FirstSun Capital Bancorp

Good morning and welcome to the First Sun Capital Bangkok conference call to discuss the company's announced merger with the First Foundation 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 Jacks, 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 Sun and First Foundation. 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 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 30th. 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 First Sun and First Foundation 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 First Sons President and CEO, Neil Arnold.

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 Schaffer and then turn the call over to Rob Kuffer, 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 are doing together to unlock this, we believe it'll make more sense. We've known First Foundation 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. So we have lots of history and have spent considerable amount of time on both sides, making sure the diligence and the structuring makes sense for all parties. 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 Cal 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 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. We like the workforce housing nature and rent security and 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. 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've taken to heart are three things. One, we need to move quickly to transform them. Number two, we need to make those changes quickly and significantly by and around closing. And 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 Cal 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. So with that, let me introduce Tom and have him share some of his perspective, and then I'll take it back. 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 CNI background. I've spent a lot of time with the First Son 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 CNI growth they have, their focus on TM, 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 start. So our team is looking very much forward to helping and 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. I'd like to make a couple 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. AND SO TO US, MOST OF YOU KNOW WE CARE A LOT ABOUT THE OPPORTUNITY ON THE CORE DEPOSIT SIDE SO ADDING TOM'S BRANCH NETWORK INTO OUR STRATEGY HERE IS GOING TO BE AN IMPORTANT PART OF 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. 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 CNI 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, and also we have better mix on the fee income side from a lot more expanded wealth platforms, so 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. 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 and 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. There's a terrific geographic footprint here. to drive organic growth. We'll be an eighth of the top 10 largest MSAs in the Central and Western regions of the US, and in five of the top 10 fastest growing markets in the entire US. And 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 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 with Treasury 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. 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'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. And 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. On the interest rate front, we improved the sensitivity profile and 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. And 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 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 at approximately 238%. A significant improvement from the level at First Foundation today and certainly a very comfortable operating level. And our CET1 capital level pro forma after closing, is projected at a strong 10.5%. And there's no new capital required as part of the deal as we outlined in the deck. We see this as a very thoughtful utilization of First Son's capital position. And 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's 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 remix the balance sheet. Simply put, we're going to make the first foundation balance sheet historical look more like first son. An emphasis on core funding, both commercial via treasury management emphasis and our consumer playbook. You know, the fee income piece, and of course, you know, our emphasis in the CNI space. Page 16 of the deck highlights the resulting math behind this, you know, between the repositioning, purchase accounting, and deploying our playbook. You know, this is a unique opportunity to take a company with a recent run rate NIM in the 160s 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. So we're excited about the pro forma operating profile here, driving an approximate 30% level of accretion in 27 and off the roughly 14% TBD dilution. You know, we see a fully loaded TBD earn back of you know, 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, you know, I think Neil said it before, you know, 7.7 roughly times pro forma 27 run rate earnings. I think there's 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.

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 a combined organization. We'd 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. 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 Stevens. Your line is now open. Please go ahead.

Thanks. Good morning. Just a few questions on the acquisition, specifically the repositioning plan that you outlined on slide 14. 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 expected these to take place relative to the closing date? It just seems like there is going to be some risk in executing this. So just want to make sure I understand just the mechanics behind all this.

Thanks. Sure, Matt. Thank you for joining today. And, you know, we're very focused on know continuing the play that tom and his team have deployed so i tell you on the timing side tom and his team um already have some plans in place you know we're just um upsizing you know the overall magnitude so um in q4 and q1 um we expect some progress just based on the existing plans that Tom and his team have. And then over and above that, we'll be layering on the additional activities. So, you know, in terms of the mechanics, you know, we'll be pursuing some bulk sales. We may look at securitization, but it'll be bulk activity. We expect some, you know, just some natural declination in the overall portfolio here as, 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, you know, right around closing, you know, shortly after closing. but certainly well in advance of the first reporting point that we would have post-closing. And we're projecting an early Q2 closing date here.

