity in Texas and Southern California from a growth opportunity perspective. We also saw a bump, sequentially speaking, in the annual payroll tax and retirement account contribution, which resets in the first quarter every year. We also saw an increase in overall medical insurance costs. On the asset quality side, provision expense for the first quarter was $8.3 million, and our allowance for credit losses as a percentage of loans was 1.20%, a decrease of 7 basis points from Q4.

As Neal noted, our provision expense for this quarter was due to a combination of net portfolio downgrades and our strong loan growth. We took a charge-off on a telecom loan that we had partially reserved for last year, and we took a charge-off on an auto finance lender loan that we had fully reserved for last year, both of which were part of our charge-off expectations for 2026. These two loans drove the bulk of the $10.5 million in net charge-offs or 63 basis points on an annualized basis. Overall, we are not seeing broad-based credit issues across any particular geography in our footprint or sector within our portfolio. However, we have seen a relatively consistent level of non-performance in the portfolio as a whole, with an average level of non-performers around 1% of the loan portfolio over the last year.

Although that level did come down slightly to 86 basis points at the end of the first quarter. I'll just underscore what Neal noted earlier, and that is the significant level of loan growth we saw did result in incremental loan loss provisioning for us in the first quarter. Our overall level of credit-adjusted NIM, which we reference on page 15 in our earnings presentation deck, came down slightly as well, but is still above peer averages. On the capital side, we continue to strengthen our position as we ended the first quarter with our TBV per share improving by $0.74 to $38.57. Next, I'll turn to a few comments on the First Foundation acquisition. As Neal noted, there's a lot of momentum on the business side, and all of our integration activities are well underway.

Our macro objective, again, is to de-risk the acquired balance sheet and transform the business to look more like FirstSun. I'll start with an overview on our balance sheet repositioning activities, and I'll note that we have some details in the earnings presentation on this topic on page 20. At the end of the first quarter, before the transaction closed, First Foundation had already made significant progress on the loan downsizing, successfully reducing balances by approximately $1 billion or 44% of the planned $2.3 billion in total loan downsizing. We are now actively working on the remaining $1.3 billion in total loan downsizing, and based on our ongoing work with certain counterparties there, we expect to be completed by the end of the second quarter.

Even after the remaining planned repositioning activities are complete in the second quarter, we expect to continue to remix the acquired loan portfolio and specifically expect to continue to bring down the multifamily balances as they naturally hit their scheduled repricing dates over the next several years. We have approximately $310 million in scheduled repricing in the acquired multifamily portfolio over the remainder of 2026 and another approximate $400 million in 2027. Our focus here will be on keeping true relationships rather than where it is simply a credit-only situation. To us, credit only is not a true relationship, and this is where we want to de-risk the portfolio. Additionally, while our initial targeted balance reduction in the STIC portfolio is complete, we also expect to strategically continue to reduce the non-relationship balances in this portfolio on a go-forward basis.

Again, with an emphasis on cultivating true relationships that have deposits and connections into our service revenue businesses like treasury management and wealth advisory services. We expect to bring down the overall investor CRE concentration level to below 250% of capital by the end of the second quarter. As a reminder, while the legacy FirstSun investor CRE concentration level was less than 120% at the end of the first quarter, the loans acquired from First Foundation did result in that level increasing significantly post-acquisition. As to the other components of our repositioning work, in the month of April, we completed all of the downsizing in the securities portfolio and have already meaningfully exited some of the higher cost funding, including all of the acquired FHLB term advances totaling $1.4 billion.

Similarly, we expect we will utilize the proceeds from all the remaining second quarter repositioning on the asset side to exit funding targeted in Q2, including our initial targeted broker deposit balance exits. I will note that similar to our continued remix plans on the loan side, we also plan to continue to bring down the broker deposit balances as those remaining maturities occur in future quarters. We do expect we will be on target to bring down the overall wholesale funding ratio to approximately 10% by the end of the second quarter. As a reminder, while the legacy FirstSun wholesale funding ratio was only approximately 6% at the end of the first quarter, the acquired funding mix at First Foundation did result in the level of wholesale funding increasing significantly post-acquisition.

