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Performance was driven by robust annualized loan growth of over 16%, primarily within the C&I portfolio across high-growth Texas and Southern California markets.

Net interest margin expanded to 4.25% due to improved funding costs, marking 14 consecutive quarters above the 4% threshold.

Management attributed higher provision expense to a combination of strong loan growth and specific portfolio downgrades, including two anticipated charge-offs in telecom and auto finance.

The First Foundation acquisition is viewed as a catalyst for scale, expanding the branch network in Southern California and Southwest Florida while significantly broadening the wealth advisory platform.

Strategic focus has shifted toward derisking the acquired balance sheet by exiting non-relationship Shared National Credits and high-cost wholesale funding.

Management emphasizes a 'credit-adjusted NIM' framework, prioritizing high-spread C&I lending despite the inherent lumpiness in credit performance compared to CRE-heavy peers.

Balance sheet repositioning is expected to be completed by the end of Q2 2026, including the remaining $1.3 billion in planned loan downsizing.

Full-year 2026 NIM is projected in the mid-3.80s, with a temporary dip in Q2 and Q3 during downsizing before elevating to the 3.90s in Q4.

Cost synergies are expected to be 65% phased in by the end of Q2, reaching 100% by year-end following major system conversions in September and Q4.

Management expects to return to a balanced growth mode in 2027 after completing the multi-year remix of the acquired multifamily portfolio.

Capital positioning is expected to remain strong with a CET1 ratio in the 11% range post repositioning, providing capacity for near-term share repurchases.

Net charge-offs of $10.5 million (63 bps annualized) were heavily concentrated in two specific loans that were already partially or fully reserved.

The investor CRE concentration level increased significantly post-acquisition, with a strategic goal to reduce it below 250% of capital by the end of Q2.

Wholesale funding ratios spiked following the merger, but management targets a reduction to approximately 10% by the end of the second quarter.

Preliminary fair value marks are coming in lower than October 2025 estimates, which may reduce tangible book value dilution but also result in lower interest rate mark accretion in future periods.

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Management clarified that the additional $1 billion in repositioning was due to a short-term leverage strategy deployed by First Foundation during the pendency period.

Despite the downsizing, the company maintains its 2027 EPS target of $5-plus as the core balance sheet base remains consistent with original deal assumptions.

The mid-20s basis point charge-off guidance for 2026 assumes a significant step down after Q1, as the bulk of the year's expected losses were realized early.

Management expressed confidence in the C&I-heavy strategy, noting that 300-plus spreads provide an adequate buffer for the 'lumpy' nature of C&I credit losses.

Approximately $310 million in acquired multifamily loans will reprice in the remainder of 2026, with another $400 million in 2027.

The bank will exit 'credit-only' situations that lack deposit depth, using these maturities to naturally reduce concentration and improve the funding mix.

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