WaFd Q1 2026 WaFd Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q1 2026 WaFd Inc Earnings Call
Speaker #1: Please be advised that today’s conference is being recorded. After the speakers’ presentation, there will be a question-and-answer session. To ask a question, please press star one-one on your telephone and wait for your name to be announced.
Speaker #1: To withdraw your question, please press star 11 again. I would now like to hand the conference over to your speaker today, Brad Goode, Chief Marketing and Investor Relations Manager.
Speaker #2: Thank you, Josh. Good morning, everybody. Happy New Year. Let's dive into our 2026 first quarter earnings report. You can find our earnings press release, along with our detailed fact sheet and investor scorecard, on our website at wafdbank.com.
Brad Goode: Thank you, Josh. Good morning, everybody. Happy New Year. Let's dive into our 2026 Q1 earnings report. You can find our earnings press release along with our detailed fact sheet and investor scorecard on our website at wafdbank.com.
Speaker #2: During today's call, we'll make some forward-looking statements, which are subject to risks and uncertainties and are intended to be covered by the safe harbor provisions of federal securities law.
Operator: During today's call, we'll make some forward-looking statements, which are subject to risks and uncertainties, and are intended to be covered by the safe harbor provisions of federal securities law. Information on risk factors that could cause actual results to differ are available from the earnings press release that was released yesterday and the recently filed Form 10-K for the fiscal year ended 30 September 2025. Forward-looking statements are effective only as the date they are made, and WAFD assumes no obligation to update information concerning its expectations. We will also reference non-GAAP financial measures, and I encourage you to review the non-GAAP reconciliations provided in our earnings materials. With us this morning are President and CEO Brent Beardall, Chief Financial Officer Kelli Holz, and Chief Credit Officer Ryan Mauer. I'd now like to hand the call over to Mr. Beardall. Thank you, Mr. Goode.
During today's call, we'll make some forward-looking statements, which are subject to risks and uncertainties, and are intended to be covered by the safe harbor provisions of federal securities law. Information on risk factors that could cause actual results to differ are available from the earnings press release that was released yesterday and the recently filed Form 10-K for the fiscal year ended 30 September 2025. Forward-looking statements are effective only as the date they are made, and WAFD assumes no obligation to update information concerning its expectations. We will also reference non-GAAP financial measures, and I encourage you to review the non-GAAP reconciliations provided in our earnings materials. With us this morning are President and CEO Brent Beardall, Chief Financial Officer Kelli Holz, and Chief Credit Officer Ryan Mauer. I'd now like to hand the call over to Mr. Beardall.
Speaker #2: Information on risk factors that could cause actual results to differ are available from the earnings press release that was released yesterday and the recently filed Form 10-K for the fiscal year ended September 30, 2025.
Speaker #2: Forward-looking statements are effective only as of the date they are made, and WAFD assumes no obligation to update information concerning its expectations. We will also reference non-GAAP financial measures, and I encourage you to review the non-GAAP reconciliations provided in our earnings materials.
Speaker #2: With us this morning are our President and CEO, Brent Beardall; Chief Financial Officer, Kelli Holz; and Chief Credit Officer, Ryan Mauer. I'd now like to hand the call over to Mr. Beardall.
Brent Beardall: Thank you, Mr. Goode. Good morning, everyone, and happy New Year. This morning, we will cover four areas for you. First, Kelli will provide you with a detailed review of our balance sheet and income statement for the quarter ended December 31, including the impact on our margin from the increase in non-accrual loans, which everyone has undoubtedly noticed. Second, Ryan Mauer will provide comments on the current status of our loan portfolio and credit quality trends. Third, I will provide you my insights on our future prospects, capital management, and macro developments that impact WAFD. Finally, we'll be happy to answer any questions you have. Before turning it over to Kelli, I want to point out that based on your historical inquiries about repricing on our assets and liabilities, we have added a new table to our fact sheet on page six.
Speaker #3: Thank you, Mr. Goode. Good morning, everyone, and Happy New Year. This morning, we will cover four areas for you. First, Kelli will provide you with a detailed review of our balance sheet and income statement for the quarter ended December 31.
Operator: Good morning, everyone, and happy New Year. This morning, we will cover four areas for you. First, Kelli will provide you with a detailed review of our balance sheet and income statement for the quarter ended December 31, including the impact on our margin from the increase in non-accrual loans, which everyone has undoubtedly noticed. Second, Ryan Mauer will provide comments on the current status of our loan portfolio and credit quality trends. Third, I will provide you my insights on our future prospects, capital management, and macro developments that impact WAFD. Finally, we'll be happy to answer any questions you have. Before turning it over to Kelli, I want to point out that based on your historical inquiries about repricing on our assets and liabilities, we have added a new table to our fact sheet on page six.
Speaker #3: Including the impact on our margin from the increase in non-accrual loans, which everyone has undoubtedly noticed. Second, Ryan Mauer will provide comments on the current status of our loan portfolio and credit quality trends.
Speaker #3: Third, I will provide you my insights on our future prospects, capital management, and macro developments—the impact on WaFd. Finally, we'll be happy to answer any questions you have.
Speaker #3: Before turning it over to Kelli, I want to point out that, based on your historical inquiries about repricing on our assets and liabilities, we have added a new table to our fact sheet on page six.
Speaker #3: This table details our largest categories of assets and liabilities, what percentage of each is fixed versus variable, then the cumulative amount of repricing in quarterly increments over the next two years.
