Firstsun Capital Bancorp(FSUN) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The merger with First Foundation Inc. was announced, which is expected to significantly enhance the company's growth and risk profile [2][4] - The pro forma CET1 capital level after closing is projected at 10.5%, with no new capital required as part of the deal [18] - The company anticipates a significant improvement in net interest margin (NIM) from a recent run rate of 1.60% to nearly 4% by 2027 [19] Business Line Data and Key Metrics Changes - The merger will allow for a dramatic acceleration of the business plan, particularly in Southern California, enhancing the wealth management platform with over $5.3 billion in assets under management [15][16] - The repositioning plan includes downsizing $3.4 billion in total liabilities, focusing on reducing non-relationship rate-sensitive elements [16][19] Market Data and Key Metrics Changes - The company will operate in eight of the top 10 largest metropolitan statistical areas (MSAs) in the Central and Western regions of the U.S. and five of the top 10 fastest-growing markets [15] - The Southern California market is highlighted as having a better lower-cost mix of deposits compared to other regions [11] Company Strategy and Development Direction - The company aims to transform First Foundation's balance sheet to align more closely with its own, focusing on core funding and enhancing fee income [12][19] - The strategy includes leveraging existing teams in Southern California to drive organic growth and improve the overall business mix [60][61] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the merger's ability to reduce risk while enhancing growth opportunities in attractive markets [22] - The management team noted that the current economic environment presents unique opportunities due to disruptions faced by larger banks, particularly in the middle market [65] Other Important Information - The company expects to achieve a 35% cost savings post-merger, primarily through personnel reductions and professional services [80] - The company is focused on improving its credit risk profile and has a detailed plan to address liquidity, interest rate, and credit risks [17][18] Q&A Session Summary Question: Can you walk us through the mechanics of the $3.4 billion repositioning plan? - The repositioning is expected to be completed around the closing date, with some activities already in progress [25][26] Question: What are the expectations for capital management long-term? - The company anticipates a significant amount of capital accretion, providing flexibility for future growth and M&A opportunities [32][33] Question: How do the EPS projections compare to street estimates? - Internal projections indicate a significant improvement in net interest income (NII) and expense reductions, leading to a positive outlook for EPS [40][42] Question: What gives confidence in the regulatory approval of the merger? - Extensive discussions with regulators have been held, and the company has taken lessons from past experiences to ensure a smoother process this time [46][47] Question: What are the sources of the expected cost savings? - Approximately 70% of the cost savings are expected to come from personnel reductions, with additional savings from professional services and back-office efficiencies [80][82]