Oct 27, 2026 earnings call — Integration progress and net interest margin expansion
Adjusted net income totaled $48.2 million, or $1.03 per diluted share.
Revenue $0.2B (est $0.2B) · EPS $1.03 (est $0.97)
Key quotes
"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 are pleased with the expansion of our net interest margin in Q3, which increased 24 basis points to 3.82% compared to the 3.58% we saw in the second quarter."
"With the core system conversion now complete, we expect to capture the vast majority of the remaining incremental 30% run rate savings in the fourth quarter."
Analyst Q&A 5
reserves, criticized loans, deposit costs
Q (Matthew Clark · Piper Sandler): He asked how gross reserves would change if the First Foundation credit mark was added back and what percent of criticized loans come from First Foundation. He also asked if the bank would sell marked criticized loans and what the spot cost of deposits was.
A: Management said the credit mark on the acquired First Foundation portfolio is included in the 1.52%. They said they are not planning any bulk sales like in Q2 but may consider one-off sales. They gave deposit rates: third quarter interest bearing deposit rate was at 2.75, equivalent interest bearing deposit cost at 9/30 was at 2.82, and the month of September was 2.78.
"You know, we are not looking at any bulk sales similar to the size that we did in the second quarter." — Neal E. Arnold (CEO)
earnings outlook and balance sheet drivers
Q (Michael Rose · Raymond James): He asked the company to level set or reiterate the $5-plus earnings trajectory for next year given a smaller balance sheet, accretion, deposit costs, and likely lower mortgage revenue. He wanted to know if that target still makes sense.
A: Management said loan growth is still expected in the low single digit territory for the second half of 2026 and deposits are closer to flat, so the annuity base is only a little lower. They said they remain focused on optimizing margin, see positive trends in fee businesses, and expect to come in ahead on cost saves to support 2027 targets.
"we do think we are going to come in ahead of our original projections on total cost saves." — Robert A. Cafera Jr. (CFO)
Q4 expenses and efficiency ratio
Q (Michael Rose · Raymond James): He asked how to think about fourth quarter expenses and the base level of expense growth into next year. He wanted to know if expenses should step down further and how investments affect the outlook.
A: They expect expense to decline in Q4 versus Q3 and guided to an efficiency ratio in the low 60s, which implies about a mid single digit decline from Q3. They said efficiency should continue to improve modestly into 2027 and noted criticized loans are roughly split 50/50 between legacy Sunflower and legacy First Foundation.
"It is roughly 50% legacy Sunflower and legacy First Foundation." — Robert A. Cafera Jr. (CFO)
loan collection expense and loan pipeline
Q (Matt Olney · Stephens): He asked for more color on the higher loan collection expense line: the drivers and the outlook for the next few quarters. He also asked for numbers on how the current loan pipeline compares to a few months ago.
A: They said loan collection expense was elevated in Q3 due to a few workouts and they expect that item to step down toward a normal run rate. They said they expect mid single digit loan growth in Q4 and that the pipeline is about 30% to 40% higher than earlier in the year.
"I think the pipeline we are seeing in percentage terms is 30% to 40% higher than we have seen it earlier in the year." — Robert A. Cafera Jr. (CFO)
brokered deposits, margin sensitivity, capital use
Q (Wood Lay · KBW): He asked how much broker deposit runoff the guide assumes. He also asked how sensitive the margin is to rate hikes or no hikes. Finally, he asked if the bank would shift capital to buybacks if growth misses guidance.
A: They said brokered deposits are now between 6% and 7% and their objective is to keep brokered below 10%. They said the interest rate sensitivity is slightly asset sensitive, expect one rate increase in December in their view and nothing factored for 2027, and noted about 70% of loans are variable with much repricing in the first 30 days. On capital use they said execution is the main driver and they do not see a regional slowdown.
"I think we are between 6% and 7% still." — Robert A. Cafera Jr. (CFO)