FirstSun Capital Bancorp

Good morning and welcome to the First Son Capital Bancorp third 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 the star followed by the number one on your phone keypad. If you would like to withdraw your question press star 1 again. Also as a reminder this call may be recorded. I'd now like to turn the call over to Ed Jacques, First Sons 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 about our third 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 gap metrics and non-gap financial measures. Important information about these non-gap financial measures, including reconciliations to comparable gap measures, is included in the appendix to our earnings presentation and in our earnings release. During this call, we will 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. Good morning and thank you for joining us. The third quarter represented another important milestone for First Son as we continue to progress on our strategic priorities and on the integration of the First Foundation businesses acquired. For the quarter adjusted net income, which excluded merger related expenses, totaled $48.2 million or $1.03 per diluted share with an adjusted return on average assets of $123. In addition to the strong bottom line performance and continued integration of the acquired business, highlights in the third quarter included our net interest margin expansion to 3.82% over the last quarter and continued strong service fee income revenues, which again accounted for 21.9% of total revenue. We are very pleased with the progress We've made on our balance sheet profile. We significantly repositioned the acquired balance sheet in the second quarter and the remix efforts continued into the third quarter as we move away from more rate sensitive non-relationship deposits and as our loan origination activity continues to be more heavily centered on floating rate C&I loans versus the fixed rate CRE loans. Our focus continues on expanding and deepening relationships across our entire customer base. A diversified and strong balance sheet enables us to focus on the growth opportunities across all of our great markets. All our work to reposition the required balance sheet which helped to address the challenges inherent in the rate profile of that acquired balance sheet was a key driver in the improved net interest margin that we saw in the third quarter. While the deposit competition has been very strong our focus has been on continued improvement in our net interest margin. We expect the balance sheet repositioning work to drive further incremental improvement in our net interest margin in Q4 and into the first quarter Growing our service fee revenue businesses will also continue to be one of our strategic priorities. We believe a diversified revenue management side, but also in treasury management syndication and swaps provide a meaningful opportunity to deepen our client relationships and further enhance our overall revenue mix. Our capital position remains very strong and continues to provide us with meaningful flexibility as we execute on our overall strategy. During the third quarter, we repurchased approximately 50 million of common shares under our previously announced $150 million share repurchase program. And we currently expect to complete the remaining 100 million over the next three quarters. We believe the continued strength of our capital position provides us with the capacity to return capital to stockholders while also supporting our organic growth and maintaining overall balance sheet flexibility. On the asset quality side, We are encouraged by the improvement this quarter across several key measures, including a meaningful reduction in special mention loans of about $23.8 million, as well as a reduction in substandard of nearly $40 million. We continue to take a disciplined approach to underwriting portfolio management, early risk identification, and we believe the improvement this quarter reflects the continued work of our teams to actively manage our loan portfolio. On the integration side in late September, our team successfully completed the core system conversion of First Foundation. This was another important milestone in our integration plans and certainly resulted from a tremendous amount of hard work across the organization. We're pleased to have completed this phase of the business integration and look forward and expected additional operating synergies that will result. As we look forward to the next several quarters, we are seeing very strong pipelines in all of our major markets for both loan and deposit relationships. I believe the strong pipelines are the result of our investment that we've made in further building our sales force over the last several years, particularly in Texas and Southern California. I expect this to be a driver of our organic growth going forward in 2027. Our priorities remain very focused, driving disciplined organic growth, deepening our client relationships, growing core deposits, improving service fee revenue, and realizing the benefits from the integration of First Foundation businesses and delivering strong financial results that result in sustained long-term value for our stockholders. Before turning the call over to Rob, I wanna recognize and thank all of our teammates for the extraordinary effort that went into completing the recent core systems conversion. An undertaking of this scale requires significant planning, collaboration, and execution across virtually every area of the company. And our teams delivered while continuing Thank you, Neal. I would also like to add my thanks to all our teammates for the very hard