Operator: This table details our largest categories of assets and liabilities, what percentage of each is fixed versus variable, then the cumulative amount of repricing in quarterly increments over the next two years. Please note that this table takes into account both variable rate instruments and fixed rate instruments that mature in the stated time frames. It also takes into account the effect of various hedging strategies. Kelli, I'll turn it over to you to walk through the quarter-end results. Thank you, Brent. As announced, WAFD Inc. reported net income available to common shareholders of $60.5 million or $0.79 per diluted share for the quarter ended 31 December 2025. This compares to net income to common shareholders of $0.54 per share for the first quarter of fiscal 2025 and $0.72 per share for the September 2025 quarter.
This table details our largest categories of assets and liabilities, what percentage of each is fixed versus variable, then the cumulative amount of repricing in quarterly increments over the next two years. Please note that this table takes into account both variable rate instruments and fixed rate instruments that mature in the stated time frames. It also takes into account the effect of various hedging strategies. Kelli, I'll turn it over to you to walk through the quarter-end results.
Speaker #3: Please note that this table takes into account both variable-rate instruments and fixed-rate instruments that mature in the stated timeframes. It also takes into account the effect of various hedging strategies.
Speaker #3: Kelli, I'll turn it over to you to walk through the quarter end.
Kelli Holz: Thank you, Brent. As announced, WAFD Inc. reported net income available to common shareholders of $60.5 million or $0.79 per diluted share for the quarter ended 31 December 2025. This compares to net income to common shareholders of $0.54 per share for the first quarter of fiscal 2025 and $0.72 per share for the September 2025 quarter.
Speaker #4: Thank you, Brent. As announced, WaFd Inc. reported net income available to common shareholders of $60.5 million, or $0.79 per diluted share, for the quarter ended December 31, 2025.
Speaker #4: This compares to net income to common shareholders of $0.54 per share for the first quarter of fiscal 2025 and $0.72 per share for the September 25 quarter.
Speaker #4: The $0.07 increase in earnings per share for the quarter was a result of improvements in both income and expense, a modest increase in net interest income and increased non-interest income, as well as an overall decrease in total non-interest expense.
Operator: The $0.07 increase in earnings per share for the quarter was a result of improvements in both income and expense, a modest increase in net interest income, and increased non-interest income, as well as an overall decrease in total non-interest expense. For the balance sheet, loans receivable decreased $240 million during the quarter, primarily due to a decrease in our inactive loan types, SFR, custom construction, and consumer lot loans, which combined decreased by $256 million. Loan originations and advances for the quarter outpaced repayments and payoffs in our active loan types, with originations at $1.1 billion and repayments and payoffs at $1 billion. Active loan types include multifamily, commercial real estate, C&I, construction, land A&D, and consumer loans. For the inactive loan types, advances were $25 million and repayments and maturities were $321 million.
The $0.07 increase in earnings per share for the quarter was a result of improvements in both income and expense, a modest increase in net interest income, and increased non-interest income, as well as an overall decrease in total non-interest expense. For the balance sheet, loans receivable decreased $240 million during the quarter, primarily due to a decrease in our inactive loan types, SFR, custom construction, and consumer lot loans, which combined decreased by $256 million. Loan originations and advances for the quarter outpaced repayments and payoffs in our active loan types, with originations at $1.1 billion and repayments and payoffs at $1 billion. Active loan types include multifamily, commercial real estate, C&I, construction, land A&D, and consumer loans. For the inactive loan types, advances were $25 million and repayments and maturities were $321 million.
Speaker #4: For the balance sheet, loans receivable decreased $240 million during the quarter, primarily due to a decrease in our inactive loan types: SFR, custom construction, and consumer lot loans, which combined decreased by $256 million.
Speaker #4: Loan originations and advances for the quarter outpaced repayments and payoffs in our active loan types, with originations at $1.1 billion and repayments and payoffs at $1.0 billion.
Speaker #4: Active loan types include multifamily, commercial real estate, C&I, construction, land A&D, and consumer loans. For the inactive loan types, advances were $25 million and repayments and maturities were $321 million.
Speaker #4: Please see the table in our fact sheet that provides a breakdown between our active and inactive loan types. Total investments and mortgage-backed securities increased $728 million during the quarter, funded primarily by the increase in borrowings of $671 million.
Operator: Please see the table in our fact sheet that provides a breakdown between our active and inactive loan types. Total investments and mortgage-backed securities increased $728 million during the quarter, funded primarily by the increase in borrowings of $671 million. Investment purchases were primarily discount-priced agency mortgage-backed securities with an effective yield of 4.93%. This increase in mortgage-backed securities is part of our overall investment strategy currently replacing the single-family mortgage loan balance runoff. Total deposits decreased by $21 million during the quarter, with non-interest-bearing deposits increasing $125 million or 4.9%, interest-bearing deposits increasing $434 million or 4.5%, while time deposits decreased $580 million or 6.4%. Core deposits ended the quarter at 79.7% of total deposits, up slightly from the September quarter at 77.9%. Non-interest-bearing deposits ended the quarter at 12.6% of total deposits. The loan-to-deposit ratio ended the quarter at 92.7%. We have made significant progress in this area.