We're very pleased with our progress to date on all of our repositioning work, and we believe we will hit our targets by the end of the second quarter. Our most significant application system conversion is scheduled for late September of this year. While we have already begun to realize cost synergies post-closing, and I'd say we'll be at roughly 65% phased in for the cost synergies at the end of the second quarter, we will not reach a fully phased state until the end of this year. That is largely related to the timing for our largest system conversion in September and another separate system conversion on the wealth business side scheduled for Q4. On an overall basis, we believe we could actually overachieve a bit on the cost save side once we're fully phased in.

Based on all our preliminary work to date, we believe the overall level of fair value marks may come down a bit as compared to our expectations at the time we announced the transaction in October last year. While this means we could see a lesser level of TBV dilution, perhaps by a couple percentage points. We expect it will also translate into a lesser level of interest rate market accretion in the go-forward P&L. We also believe we'll see a slightly higher CET1 ratio compared to our expectations at the time we announced the transaction in October of last year, and expect we'll have capacity for some nearer term share repurchases. Specifically, as noted in our earnings presentation deck, we're expecting CET1 in the 10.70s range post repositioning, which compares favorably to the 10.5% we referenced when we announced the deal back in October.

I thought I'd make a couple references to our 2026 full year financial outlook, which we have updated to reflect the acquisition and includes preliminary estimates of purchase accounting adjustments and expectations related to the balance sheet repositioning. You'll see our 2026 outlook in the earnings presentation on page 21. On the balance sheet side for loans, given our continued focus on the remix of acquired balances, we expect balances to be relatively stable to post reposition and postmark balances through the end of the year, then expect to return to a balanced growth mode. While we expect healthy new loan origination levels this year, as I previously noted, we also expect to continue to remix the acquired First Foundation loan portfolio.

This means we will have additional balance runoff and leads to our expectation of relatively stable balances in comparison to the post reposition and postmarked starting point considering the acquisition. For deposits, given our continued focus on the remix of acquired balances, we expect balances to be relatively stable to post reposition and postmark balances through the end of the year, and then expect to return to a balanced growth mode. On the NIM side, in addition to our strong legacy FirstSun NIM run rate, our repositioning work and the impact from purchase accounting will have a significant favorable impact to the most recent First Foundation first quarter NIM of 1.07%. We expect our full year 2026 net interest margin to be in the mid-3.80s% range.

For the next cup of quarters, we expect to see a drop as we complete the downsizing in Q2, as we work to further remix the acquired base in Q3 forward. With the 4th quarter NIM expected to elevate into the 390s performance range. In terms of revenue mix, we expect our level of non-interest income to total revenue to decline into the lower 20s range. In terms of adjusted efficiency ratio, which excludes merger related expenses, we expect to operate in the mid to lower 60s range for the next cup of quarters and then drop to an approximate 60% level in the 4th quarter. In terms of net charge-offs to average loans, we expect levels to end the year in the mid-20s basis points, albeit on a higher average balance base post-acquisition.

Overall, we're very pleased with the progress we have made with respect to the acquisition to date. We believe the combined earnings profile will quickly take the shape of what you have been become accustomed to from legacy FirstSun. I will now turn the call back to the moderator to open the line for questions.

Thank you. We will now begin the question and answer session. Your line will remain open for follow-up questions. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Woody Lay with KBW. Woody, your line is open. Please go ahead.

Hey, good morning, guys.

Morning, Woody.

Morning.

Want to start on the size of the balance sheet. As you mentioned, you know, tangible book value dilution with the deal is coming a little bit better than expected because the marks are lower, but that could, you know, have a slight impact on EPS as well. It also looks like, you know, the repositioning is ahead of schedule, and it's about $1 billion more than what was initially laid out at the merger announcement. How do you expect the smaller balance sheet to impact that 524 EPS run rate that you initially laid out at deal announcement?

Yeah. Thank you, Woody. Yes, we do see a little bit more in repositioning as we outlined on slide 20 in the earnings deck. That's largely related to, or entirely related to, I should say, a short-term leverage strategy that the First Foundation team deployed for the pendency period. That's what is driving that. It was entirely wholesale deposit funded, that's, if you will, the reconciliation between the original 3.4 and what you see on slide 20 there of 4.4. In terms of our expectations on a after repositioning balance perspective, they're largely unchanged because that was an incremental leveraging on the balance sheet that was deployed post-announcement.

