FSUN

• Acquisition and Integration Progress • First Son completed the acquisition of First Foundation on April 1, 2026, expanding its footprint to Southern California and adding a premier wealth management platform. • All planned balance sheet downsizing for the acquisition was completed in Q2 2026, reducing total assets by ~$3.9 billion (including $1.4 billion in acquired securities and $1.3 billion in acquired loans) and cutting $3.9 billion in higher-cost funding. • Core system conversion for the integration is scheduled for late September 2026 (Q3 2026). • Tangible book value dilution from the acquisition is ~10%, lower than the original 14% estimate at announcement, driven by lower merger expenses and better net fair value results.

• Balance Sheet Strategy • Adjusted annualized core deposit growth (excluding acquired First Foundation deposits net of downsizing) was ~5%, led by growth in Southern California Los Angeles and Orange County markets. • Non-interest-bearing deposits made up 18.1% of total deposits at quarter-end, down from 23.1% in Q1, while combined savings and money market deposits increased to 40.4% from 38% in Q1. • Excluding acquired loans and downsizing impacts, core loan balances declined 6% annualized in Q2, but grew 9.7% in the first half of 2026 overall. New loan originations averaged a 6.76% coupon, similar to Q1's 6.72% and above the coupon on acquired First Foundation loans. • The wholesale funding ratio fell to 6.8% at quarter-end, aligned with First Son's historical levels.

• Cost Saving Progress • The original total annual cost save target from the acquisition is $68 million. 65% of this target (=$44.2 million annualized run rate) was already realized in Q2 2026, putting integration ahead of schedule.

• Capital Management • The board approved a $150 million share repurchase program, to be executed over the next four quarters starting in August 2026 (Q3), as a core component of driving shareholder value. The company maintains a 11% minimum target CET1 operating level to support organic growth and repurchases.

• Asset Quality Update • Elevated Q2 losses were driven by two isolated, borrower-specific credit events: a fraudulent misrepresentation by a materials distribution borrower and poor performance at a technology company, which together represented 86% of Q2's loan loss provision and 82% of total Q2 charge-offs. • Total criticized loans rose to 7.7% of total loans from 4.3% in Q1, and non-performing loans rose to 1.64% of total loans from 0.86% in Q1, with 76% of the increase in criticized loans coming from the acquired First Foundation portfolio. • Management emphasizes that losses are concentrated in a small number of large credits, not broad-based deterioration across the portfolio, and that adequate reserves have been established for all potential losses.

• Balance Sheet Growth: Low single-digit total loan and deposit balance growth is expected from Q2 2026 period-end through the end of 2026, with mid single-digit growth projected for 2027. Up to $100 million in additional balance runoff from the acquired multifamily loan portfolio is expected in H2 2026, and up to $285 million in runoff is projected for 2027.
• Net Interest Margin: Margin is expected to increase slightly in Q3 2026 from June's 376bps level, rising to the mid 380s in Q4 2026 and reaching the high 380s in Q1 2027, driven primarily by lower cost of funds from repricing maturing high-cost broker deposits.
• Revenue and Efficiency Ratios: Non-interest income is expected to make up the low 20% of total revenue for full year 2026 and Q4 2026. The adjusted efficiency ratio (excluding merger expenses) is projected to be in the mid to low 60s range in H2 2026, falling to the low 60s in Q4 2026 and reaching the high 50s to low 60s range in Q1 2027 after the September core system conversion unlocks additional cost savings.
• Credit Losses: Full year 2026 net charge-offs to average loans are expected to be in the high 50bps range, implying an annualized mid-teens bps charge-off level in H2 2026. The ACL to loans ratio is expected to stay in the 145bps to 150bps range for the full year, and charge-offs are projected to return to normalized levels in 2027, aligned with Q4 2026 projections.
• 2027 EPS Guidance: Management reaffirmed its prior target of at least $5+ EPS for 2027 and maintains optimism for stronger performance.

The transcript does not break out financial performance for separate defined product segments. It only reports overall company results for Q2 2026: a GAAP net loss of $23 million, which included $44 million in after-tax merger-related expenses and $30 million in after-tax credit loss provisioning. Service fee revenue contributed 22% of total revenue in the quarter, with combined mortgage and wealth revenues accounting for 62.3% of total service fee revenue. Net interest margin was 3.58%, down from 4.25% in Q1 2026. Adjusted core business EPS was $1.32, matching the Q1 2026 level. Provision for credit losses was $40.4 million, with total charge-offs of $42.4 million (145bps of total loans). Tangible book value per share was $35.16, down ~9% from Q1 2026. Capital ratios remain strong: CET1 at 11.95%, total risk-based capital at 14.13%, and Tier 1 leverage at 9.47%.

• Elevated loan loss provisions and charge-offs in Q2 2026 driven by two large, isolated borrower-specific credit events (fraudulent misrepresentation and idiosyncratic business deterioration). • Increase in criticized and non-performing loans quarter-over-quarter, with the majority of the increase coming from the acquired First Foundation loan portfolio. • Interest rate sensitivity and higher funding costs that compressed net interest margin in Q2 2026, though management has taken steps to reduce this risk via balance sheet repositioning. • Integration execution risk associated with the upcoming core system conversion for the First Foundation acquisition, with remaining cleanup work on the acquired balance sheet and credit portfolio still ongoing. • Natural lumpiness of credit losses inherent to First Son's focus on middle market C&I lending, which can lead to more volatile quarterly loss results compared to peers with larger CRE concentrations.

Q: Given that most balance sheet downsizing occurred late in Q2, what is the outlook for average earning assets in Q3 relative to Q2's ~$16 billion level? / A: Management reaffirms its low single-digit growth guidance from Q2 period-end through year-end, and this applies to both period-end and average earning assets. Growth will fall at the lower end of the low single-digit range for Q3 average assets compared to Q2 period-end. Total size of the balance sheet shrank faster than planned in Q2 as management fast-forwarded high-cost deposit runoff from the acquired portfolio.

Q: What is driving expected margin improvement in H2 2026, and what is the strategy for replacing high-cost brokered deposits? / A: The primary driver of margin improvement will be lower cost of funds from repricing maturing high-cost brokered deposits, which currently carry weighted rates near 4.8%. The wholesale funding ratio is already aligned with historical levels at 6.8% and will decline slightly further, as higher-cost brokered deposits are replaced with lower-cost core deposits. This mix shift will directly support margin expansion.

Q: Legacy First Son criticized loan balances increased 50% quarter-over-quarter, with losses elevated relative to peers. How can investors be confident underwriting processes are controlled, and has a third-party credit review been completed? / A: Management notes First Son is a C&I-focused lender, so credit losses are naturally lumpier than peers with different loan mix. Losses are concentrated in a small number of isolated borrower-specific situations, not broad underwriting failure or systemic portfolio issues. Third-party credit reviews were completed as part of the merger diligence for both the First Son legacy portfolio and the First Foundation acquired portfolio. Management conducts quarterly deep dives into portfolio segments and maintains strong reserves for identified risks, with no material concentration exposure to any single industry or borrower.

Q: Is the prior $5+ 2027 EPS target still achievable? / A: Management confirms guidance is unchanged, and actually projects 2027 EPS will come in above the $5 target. The integration of First Foundation is progressing ahead of schedule on cost saves, the underlying franchise profile matches First Son's strategic growth plan, and the expanded deposit base and fee income platform support long-term profitability. Management acknowledged remaining work to complete integration and credit portfolio cleanup, but noted no discoveries have altered the original positive strategic outlook for the acquisition.