Please see the table in our fact sheet that provides a breakdown between our active and inactive loan types. Total investments and mortgage-backed securities increased $728 million during the quarter, funded primarily by the increase in borrowings of $671 million. Investment purchases were primarily discount-priced agency mortgage-backed securities with an effective yield of 4.93%. This increase in mortgage-backed securities is part of our overall investment strategy currently replacing the single-family mortgage loan balance runoff. Total deposits decreased by $21 million during the quarter, with non-interest-bearing deposits increasing $125 million or 4.9%, interest-bearing deposits increasing $434 million or 4.5%, while time deposits decreased $580 million or 6.4%. Core deposits ended the quarter at 79.7% of total deposits, up slightly from the September quarter at 77.9%. Non-interest-bearing deposits ended the quarter at 12.6% of total deposits. The loan-to-deposit ratio ended the quarter at 92.7%. We have made significant progress in this area.
Speaker #4: Investment purchases were primarily discount-priced agency mortgage-backed securities with an effective yield of 4.93%. This increase in mortgage-backed securities is part of our overall investment strategy, currently replacing the single-family mortgage loan balance runoff.
Speaker #4: Total deposits decreased by $21 million during the quarter, with non-interest-bearing deposits increasing $125 million, or 4.9%. Interest-bearing deposits increased $434 million, or 4.5%, while time deposits decreased $580 million, or 6.4%.
Speaker #4: Core deposits ended the quarter at 79.7% of total deposits, up slightly from the September quarter at 77.9%. Non-interest-bearing deposits ended the quarter at 12.6% of total deposits.
Speaker #4: The loan-to-deposit ratio ended the quarter at 92.7%. We have made significant progress in this area. As you may recall, our loan-to-deposit ratio just two years ago, at December 2023, was north of 110%.
Operator: As you may recall, our loan-to-deposit ratio just two years ago at December 2023 was north of 110%. WAFD's liquidity and capital profile remain strong with a robust core funding base, a low reliance on wholesale borrowings, and significant off-balance sheet borrowing capacity. In addition, all of our capital ratios are in excess of regulatory well-capitalized levels. For the income statement, net interest income increased $1.2 million from the prior quarter, the effect of the reduction in interest paid on liabilities outpacing the reduction in interest earned on assets by two basis points. The net interest margin was 2.7% in the December quarter compared to 2.71% for the September quarter. For the spot rate as of December 2025 period end, the yield on interest earning assets was 5.05%, while the cost of interest-bearing liabilities was 2.76%, with a resulting margin of 2.77%.
As you may recall, our loan-to-deposit ratio just two years ago at December 2023 was north of 110%. WAFD's liquidity and capital profile remain strong with a robust core funding base, a low reliance on wholesale borrowings, and significant off-balance sheet borrowing capacity. In addition, all of our capital ratios are in excess of regulatory well-capitalized levels. For the income statement, net interest income increased $1.2 million from the prior quarter, the effect of the reduction in interest paid on liabilities outpacing the reduction in interest earned on assets by two basis points. The net interest margin was 2.7% in the December quarter compared to 2.71% for the September quarter. For the spot rate as of December 2025 period end, the yield on interest earning assets was 5.05%, while the cost of interest-bearing liabilities was 2.76%, with a resulting margin of 2.77%.
Speaker #4: WaFd’s liquidity and capital profile remain strong, with a robust core funding base, a low reliance on wholesale borrowings, and significant off-balance sheet borrowing capacity.
Speaker #4: In addition, all of our capital ratios are in excess of regulatory well-capitalized levels. For the income statement, net interest income increased $1.2 million from the prior quarter.
Speaker #4: The effect of the reduction in interest paid on liabilities outpacing the reduction in interest earned on assets by two basis points. The net interest margin was 2.70% in the December quarter compared to 2.71% for the September quarter.
Speaker #4: For the spot rate as of December 2025 period end, the yield on interest-earning assets was 5.05%, while the cost of interest-bearing liabilities was 2.76%, with a resulting margin of 2.77%.
Speaker #4: Comparing the spot rate at September 30th, which was 2.82%, to our December quarter margin realized at 2.7%, nine basis points of the difference relates to non-accrual interest, one-time reversals when loans go non-accrual, and also interest income not being recognized going forward from the non-accrual date.
Operator: Comparing the spot rate at 30 September, which was 2.82%, to our December quarter margin realized at 2.7%, nine basis points of the difference relates to non-accrual interest, one-time reversals when loans go non-accrual, and also interest income not being recognized going forward from the non-accrual date. The three remaining basis points relate to our purchase of mortgage-backed securities during the quarter, as I mentioned, with a net yield of 4.93%. While these purchases put pressure on the margin, they generate annual net interest income of approximately 1.03% of the average balances purchased. For the December quarter, this amounted to $1.2 million in net interest income. Looking forward, I would expect more pressure on the margin from additional mortgage-backed securities purchases in addition to net increased net interest income. Total non-interest income increased $1.9 million compared to the prior quarter at $20.3 million.
Comparing the spot rate at 30 September, which was 2.82%, to our December quarter margin realized at 2.7%, nine basis points of the difference relates to non-accrual interest, one-time reversals when loans go non-accrual, and also interest income not being recognized going forward from the non-accrual date. The three remaining basis points relate to our purchase of mortgage-backed securities during the quarter, as I mentioned, with a net yield of 4.93%. While these purchases put pressure on the margin, they generate annual net interest income of approximately 1.03% of the average balances purchased. For the December quarter, this amounted to $1.2 million in net interest income. Looking forward, I would expect more pressure on the margin from additional mortgage-backed securities purchases in addition to net increased net interest income. Total non-interest income increased $1.9 million compared to the prior quarter at $20.3 million.