You know, if you will, the balance sheet base, our expectations are largely unchanged from, you know, announcement where we were as we look at 2026. We do see a lot of healthy opportunity, they expect healthy origination in the core C&I's space. We expect that will be met with some incremental remix and balance runoff as we continue to work through and get the overall concentration levels down from the acquired balance sheet. We do as you referenced, see some slight improvement in the TDD dilution as a result of where marks are coming in as we're looking at those here preliminarily now in the second quarter. You know, we put some guidance on slide 21 in terms of the level of loan interest rate accretion for 2026.

You know, it's relatively comparable to what you saw in the investor deck back in October, or the announcement deck back in October last year. You know, like I said, it's relatively comparable, and that relative comparability extends into 2027 as well. You know, we feel pretty good about, you know, that $5+ level, as you just look forward to 2027. That was referenced in that October announcement deck.

Yeah. That's extremely helpful. I appreciate you walking through the moving pieces there. Maybe just thinking about the Net Interest Margin. Appreciate the glide path you provided for 2026. As we think about longer term, you know, there's still some remix initiatives going on behind the scenes. Do you think the NIM is bias higher in 2027 as that remix occurs?

I'm sorry. Do we think that remix is what in?

Well, just given the remix is gonna continue on in 2027. I mean, do you think the NIM continues to improve off that fourth, the 4Q expected base?

Oh, yeah.

From the three range?

Yep, sorry. My line cut out just slightly there. I missed the last part of yours. Yeah, as I mentioned for the fourth quarter of 2026 here, and as we referenced in the deck there on slide 21, we expect four Q to be in the 390s range. You know, as you look forward into 2027, I would expect, you know, a little bit of an uptick from that level. It's gonna be in that same neighborhood. We feel pretty good about, you know, that as a, as a run rate as we extend out, you know, looking over the, you know, that kind of near-term horizon here, end of, you know, fourth quarter 2026 and for 2027.

Got it. Maybe just the last from me. You all sound a little more incrementally positive on buybacks and being active there. CET1 is coming slightly above where you all laid out. Just thoughts on where you'd like to keep CET1 as a pro forma company. Any target you're thinking of?

Yeah, fair question. You know, we have looked at, you know, an 11% level for CET1. I think we've referenced that, you know, in the past. That's a level that internally, you know, in our conversations with our board that we've set as kind of a targeted level for CET1. As you referenced, you know, we do see the capacity for some near-term share repurchase activity. You know, those are always active conversations within our boardroom and will continue to be on that side. We feel really good about our capital positioning.

All right. Well, I appreciate you all taking my questions.

Thank you, Woody.

Your next question comes from the line of Michael Rose with Raymond James. Michael, your line is open. Please go ahead.

Hey, good morning, guys. Thanks for taking my questions.

Good morning.

Maybe just following up on. Good morning. Maybe just following up on some of the loan growth question and commentary that you provided. It sounds like, you know, there's gonna be some ongoing remixing as we get beyond the second quarter in the third and fourth. I guess my question is that largely complete by you get, you know, by the time you get to the end of the year? I guess with, you know, obviously some of the, you know, personnel shifts and changes that I think will happen on the First Foundation side.

You know, just in ongoing hiring efforts, how should we think about kind of the, you know, pro forma intermediate to longer term, you know, kind of growth rate, you know, for the company, just as we're thinking, you know, beyond this year, as some of those remixing activities, you know, kind of run their course? Thanks.

Got it. Yeah.

I might-

Um-

Yeah.

Yeah. Go ahead, Neal.

I guess what I'd say, Michael, is that the loan growth we had in the first quarter was surprising to us. I think as [Rob] said, you know, both Southern Cal and Texas are leading the way, and, you know, we're seeing that across some of those markets. I think the remix that we're gonna have going on is a multi-year one as we see maturities on the multifamily portfolio. Some of those we'll keep as they become deposit clients and other, some of those will run off. The more loan growth we have on the C&I side, I'd say the asset or asset yield step up will happen. The other thing I'm pretty bullish on is the focus on core deposits across our franchise.

The deposit teams have already kicked off their campaigns. You know, we could see a material impact as we continue to improve the mix on the funding side. You know, obviously getting rid of wholesale was the immediate priority. I would say just remixing the core deposit work, Rob and the teams have been hard at it. Rob, I'll let you add to that color.