And 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 even beyond the repositioning that you guys highlight, it seems like there could be, uh, more of this in the future. In other words, more remixing repositioning, even beyond the $3.4 billion. Can you just kind of give, provide some commentary about other opportunities, uh, beyond the 3.4, uh, that we could see following closing in the coming months after the, uh, deal closing?

Yeah. You know, I think, uh, 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. So 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. So, yeah, 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.

And I think, Neil, also, you know, in terms of the remix, you know, part of this is, you know our plan did to be a offensive in terms of bringing in some additional C and I focus teams certainly in in the in the Southern California market but honestly in in some of our other markets as well- and so there there is some natural scheduled repricing within- the first foundation portfolio and so that you know that's part of the remix that that will that will also be occurring here on on the asset side.

Okay, that's helpful. If I could just sneak one more question on capital. Looks like we're closing with a CT1 ratio around 10.5%, but based off 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.

Yeah, absolutely. You know, and thank you for the questions, Matt. And, you know, we've talked in the past about, you know, kind of our capital strategy and, you know, maybe just start off there by saying, you know, we've always had a very intentional approach as it relates to capital. And, you know, that starts with, you know, we have operating thresholds that we want to operate above. um you know we're always very focused on supporting the organic growth opportunities in the business you know that will continue that's that's the first threshold and of course you know 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 you know our expectation as you noted appropriately is that we we expect to be accreting a significant amount of capital and that's going to provide us a lot of flexibility You know, you were referencing the view in the IR deck, you know, that kind of tracks our projections on a CET1 level. And we do expect to see CET1 leveling off as you get out beyond 2027. So we do, you know, that translates to we do expect some future, you know, capital management strategies being employed that, you know, we haven't historically employed at first son.

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

Thank you.

Thanks.

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

Hey, good morning, guys. Morning. Wanted to start on assumptions behind the EPS accretion. It looks like internal projections were used for both companies. And 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 potential upside you see to consensus?

Yeah, absolutely. I'll kick it off there. You know, so we did kind of walk through some waterfall, um, uh, thoughts in, in the deck in terms of how we see the pieces, you know, I'll start on the first foundation side and, and maybe just, you know, kind of start from a Q3 25 perspective, you know, just from a run rate, um, standpoint, um, you know, and, and I think it's actually page 16, the IR deck, um, you know, that shows, you know, trailing 12 months is, you know, roughly at about a 10 million, Q3 of 25 is, you know, roughly at a flat level. And so as you cast forward to 26, we see some major shifts in the first foundation business. You know, on the NII side, you know, we see improvement of, I'd call it low teens, in NII, and that's going to be driven on the funding side. You know, our rate curve assumption that both companies have been operating with that, you know, weren't fully reflected in recent emphasis consensus estimates was for a down additional 100 basis points. And so, you know, that's going to drive and given the liability sensitivity on the first foundation side, a lot of accretion opportunity for them on the NII side. So we see in 26 relative to, you know, where they are and recent run rate, you know, roughly a 13 percent 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. And, you know, we think that, you know, alone will drive NIM up, you know, 20-ish basis points. We also see expense improvement. You know, 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. You know, customer service expenses are another type of deposit interest costs for them. We don't have those at First Son, as you all know, but the customer service costs, again, 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. So we expect improvement on the expense side, driven by customer service costs, some reduction in professional expenses. And so, you know, between expenses and NII, you know, that's roughly an improvement from the break-even level of Q3 of 25 to roughly about $28 million. That's pre-loan loss provision. Loan loss provision, you know, that's, you know, about, you know, $23 million all in. So that's kind of the improvement that we see, 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 the multifamily book, driving some further NIM improvement, again, anywhere from that mid-20s in terms of basis points and NIM improvement. And then in 27, we actually see also fee income improvement particularly in the expansion that we would anticipate in the wealth business. You know, conservatively, we didn't build as much into 26 on the wealth side, but, you know, 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 side, but also the First Sun side. So that's how we see, you know, that legacy run rate on First Foundation extending into our pro formas.