Speaker #4: The three remaining basis points relate to our purchase of mortgage-backed securities during the quarter, as I mentioned, with a net yield of 4.93%. While these purchases put pressure on the margin, they generate annual net interest income of approximately 1.03% of the average balances purchased.
Speaker #4: For the December quarter, this amounted to $1.2 million in net interest income. Looking forward, I would expect more pressure on the margin from additional mortgage-backed securities purchases, in addition to increased net interest income.
Speaker #4: Total non-interest income increased $1.9 million compared to the prior quarter, at $20.3 million. Contributing to the non-interest income is a $3.2 million gain on sale of a branch property, offset by losses of $408,000 taken on certain equity method investments in the quarter, compared to gains on those investments of $815,000 in the prior quarter.
Operator: Contributing to the non-interest income is $3.2 million gain on sale of a branch property offset by losses of $408,000 taken on certain equity method investments in the quarter compared to gains on those investments of $815,000 in the prior quarter. Total non-interest expense decreased $1.3 million or 1.2% from the prior quarter as a result of reduced compensation and technology expenses offset by increases in other expense. Decreased expenses combined with increased income resulted in a decrease in our efficiency ratio for the current quarter to 55.3% compared to 56.8% in the prior quarter. During the quarter, 1.95 million shares of common stock were repurchased at a weighted average price of $29.75. The impact on earnings per share for these repurchases was $0.02 for the quarter. Our share repurchase plan currently has a remaining authorization of 6.3 million shares, which, depending on share price, provides a compelling investment alternative.
Contributing to the non-interest income is $3.2 million gain on sale of a branch property offset by losses of $408,000 taken on certain equity method investments in the quarter compared to gains on those investments of $815,000 in the prior quarter. Total non-interest expense decreased $1.3 million or 1.2% from the prior quarter as a result of reduced compensation and technology expenses offset by increases in other expense. Decreased expenses combined with increased income resulted in a decrease in our efficiency ratio for the current quarter to 55.3% compared to 56.8% in the prior quarter. During the quarter, 1.95 million shares of common stock were repurchased at a weighted average price of $29.75. The impact on earnings per share for these repurchases was $0.02 for the quarter. Our share repurchase plan currently has a remaining authorization of 6.3 million shares, which, depending on share price, provides a compelling investment alternative.
Speaker #4: Total non-interest expense decreased $1.3 million, or 1.2%, from the prior quarter as a result of reduced compensation and technology expenses, offset by increases in other expense.
Speaker #4: Decreased expenses combined with increased income resulted in a decrease in our efficiency ratio for the current quarter to 55.3%, compared to 56.8% in the prior quarter.
Speaker #4: During the quarter, 1.95 million shares of common stock were repurchased at a weighted average price of $29.75. The impact on earnings per share for these repurchases was $0.02 for the quarter.
Speaker #4: Our share repurchase plan currently has a remaining authorization of 6.3 million shares, which, depending on share price, provides a compelling investment alternative. I will now turn the call over to Ryan to share his comments on WaFd's credit quality.
Operator: I will now turn the call over to Ryan to share his comments on WAFD's credit quality. Thank you, Kelli, and good morning, everyone. As reflected in our earnings release, we had a solid quarter of new loan production along multiple product lines. As Kelli indicated, total production in our active portfolio was $1.1 billion for the December quarter. This loan production was centered in commercial and industrial of 46%, commercial real estate of 23%, and construction of 25%. Importantly, we were able to achieve this level of loan production with a consistent approach to underwriting that maintained a moderate risk profile. Adversely classified loans decreased by $51 million in the quarter and now represent 2.94% of net loans compared to 3.16% as of the September quarter and 1.97% as of December 2024.
Operator: I will now turn the call over to Ryan to share his comments on WAFD's credit quality.
Ryan Mauer: Thank you, Kelli, and good morning, everyone. As reflected in our earnings release, we had a solid quarter of new loan production along multiple product lines. As Kelli indicated, total production in our active portfolio was $1.1 billion for the December quarter. This loan production was centered in commercial and industrial of 46%, commercial real estate of 23%, and construction of 25%. Importantly, we were able to achieve this level of loan production with a consistent approach to underwriting that maintained a moderate risk profile. Adversely classified loans decreased by $51 million in the quarter and now represent 2.94% of net loans compared to 3.16% as of the September quarter and 1.97% as of December 2024.
Speaker #2: Thank you, Kelli, and good morning, everyone. As reflected in our earnings release, we had a solid quarter of new loan production across multiple product lines.
Speaker #2: As Kelli indicated, total production in our active portfolio was $1.1 billion for the December quarter. This loan production was centered in commercial and industrial at 46%, commercial real estate at 23%, and construction at 25%.
Speaker #2: Importantly, we were able to achieve this level of loan production with a consistent approach to underwriting that maintained a moderate risk profile. Adversely classified loans decreased by $51 million in the quarter and now represent 2.94% of net loans, compared to 3.16% as of the September quarter and 1.97% as of December 2024.
Speaker #2: Total criticized loans increased by $30 million to 4.6% of net loans, compared to 4.39% as of the September quarter and 2.54% as of December 2024.