Yeah, yeah. Just to underscore, maybe a little bit, what Neal was referencing there, Michael, and back to one of the remarks I made in the prepared remarks section. You know, there is scheduled repricing in that multifamily portfolio here, not only in 2026, but also in 2027 at somewhat elevated levels. You know, that's a, if you will, a bit of a headwind relative to from a growth perspective. Again, it's all part of our overall strategy on bringing concentration levels down as we've talked about. It will mute the overall growth in 2026, you know, to that relatively stable level that we've referenced. You know, I think there's, you know, roughly another $400 million in repricing scheduled.

As Neal referenced, you know, our objective is to, you know, get deposit penetration within that base and, you know, convert to, you know, core relationship. That's what we'll be hard at work at, that's what the team will be hard at work at, and continue to be hard at work at, you know, as we cast forward into 2027. I think I referenced, you know, returning to a growth mode. We certainly see more of a growth mode as we look out, you know, into 2027 and beyond.

Okay. That's helpful. I won't try and pin you down for a percentage or anything like that for 2027. I understand the dynamics. Maybe if we can just, you know, switch to credit. You know, certainly appreciate the reminder and the color on those two credits that were, you know, kind of the bulk, I think you said, of the charge-offs, you know, this quarter. Obviously the guidance implies a pretty big step down in kind of the combined charge-off rate as we move forward.

I guess one of the bigger questions is, you know, you guys have been pretty clear that, you know, just given the C&I mix and how it's higher than peers, that and the average size of your loans being a little bit higher, that, you know, credit is gonna be on a ratio basis somewhat lumpy. I guess, you know, what gives you confidence that you can kind of operate, you know, in that 20 basis point-ish range, you know, not only this year, but as we move forward as growth re-accelerates? I think that's one of the bigger questions for investors coming off of this quarter's results. Thanks.

Yeah. I'll kick it off there. I'm sure Neal will have something to add there as well. I think, you know, you're right, Michael. As we've talked about, given our heavier C&I mix, we do see credit coming in some, you know, lumpy fashion at times. We've had the onesie, twosie, you know, as we look back over the course of, you know, the first quarter here in 2026 and back into 2025. I think, you know, one of the things that we intently focus on, of course, is the overall return level within the business and the underlying economics that we're delivering. One of those metrics that we do point to is that credit-adjusted NIM level.

Given we're in a heavy C&I business, you know, credit spreads that we're operating with are obviously different than, you know, a CRE heavy, you know, bank-based business mix, i.e., we're 300+ spreads, you know, as opposed to, you know, 200, 225 kind of spreads. You know, we realize that, you know, the credit profile on the C&I side will lead to some lumpiness at times. You know, as we analyze and as the teams work hard constantly on our portfolio and, you know, performance there. We're not seeing, you know, broad-based, you know, structural issues in a sector or in a geography within the portfolio.

I mean, it's just the one-off, you know, isolated instances with, you know, a company here, in this past quarter, a telecom company here, an auto finance lender. Both of those, you know, we had spoken and referenced in the prior year. We are seeing some elevated, you know, loss realization levels there on those exits. I think it's just the overall performance in the business that, you know, we see, you know, being able to continue to operate strongly, you know, just from an overall return perspective, that credit-adjusted return perspective, and the absence of any deep broad-based issues across the portfolio. We've been operating around the 1% NPA level and that's actually down in Q4, you know, just a little bit.

But, you know, that's where we've been operating, you know, in that territory for, you know, the past many quarters. You know, our performance, you know, has been, you know, fairly consistent in terms of the one-offs on the credit side that we've seen. You know, the first quarter on an annualized basis, of course, looks a little elevated because, you know, we did take, you know, those couple charges in the first quarter. They were all part of what we saw coming at us for fiscal 2026. You know, the events, you know, metastasized if you will, in the first quarter and it lost recognition the first quarter on those was appropriate.

Hopefully, that gives you a sense for how we're looking at the business, what we're seeing in the business that ultimately leads us to, you know, our guidance around, you know, if you will, that mid-20s level on charge-off performance.

Yeah. Michael, I would just add.

Okay. Oh.