And again, I might just add, you know, because of the amount of balance sheet restructure here, we built the first foundation 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 the 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 in some of these kinds of transactions just not really drive good organic earnings growth going forward. And so to us, we've positioned the company and the balance sheet to do that.

That's a really helpful color. I appreciate that. Maybe on the de-risking part, you know, 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 lessons learned on the way this deal is structured. But what gives you the confidence on the regulatory side this go-round?

Yeah, certainly a fair question. You know, I'd say two things we've we've noticed Washington's 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. And, you know, 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, and we walked through that with the regulators. We're well inside the CRE. We're well above the capital ratios. So I think all the touch points, in addition to the magnitude of the risk reduction, you know, on asset quality, liquidity, and interest rate sensitivity, have all positioned this to go well. And we're highly confident that it will. And 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.

Yeah. Maybe just last for me, looking at Legacy first on 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.

Sure, absolutely. In a week, we had about a $10 million provision expense in the third quarter for You know, that included a specific reserve related to a CNI loan in the auto finance industry. You know, our provisioning was also driven by we had 11% loan growth, you know, so that, of course, is going to drive provisioning. So we were very strong on that side. We had some net downgrades. You know, we did charge off two CNI loans. And that represented the bulk of the $9 million in 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. You know, 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 24. And so, you know, classified loan balances were down about 5%. Non-performing balances did track back up in the third quarter. We're at about 104 basis points, which, you know, with the exception of Q2, we've been operating with non-performing loan balances in that 1%, you know, very low 1% neighborhood for most of this year and the last year. So, you know, that's, you know, an overview of some of the moving pieces there. I think we've We've said that in the earnings deck that we expect charge-offs to be in the low 40s in terms of basis points for 25 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've been exiting.

Yeah, the only thing I would add is we never, like, losing money on credit, and I promise you we look hard at it. But 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. 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, you know, just some of the disruption and higher debt financing costs have impacted it, but I do think it's mitigating. But, you know, the hard thing is we can't predict one-off sort of losses, and 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 I'd just say we still don't take lightly credit losses.

Got it. Well, I appreciate all the answers. Thanks for taking my questions.

Thank you.

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 follow-up here. Good morning. You know, the slide deck talks about, you know, just some of the significant, you know, revenue synergies that are out there, just trying to better appreciate what is going to be kind of the near-term focus versus, you know, what could take, you know, 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 it hiring more people? Is it different products and services? Just trying to, you know, get a better understanding of that. Thanks.

Yeah, thanks, Michael. And funny headline. Thank you. The, the, the thing I would say is, from our perspective, retail branch run in our playbook on the retail side. Yeah, I wish it could happen overnight. But that's probably a 18 month 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 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 in Pioneer, you look at our history in SGB, we had higher CRE. And 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. So we'll continue to work on that. I would say the speed by which this operation on a combined basis will look like the history of First Son is nothing 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 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. So our goal is to leverage that and really improve that piece of the puzzle. And I'll let Rob add any color.

Yeah, absolutely. You know, I think our business mix also, Michael, you know, gives us some added flexibility. You know, we see, you know, the branch footprint, particularly in Southern California, on the first foundation side is being underutilized. And we have more flexibility, you know, than they've been able to operate with. So, and what I mean by that is, you know, given the mix of our business, you know, we've got a higher margin. Uh, we're certainly on the higher side than most, you know, that gives us some flexibility in terms of how we run some of the plays. So as Neil mentioned, you know, this is a daily business for us on, on the branch side. Um, it's a, it's a maniacal, uh, managerial approach to daily activity. Um, but we mix in, I think a pretty darn good product set, you know, promotions, 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 roll out our playbook there 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. I think that's probably on the higher side than most. So we talk about this internally in the halls of First Son every day. Deposits are critical. Everybody knows it. And that's not changing.

I might ask Tom to share, being a Michigan C&I banker, having spent a year here in Southern Cal, seeing the opportunity in middle market out here, maybe you want to share some of your perspective as you look

At this market, yeah, well, so this creates a moment where we can get really excited because we can lean forward in doing this. We do that. We've got good distribution, but you know the scale of the market is shocking. I spent my the vast majority of my career in the Midwest kind of, you know, no growth, limited growth marketplaces. That's that's filled with, you know, 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, 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, many bright spots, but that's one of the bright spots of operating in this marketplace.