Operator: Total criticized loans increased by $30 million to 4.6% of net loans compared to 4.93%, excuse me, 4.39% as of the September quarter and 2.54% as of December 2024. It should be noted that the increase in criticized loans is not concentrated in any one business category or line and is reflective of the economic environment where elevated interest rates and economic uncertainty impacted both commercial and consumer borrowers. In addition, an asset being criticized does not imply that loss exposure exists. Rather, it is a representation that the borrower is experiencing some level of financial stress that needs to be addressed. Non-performing assets increased to $203 million or 0.75% of total assets from $143 million or 0.54% at 30 September 2025. The change is due to non-accrual loans increasing by $62.7 million or 49% since 30 September 2025.
Total criticized loans increased by $30 million to 4.6% of net loans compared to 4.93%, excuse me, 4.39% as of the September quarter and 2.54% as of December 2024. It should be noted that the increase in criticized loans is not concentrated in any one business category or line and is reflective of the economic environment where elevated interest rates and economic uncertainty impacted both commercial and consumer borrowers. In addition, an asset being criticized does not imply that loss exposure exists. Rather, it is a representation that the borrower is experiencing some level of financial stress that needs to be addressed. Non-performing assets increased to $203 million or 0.75% of total assets from $143 million or 0.54% at 30 September 2025. The change is due to non-accrual loans increasing by $62.7 million or 49% since 30 September 2025.
Speaker #2: It should be noted that the increase in criticized loans is not concentrated in any one business category or line, and is reflective of the economic environment, where elevated interest rates and economic uncertainty impacted both commercial and consumer borrowers.
Speaker #2: In addition, an asset being criticized does not imply that loss exposure exists. Rather, it is a representation that the borrower is experiencing some level of financial stress that needs to be addressed.
Speaker #2: Non-performing assets increased to $203 million, or 0.75% of total assets, from $143 million, or 0.54%, at September 30, 2025. The change is due to non-accrual loans increasing by $62.7 million, or 49%, since September 30, 2025.
Speaker #2: This was offset by a decrease in REO of $2.3 million during the same timeframe. Delinquent loans increased to 1.07% of total loans at December 31, 2025, compared to 0.6% at September 30, 2025, and 0.3% at December 31, 2024.
Operator: This was offset by a decrease in REO of $2.3 million during the same timeframe. Delinquent loans increased to 1.07% of total loans at 31 December 2025, compared to 0.6% at 30 September 2025, and 0.3% at 31 December 2024. While elevated in comparison to recent periods, these credit metrics remain modest in light of WAFD's loan loss reserve, and capital position and are indicative of our culture of early and proactive portfolio management. It is important to note here that the increases in delinquencies and non-performing assets were largely impacted by two commercial relationships over 90 days past due. Outstanding balances to these relationships amount to $58 million collectively. Although appropriately placed on non-accrual per policy, there was no charge-off taken upon revaluation, and we are actively collaborating with both borrowers to resolve the issues.
This was offset by a decrease in REO of $2.3 million during the same timeframe. Delinquent loans increased to 1.07% of total loans at 31 December 2025, compared to 0.6% at 30 September 2025, and 0.3% at 31 December 2024. While elevated in comparison to recent periods, these credit metrics remain modest in light of WAFD's loan loss reserve, and capital position and are indicative of our culture of early and proactive portfolio management. It is important to note here that the increases in delinquencies and non-performing assets were largely impacted by two commercial relationships over 90 days past due. Outstanding balances to these relationships amount to $58 million collectively. Although appropriately placed on non-accrual per policy, there was no charge-off taken upon revaluation, and we are actively collaborating with both borrowers to resolve the issues.
Speaker #2: While elevated in comparison to recent periods, these credit metrics remain modest in light of WaFd's loan loss reserve and capital position, and are indicative of our culture of early and proactive portfolio management.
Speaker #2: It is important to note here that the increases in delinquencies and non-performing assets were largely impacted by two commercial relationships over 90 days past due.
Speaker #2: Outstanding balances to these relationships amount to $58 million collectively. Although appropriately placed on non-accrual per policy, there was no charge-off taken upon revaluation, and we are actively collaborating with both borrowers to resolve the issues.
Speaker #2: If non-performing assets and delinquencies were adjusted for these relationships, NPAs would be 0.67% of total assets, compared to 0.64% at September 2025, and delinquencies would be 0.78% of total loans, compared to 0.6% at September of 2025.
Operator: If non-performing assets and delinquencies were adjusted for these relationships, NPAs would be 0.67% of total assets compared to 0.64% at September 2025, and delinquencies would be 0.78% of total loans compared to 0.6% at September of 2025. The net provision for credit losses in the quarter was $3.5 million. The provision is the result of decreased loan balances, mixed credit metrics, including increasing trends in negative migration of criticized and non-performing loans, and $3.7 million of net charge-offs taken during the quarter. Net loan charge-offs for the quarter represented a nominal seven basis points of total loans annualized at December of 2025. The charge-off was driven by a relationship in the C&I energy sector as a result of depressed oil prices coupled with diminished working capital.
If non-performing assets and delinquencies were adjusted for these relationships, NPAs would be 0.67% of total assets compared to 0.64% at September 2025, and delinquencies would be 0.78% of total loans compared to 0.6% at September of 2025. The net provision for credit losses in the quarter was $3.5 million. The provision is the result of decreased loan balances, mixed credit metrics, including increasing trends in negative migration of criticized and non-performing loans, and $3.7 million of net charge-offs taken during the quarter. Net loan charge-offs for the quarter represented a nominal seven basis points of total loans annualized at December of 2025. The charge-off was driven by a relationship in the C&I energy sector as a result of depressed oil prices coupled with diminished working capital.