Michael, I guess what I'd say is we've never liked losing money. The hard part with C&I is we don't have an industry concentration, and we're not seeing it out of any one sector or one geography. It makes it hard to forecast. You know, if I could plan for events, I certainly would rather not have charge-offs in our biggest loan quarter. You know, it's just, it is what it is. We don't take it lightly. I'd also say, you know, we're provisioning on the front end for some extraordinary loan growth. It's just, we'll still continue to say we want more C&I opportunity because on a risk-adjusted NIM, it's the best thing we can do.

Totally get it. I appreciate all the color. Maybe just last one for me. If I go back to the slide deck from, you know, when you guys announced the deal. You guys talked about a 1.45 pro forma ROA, about a 13.5% ROTSE. Understanding, you know, some of the marks and the rate landscape has certainly changed. Any sort of updates to those targets? I know you kind of talked about the tangible book value being a little bit less. I'd expect there'd be some change there. Any updates there? You know, if we were to kind of exclude the impacts of expected accretion in 2027, like, what could that, what could those levels look like? Thanks.

Sure. You know, as you look at, you know, returns in the business and, you know, comparison to what we, you know, return references that were in the announcement deck. You know, given the lesser level of TBV dilution, you know, and the linkage on the mark side, there is some lesser level of accretion. You know, not materially, as I mentioned a little bit ago relative to our expectations on the bottom line EPS perspective in 2027. You know, we do think we're still in that 5% or, excuse me, $5 neighborhood, you know, for 2027. You know, returns, you know, as you look at returns kind of casting out into, you know, the next year certainly will be increasing over 2026 level returns.

You know, I would say coming down a little bit as in relation to what was in the announcement deck, but certainly above the, you know, the most recent return levels that, you know, we delivered in fiscal 2025 at, you know, in the low 120s on the ROA side. You know, on the capital side, you know, we'll continue to look at, you know, the right mix of capital given, you know, our overall CET1 target levels and, you know, coming out a little favorably on that side and, you know, having a, you know, a more nearer term capacity for, you know, some possible repurchase activity there.

You know, that I think can certainly impact favorably on the return on tangible capital levels as well.

Yeah. The only thing I might add.

All right. Great. Thanks, [Rob].

The only thing I might add is I like the flexibility of the new combined balance sheet. You know, that we have both the floating rate growth in the C&I and the term nature of the multifamily. I think we both on prepay and otherwise, I would not trade our balance sheet for anyone out there.

All right, I'll step back. Thanks for taking my questions, guys.

Thanks.

Your next call comes from the line of Matt Olney with Stephens. Matt, your line is open. Please go ahead.

Thanks, and good morning, everybody.

Morning.

Going back to the repositioning efforts. Good morning. The repositioning efforts in recent weeks, it sounds like you're getting some pretty good pricing versus original expectations on the loan dispositions. Anything you can disclose or any color you can give us as far as the Shared National Credits or the multifamily efforts as far as pricing versus original expectations?

I would say, you know, on the SNC side, you know, very successful performance there. You know, that, the SNC, our initial targets on the SNC side, First Foundation completed all of the strategic exits there actually prior to 331. Actually real strong performance on the SNC side. On the multifamily side, we're very favorably pleased with our discussions on that side so far. We continue to work with counterparties on all the remaining loan sales that we believe will conclude and complete here in the second quarter.

Yes, Matt, we're very pleased with what we have been talking about and what we think we'll ultimately realize there. Which, you know, maybe it's a, you know, slightly better than our original targets. Yeah, very pleased.

Okay. Thanks for that, Rob. Then on the expense side, any more color on expenses at the combined company that we'll see in the near term? I think we can see the disclosure for First Foundation expenses and obviously FirstSun. Should we just add these two together initially before we recognize some of these cost savings, or is there anything more nuanced in the run rates of either side that you wanna disclose as we think about our estimates?

Yeah, no, thank you for the question there, Matt. You're right. You know, as you look at First Foundation in the first quarter was, you know, call it a $56 million kind of run rate level. You know, to your point, if you just add that with FirstSun, apply some cost saves. You know, as I mentioned, you know, we think we'll be at about a 65% level on cost saves in the second quarter. Well on our way in total on cost saves. Actually, you know, expect to be slightly above our original targets there. You know, if you just kind of apply that. You know, our original target was 35% of the First Foundation core expense base.