Yeah. The only thing I would add is disruption in this market has been much greater than I ever expected. Sometimes you win because a great market, sometimes you win because the other guy has issues going on or their own merger activity. And so we've always had an opportunity in those kinds of markets throughout our footprint. 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. You know, they feel like they're ignored. They don't tend to get the personal touch. And so to us, we believe the best franchise in banking is still in middle market clients who need good bankers. And, you know, we're in that business.

And Michael, you asked about revenue synergies there as well. You know, 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 I think 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 on to the residential mortgage side. With the branch footprint coming online for us, as Neil mentioned, in terms of a major metro, it'll 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 within the loan and the deposit base. I mean, there is inherent opportunity on that side. And I think even in the multifamily book, you know, we'll talk about some enhancement to the multifamily strategy with, you know, some flow sale aspect, you know, layering on. So, you know, our emphasis there tends to be more off-balance sheet than on-balance sheet. And so, you know, that's another opportunity for us. So we see a lot of opportunities.

Yeah. I would just add that in the multifamily space, most of you know I've not been a current new construction multifan. throughout our footprint. That's not the product I tend to care about because tend to have higher risk, lower value and less deposits. But when you look in this market, a lot of our even new first son clients have significant personal investment portfolios in the multi family space. They aren't 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 housing.

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, 606, given the purchase price, it's about 125 intangible. What would you guys say to that? You know, because I think there's a lot of strategic merits here, but that is one of the pushbacks I got last night. Thanks.

No, certainly fair. Here's what I'd say. There aren't as many properties. I think we're all seeing the opportunities that shrink, I would always be willing to pay less. But sometimes in these negotiations, you know, we look at the opportunity to have the franchise in the biggest middle market client base as a unique one. And as we spend time getting to know the potential properties here, we felt like this was the right one for us. And we think that, you know, 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. And, you know, 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. So 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. And that's what we care about.

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.

Hey, good morning. Thanks for the questions. Good morning. Good 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 so wasn't sure if that was part of the three billion or that was on top of the 3.4 billion yeah so we do expect you know roughly concurrent with closing to have the full play completed yeah and we're estimating you know early q2 for a closing timeframe. So 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 so we won't be able to roll those down until we hit some of those maturities. So there is some extended, and that's part of the remix that we have been referring to on the funding side that will continue to occur post-closing. But that's over and above, excuse me, that $3.4 billion of total funding pay down concurrent with close.

Got it. Okay. And then just on the 35% cost saves, can you give us a sense for where you expect that to come from? Just because there is some limited overlap. You have a small presence in SoCal and You know, Florida is new, but just the source of the cost saves and the confidence in being able to achieve that number.

Yeah, we feel pretty good about the opportunity on the cost save side. You know, I think probably 70% of that will be on the people side. You know, there's some FDIC element here that actually is going to be a bigger piece. Um, and professional, um, you know, I'll just put it under the header of professional services, um, is, is a, a bigger piece. So, you know, across those, those three, um, you know, kinda, or the, you know, the biggest opportunities on the cost save side, you know, certainly we expect some, I'll call it, um, you know, non-customer facing back office facility opportunities. So, you know, there's always opportunities like that in deals. that'll fill out some of the cost save equation. But, you know, those would be the categories where we see the biggest opportunity. And, you know, 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.

Yeah, and I'd say there are whole groups that will be unimpacted. You know, certainly the branches, the wealth management, we're going to see that as... leveraging the business dramatically. But, you know, cost saves are a 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 NDFI exposure. Looks like that's going to be part of the $3.4 billion that you're going to reduce. Can you just Let us know what's going to be left in terms of the sub-segments, 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.

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

Okay, thanks again.

Yes. Absolutely. Thank you.

We currently have no further questions. I'd like to head back to Neil 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. And we look forward to getting to work. So thank you all.

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