Speaker #2: The net provision for credit losses in the quarter was $3.5 million. The provision is the result of decreased loan balances and mixed credit metrics, including increasing trends in negative migration of criticized and non-performing loans.
Speaker #2: And $3.7 million of net charge-offs taken during the quarter. Net loan charge-offs for the quarter represented a nominal seven basis points of total loans.
Speaker #2: Annualized, at December of 2025. The charge-off was driven by a relationship in the CNI energy sector as a result of depressed oil prices, coupled with diminished working capital.
Speaker #2: For reference, over the last 10 years, net charge-offs have averaged a recovery of 2 basis points per year, and over the last three years, net charge-offs have averaged 10 basis points per year.
Operator: For reference, over the last 10 years, net charge-offs have averaged a recovery of two basis points per year, and over the last three years, net charge-offs have averaged 10 basis points per year. The allowance for credit losses, including the reserve for unfunded commitments, provides coverage of 1.05% of gross loans at 31 December 2025, compared to 1% in December 2024. For the commercial loan portfolio, the allowance represents 1.33% of net loans compared to 1.26% as of December 2024. Credit metrics at December quarter end, while elevated from prior quarters, remain at healthy levels overall and have been impacted by two primary drivers. First, the elevated interest rate environment has impacted loan demand and borrowers' expense structures. Second, the economic uncertainty driven by tariffs continues to impact borrowers' top-line revenue results as well as material costs. Looking forward, these factors remain headwinds for credit quality.
Operator: For reference, over the last 10 years, net charge-offs have averaged a recovery of two basis points per year, and over the last three years, net charge-offs have averaged 10 basis points per year. The allowance for credit losses, including the reserve for unfunded commitments, provides coverage of 1.05% of gross loans at 31 December 2025, compared to 1% in December 2024. For the commercial loan portfolio, the allowance represents 1.33% of net loans compared to 1.26% as of December 2024. Credit metrics at December quarter end, while elevated from prior quarters, remain at healthy levels overall and have been impacted by two primary drivers. First, the elevated interest rate environment has impacted loan demand and borrowers' expense structures. Second, the economic uncertainty driven by tariffs continues to impact borrowers' top-line revenue results as well as material costs. Looking forward, these factors remain headwinds for credit quality.
Speaker #2: The allowance for credit losses, including the reserve for unfunded commitments, provides coverage of 1.05% of gross loans at December 31, 2025, compared to 1.00% in December of 2024.
Speaker #2: For the commercial loan portfolio, the allowance represents 1.33% of net loans compared to 1.26% as of December 2024. Credit metrics at December quarter-end, while elevated from prior quarters, remain at healthy levels overall and have been impacted by two primary drivers: First, the elevated interest rate environment has impacted loan demand and borrowers' expense structures.
Speaker #2: Second, the economic uncertainty driven by tariffs continues to impact borrowers' top-line revenue results as well as material costs. Looking forward, these factors remain headwinds for credit quality.
Speaker #2: While the uncertainty related to tariffs remains elevated, the interest rate environment appears to be easing in the near term. With that, I will turn the call over to Brent for his comments.
Operator: While the uncertainty related to tariffs remains elevated, the interest rate environment appears to be easing in the near term. With that, I will turn the call over to Brent for his comments. Excellent. Thank you, Ryan. I think we've started off the year well with a 10% linked quarter EPS growth and a 40% year-over-year growth, and importantly, 18% growth in transaction deposits on a linked quarter basis. Our strategic plan, BUILD 2030, is designed to fully shift our focus to where we can add the most value to our clients and our shareholders, serving the banking needs of businesses. This shift takes time, discipline, effort, and comes with specific goals. The most important goal is increasing our non-interest-bearing deposits to total deposits from 11% last year up to 20% by 2030, and we are currently sitting at 12.6% today.
While the uncertainty related to tariffs remains elevated, the interest rate environment appears to be easing in the near term. With that, I will turn the call over to Brent for his comments.
Brent Beardall: Excellent. Thank you, Ryan. I think we've started off the year well with a 10% linked quarter EPS growth and a 40% year-over-year growth, and importantly, 18% growth in transaction deposits on a linked quarter basis. Our strategic plan, BUILD 2030, is designed to fully shift our focus to where we can add the most value to our clients and our shareholders, serving the banking needs of businesses. This shift takes time, discipline, effort, and comes with specific goals. The most important goal is increasing our non-interest-bearing deposits to total deposits from 11% last year up to 20% by 2030, and we are currently sitting at 12.6% today.
Speaker #2: Excellent. Thank you, Ryan. I think we've started off the year well with a 10% linked-quarter EPS growth and a 40% year-over-year growth. And importantly, 18% growth in transaction deposits on a linked-quarter basis.
Speaker #2: Our strategic plan, Builds 2030, is designed to fully shift our focus to where we can add the most value to our clients and our shareholders.
Speaker #2: Serving the banking needs of businesses. This shift takes time, discipline, and effort, and comes with specific goals. The most important goal is increasing our non-interest-bearing deposits to total deposits from 11% last year up to 20% by 2030.
Speaker #2: And we are currently sitting at 12.6% today. It is an ambitious goal, but it is what we need to do as it will also drive increased loan demand and branch utilization.