If you just kind of slap that math, yeah, that should give you know, a pretty close approximation for where we'd see Q2, Q3. The, the, if you will, the metric reference there in terms of our expectations on efficiency, being in the mid-60s for the next cup of quarters, and then dropping into the lower 60s in the fourth quarter.

Yep. Okay. Appreciate that, Rob. Just to follow up on your last point there, I think we talked about that efficiency ratio getting to the 58% range when full cost saves are recognized. Definitely appreciate that we don't see that quite in the fourth quarter given the timing of the conversion. Do you still see that efficiency ratio moving to the 58% range in 2027?

We do. You know, if we're in the low 60s in Q4, you know, as you look forward and kind of go back to, you know, back in the October announcement, looking at 2027, you know, kind of run rates, we do see improvement over that low 60s in the fourth quarter, you know, to get to around that neighborhood. Yeah, we do feel real good about our overall projections from an efficiency ratio standpoint.

Okay. Thank you, guys.

Thank you.

Your next call comes from the line of Matthew Clark with Piper Sandler. Matthew, your line is open. Please go ahead.

Thanks. Good morning, everyone.

Good morning.

Want to start on slide 20. The First Foundation deposits on the right side there running off another $2 billion, so we'll call it $6.75 billion. After that, how much of that $6.75 billion do you anticipate to be non-interest bearing, just knowing that some of that might be ECR related?

Fair question. I would I think in terms of the total mix of the portfolio, on a go-forward basis. You know, I probably see, what would that be? Low 20s. I think, you know, if you look at where our mix is on a non-interest bearing, you know, to a total base standpoint, we're, you know, between 20% and 25%, probably closer to maybe 23%. You know, if you look, kind of go forward post-acquisition, post-repositioning, we'll still be in the 20s, but that's gonna drop a couple percentage points.

Okay. Okay. On the, on the margin, here in the near term, I think your guide, you know, includes the 4.31% you just put up in the 1Q, so that would suggest a decent step down in the margin here in 2Q. Any thoughts around kind of the cadence of the margin to get to that 3.90s in the 4Q? I mean, do we step down to like a 3.70% here in 2Q and build back?

Yeah, fair question. you know, I would say, you know, as you look at the overall guidance there for a mid 380s on the year and a Q4 in the 390s, you know, how do you kind of get there in the math for a Q2 and a Q3? Yeah, I mean, you're gonna see 360s, 370s, you know, kind of stepping from Q2 into Q3 before you get to the 390 neighborhood in Q4.

Okay. Then if you were to strip out the rate cut, the Fed rate cut, what would that do to your margin guidance?

It would have a nominal impact on the margin guidance basis point or two.

Just on a net charge-off guidance of the mid-20s, you know, again, assumes a pretty big step down maybe to 20 basis points going forward. I'm assuming that's partly because you're, you know, marking First Foundation's balance sheets or, you know, a lot of the portfolio. You know, won't have the losses there just because it's been marked up front. Is that fair? Is that kind of consistent with what you're thinking?

Well, I guess, we are marking the First Foundation balance sheet. You know, under the new guidance, we'll have, you know, or I should. You know, the credit mark would just go straight against the asset. We'll have now the credit mark in ACL. So if ultimately we do see a loan that, you know, we have fully reserved for it, in purchase accounting, it's actually fully reserved for in that ACL line. Actually if we see something on the First Foundation side, it'll actually, it'll still roll through charge-off even though it will have no P&L impact. So it could end up in a charge-off percentage in the charge-off base in 2026.

Yes, we do see re- certainly relative to the 63 basis points in Q1, a step down. Again, those two credits in Q1 were, part of our expectations for full 2026. You know, the point of realization, became Q1, for both of those. We do see a step down in activity, you know, over the course of the next three quarters to get to that overall mid-20s for the full year.

How much did those two credits contribute to the $10.6 million net charge-offs this quarter?

More than 10.

Got it.

I mean, it truly is bulk.

Understood. Okay, thank you.

Yep, thank you.

There are no further questions at this time. I will now turn the call over to CEO, Neal Arnold, for closing remarks. Neal, please go ahead.

Thank you. We appreciate you all joining the call this morning and your continued interest in FSUN. Thanks. Have a good day.

This concludes today's call. Thank you for attending. You may now disconnect.