FirstSun Capital Bancorp

Good morning and welcome to the First Son Capital Bancorp second quarter 2026 earnings conference call. 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 one again. Also, as a reminder, this call may be recorded. I'd now like to turn the call over to Ed Jacks, First Sons Director of Investor Relations and Business Development. Ed, 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 second quarter results 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.

Thanks Ed and good morning and thank you for joining us. The second quarter marks an important milestone for First Son as we completed our acquisition of First Foundation on April 1st and continued the hard work of integrating their businesses. We believe the expanded footprint in the Southern California markets and their premier wealth management platform have added significantly and strengthens our franchise and positions us for future success. The middle market business opportunity in Southern Cal aligns well with our CNI playbook. And I would argue that Southern California is the best core deposit market in the United States. as some of you've heard me say. I believe that coupled with adding our Southwest Florida markets to our existing deposit markets across Texas, Kansas, New Mexico, Colorado, and Arizona well positioned us to drive future growth. We're very excited about all the growth opportunities in front of us with this acquisition. Our second quarter financial results were certainly mixed. Bottom line, we reported a net loss of 23 million, which included 44 million in after-tax merger-related expenses and included the 30 million in after-tax credit loss provisioning. Earlier this month, we provided a credit update on two larger loan charge-offs totaling 26 million after-tax. This significantly contributed to our larger Loan loss provisioning in the quarter. While the bottom line performance this quarter was below our expectations, we did see significant progress in several areas. Starting with the balance sheet repositioning, which we've emphasized throughout as a key strategic step in our integration plan for the first foundation business. I'm very pleased to tell you that we've completed all of the downsizing that was part of our plan in the second quarter. Our teams executed the plan with discipline and efficiency. The repositioning strategy that we executed upon was a very important strategic step in the risk profile of the balance sheet we acquired. We believe we have a strong balance sheet with less concentration risk, less liquidity risk less interest rate sensitivity, and a stronger capital profile as a result of these repositioning actions. On the deposit side, we saw adjusted annualized growth of approximately 5%, which excludes the impact of the acquired First Foundation deposits net of the downsizing. Notably, deposit growth in Southern California drove the adjusted annualized growth rate that we mentioned. Our service fee revenue performance in the second quarter was strong as well, representing 22% of revenues this quarter, further evidencing our diversified business model. We also saw significant progress in the cost save realization in the second quarter following the closing of our acquisitions. As Rob noted in last quarter's call, we believe we'll overachieve the level of cost saves that we deliver in conjunction with fully integrating and converting the first foundation business. We're also pleased to note that the level of tangible book value dilution related to the acquisition is less than our original estimate we announced last October, with the original or the overall level coming in at only approximately 10%. Our capital position is strong. Yesterday, we also announced a share repurchase program totaling up to $150 million with repurchases targeted over the next four quarters and starting here in the third quarter. We see this as an integral component to driving shareholder value and realizing the impact of this transaction. On the asset quality side, we saw an elevated level of losses in the second quarter with two notable larger losses. The first relates to a situation involving what we believe to be a fraudulent misrepresentation by a borrower in the materials distribution business. And the second one which is unrelated to the first relates to a technology company that experienced deterioration in financial performance in the second quarter. The charge-offs on these two loans totaled approximately 35 million pre-tax, and as I said, materially drove the increase in our credit loss provisioning and charge-offs in the second quarter. While these losses were disappointing, They were driven by borrower-specific situations rather than, in our belief, an indication in broad-based significant loss content across our portfolio. Further, while the dollar amount of non-performing loans at June 30th increased from the end of the first quarter, we haven't seen a large increase in the number of CNI loans in non-performing status. So again, we don't believe it's an indicator of any broad-based deterioration in our C&I loan relationships across our portfolio. Our underwriting processes are thorough and include stress testing. Our loan grading considers the effect of P&I amortization even if a loan is on interest only currently and our recurring portfolio review activities emphasize Identifying potential risks early. We maintain strong borrower engagement and we work to take timely action to preserve the asset quality of the overall organization. As we've said before, we don't take larger risks within our portfolio. We have no loans even approaching any of our legal lending limits. Again, we are disappointed in loan losses that we experienced in the past quarter. However, we believe that loan losses and provision at this level is isolated. As I look forward to the third quarter and beyond, I believe we're making significant progress in our franchise buildup. The acquisition has enabled us to enhance our presence in attractive high growth markets and increases our scale across many of our core businesses. Our expanded branch network strengthens our ability to serve clients locally while enhancing our deposit gathering capabilities and overall relationship density. We believe we have enhanced our long-term growth profile and improved our revenue diversification and further strengthened the durability of this franchise. Our near-term focus is on completing our remaining integration work, including the core system conversion which is scheduled for this quarter in the late September. And as many of you know, acquisitions involve a fair amount of work beyond just computer conversions. And finally, I want to thank all our teammates for their tremendous commitment and hard work through all this integration work. Their dedication to serving our clients and our communities while executing on a large transaction like this has been exceptional. I'm very proud of everything they continue to help us accomplish. With that, I'll pass the call over to Rob to review our results in more detail.