Operator: It is an ambitious goal, but it is what we need to do as it will also drive increased loan demand and branch utilization. The way our peers have achieved their lower cost of funds is to focus on serving small businesses, which is exactly what we're doing. Here's what we've accomplished so far. It's hard to believe that it was just January last year that we recognized or reorganized our frontline bankers into three teams to kick off BUILD 2030. During that time, we had become a preferred SBA lender, and 98% of our branch managers who formerly specialized in mortgage lending have now passed our small business credit certification process. Our three different lines of business are first, our business bank handling commercial credit needs up to $10 million and all small business and consumer deposits. This includes our 208 branches through our nine western states.
It is an ambitious goal, but it is what we need to do as it will also drive increased loan demand and branch utilization. The way our peers have achieved their lower cost of funds is to focus on serving small businesses, which is exactly what we're doing. Here's what we've accomplished so far. It's hard to believe that it was just January last year that we recognized or reorganized our frontline bankers into three teams to kick off BUILD 2030. During that time, we had become a preferred SBA lender, and 98% of our branch managers who formerly specialized in mortgage lending have now passed our small business credit certification process. Our three different lines of business are first, our business bank handling commercial credit needs up to $10 million and all small business and consumer deposits. This includes our 208 branches through our nine western states.
Speaker #2: The way our peers have achieved their lower cost of funds is to focus on serving small businesses, which is exactly what we're doing. Here's what we've accomplished so far.
Speaker #2: It's hard to believe that it was just January last year that we recognized, or reorganized, our frontline bankers into three teams to kick off Build 2030.
Speaker #2: During that time, we've become a preferred SBA lender, and 98% of our branch managers who formerly specialized in mortgage lending have now passed our small business credit certification process.
Speaker #2: Our three different lines of business are, first, our business bank handling commercial credit needs up to $10 million, and all small business and consumer deposits.
Speaker #2: This includes our 208 branches through our nine western states. Our corporate bank, all large commercial credits and treasury needs. Then our commercial real estate bank, recognizing our historical strength and expertise in commercial real estate, we have dedicated a team to serve the credit and treasury needs of real estate developers and investors.
Operator: Our corporate bank, all large commercial credits and treasury needs. Then our commercial real estate bank. Recognizing our historical strength and expertise in commercial real estate, we have dedicated a team to serve the credit and treasury needs of real estate developers and investors. We acknowledge that we have work to do to improve our profitability. As you have heard, our margin is 2.7% for the quarter, with return on tangible common equity of 10.6%. If we can get our margin up to 3%, which is our short-term goal within the next two years, everything else being equal, return on tangible common equity would be 12.9%. The key from my perspective is growth in C&I loans and deposits supported by growth in CRE loans while running an efficient bank. I'm very pleased to see our efficiency ratio down to the top end of our target range at 55% this quarter.
Our corporate bank, all large commercial credits and treasury needs. Then our commercial real estate bank. Recognizing our historical strength and expertise in commercial real estate, we have dedicated a team to serve the credit and treasury needs of real estate developers and investors. We acknowledge that we have work to do to improve our profitability. As you have heard, our margin is 2.7% for the quarter, with return on tangible common equity of 10.6%. If we can get our margin up to 3%, which is our short-term goal within the next two years, everything else being equal, return on tangible common equity would be 12.9%. The key from my perspective is growth in C&I loans and deposits supported by growth in CRE loans while running an efficient bank. I'm very pleased to see our efficiency ratio down to the top end of our target range at 55% this quarter.
Speaker #2: We acknowledge that we have work to do to improve our profitability. As you have heard, our margin is 2.7% for the quarter, with return on tangible common equity of 10.6%.
Speaker #2: If we can get our margin up to 3%, which is our short-term goal within the next two years, everything else being equal, return on tangible common equity would be 12.9%.
Speaker #2: The key from my perspective is growth in CNI loans and deposits supported by growth in CRE loans. While running an efficient bank, I'm very pleased to see our efficiency ratio down to the top end of our target range at 55% this quarter.
Speaker #2: We believe that we have the products and teams in place to grow our active loan portfolios by 8% to 12% over the next one to two years.
Operator: We believe that we have the products and teams in place to grow our active loan portfolios by 8 to 12% over the next one to two years. Last quarter, our active loan portfolio was essentially flat, but we believe we have now turned the corner and will start growing. Looking forward, our lending pipelines continue to expand while deposits remain challenging. Our lending pipeline is up $697 million, or 28% over the last quarter. To detail it, our total lending pipeline as of the 30 September 2025 quarter was $2.5 billion, and today our total lending pipeline is at $3.2 billion, while deposits remain fairly flat. Looking at the number of accounts in the last year, non-interest-bearing accounts are up by 5,800 accounts, a 2.5% increase, which is modest, but importantly, it reverses a trend of declining numbers we had seen over the last several years.
We believe that we have the products and teams in place to grow our active loan portfolios by 8 to 12% over the next one to two years. Last quarter, our active loan portfolio was essentially flat, but we believe we have now turned the corner and will start growing. Looking forward, our lending pipelines continue to expand while deposits remain challenging. Our lending pipeline is up $697 million, or 28% over the last quarter. To detail it, our total lending pipeline as of the 30 September 2025 quarter was $2.5 billion, and today our total lending pipeline is at $3.2 billion, while deposits remain fairly flat. Looking at the number of accounts in the last year, non-interest-bearing accounts are up by 5,800 accounts, a 2.5% increase, which is modest, but importantly, it reverses a trend of declining numbers we had seen over the last several years.
Speaker #2: Last quarter, our active loan portfolio was essentially flat, but we believe we have now turned the corner and we'll start growing. Looking forward, our lending pipelines continue to expand while deposits remain challenging.
Speaker #2: Our lending pipeline is up $697 million, or 28%, over the last quarter. To detail it, our total lending pipeline as of the September 30, 2025 quarter was $2.5 billion, and today our total lending pipeline is at $3.2 billion.
Speaker #2: While deposits remain fairly flat, looking at the number of accounts in the last year, non-interest-bearing accounts are up by 5,800 accounts, a 2.5% increase.
Speaker #2: Which is modest, but importantly, it reverses a trend of declining numbers we had seen over the last several years. CNI loans, after opening up business lending to our branch teams, in the last year we have increased the number of CNI loans we have on our books by 97%.
Operator: C&I loans, after opening up business lending to our branch teams in the last year, we have increased the number of C&I loans we have on our books by 97%. With each of these new business relationships, we are planting the seeds for additional growth going forward. As we announced last quarter, we launched WAFD Wealth Management on 31 August with hiring of experienced professionals from a wirehouse firm here in Seattle. Our goal is to organically grow wealth management to $1 billion in assets under management in the first two years and then go from there. Early indications are very positive. Assets under management amounted to just over $400 million as of 31 December, and it is nice to fill a hole that we have had in our product offering. We see wealth as an essential element in growing our non-interest income going forward.
C&I loans, after opening up business lending to our branch teams in the last year, we have increased the number of C&I loans we have on our books by 97%. With each of these new business relationships, we are planting the seeds for additional growth going forward. As we announced last quarter, we launched WAFD Wealth Management on 31 August with hiring of experienced professionals from a wirehouse firm here in Seattle. Our goal is to organically grow wealth management to $1 billion in assets under management in the first two years and then go from there. Early indications are very positive. Assets under management amounted to just over $400 million as of 31 December, and it is nice to fill a hole that we have had in our product offering. We see wealth as an essential element in growing our non-interest income going forward.
Speaker #2: With each of these new business relationships, we are planting the seeds for additional growth going forward. As we announced last quarter, we launched WaFd Wealth Management on August 31.
Speaker #2: With hiring of experienced professionals from a wirehouse firm here in Seattle, our goal is to organically grow wealth management to $1 billion in assets under management in the first two years, and then go from there.
Speaker #2: Early indications are very positive. Assets under management amounted to just over $400 million as of December 31st, and it is nice to fill a hole that we have had in our product offering.
Speaker #2: We see wealth as an essential element in growing our non-interest income going forward. Turning to capital, with our stock price trading below tangible book value for some of last quarter, you have seen that we were aggressive in repurchasing our shares.
Operator: Turning to capital, with our stock price trading below tangible book value for some of last quarter, you have seen that we were aggressive in repurchasing our shares. We repurchased 2 million shares at a price of $29.75, or 99% of tangible book value. Over the last seven quarters, your company has repurchased 5.8 million shares at a weighted price of $29.45. This represents 7% of the shares outstanding on 31 March 2024. We continue to believe that with our robust capital levels, when our share price is depressed, share repurchase is the best use of capital. Based on current trading, I think our stock today is trading at about 1.1 times tangible book value. As you know, we've appealed our FDIC needs to improve CRA rating to the highest levels of the FDIC, a committee called the SARC, the Supervisory Appeals Review Committee.
Turning to capital, with our stock price trading below tangible book value for some of last quarter, you have seen that we were aggressive in repurchasing our shares. We repurchased 2 million shares at a price of $29.75, or 99% of tangible book value. Over the last seven quarters, your company has repurchased 5.8 million shares at a weighted price of $29.45. This represents 7% of the shares outstanding on 31 March 2024. We continue to believe that with our robust capital levels, when our share price is depressed, share repurchase is the best use of capital. Based on current trading, I think our stock today is trading at about 1.1 times tangible book value. As you know, we've appealed our FDIC needs to improve CRA rating to the highest levels of the FDIC, a committee called the SARC, the Supervisory Appeals Review Committee.
Speaker #2: We repurchased 2 million shares at a price of $29.75, or 99% of tangible book value. Over the last seven quarters, your company has repurchased 5.8 million shares at a weighted price of $29.45.
Speaker #2: This represents 7% of the shares outstanding on March 31, 2024. We continue to believe that with our robust capital levels, when our share price is depressed, share repurchase is the best use of capital.
Speaker #2: Based on current trading, I think our stock today is trading at about 1.1 times tangible book value. As you know, we've appealed our FDIC 'needs to improve' CRA rating to the highest levels of the FDIC, a committee called the SARC, the Supervisory Appeals Review Committee.
Speaker #2: We made our case in early December, recognizing it is a long shot, but we felt compelled to do so because our belief is the FDIC examiners were comparing apples to oranges.
Operator: We made our case in early December, recognizing it is a long shot, but we felt compelled to do so because our belief is the FDIC examiners were comparing apples to oranges by comparing WAFD with lenders that sell their loans, and all of this on a segment of our loan portfolio that we have now exited. We expect to hear the final conclusion within the next week, but are anticipating moving forward with a need to improve rating. With that, it looks like we have four questions in the queue. So, Operator, I'll let you open it up to questions. Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment for questions. Our first question comes from Matthew Clark with Piper Sandler.
We made our case in early December, recognizing it is a long shot, but we felt compelled to do so because our belief is the FDIC examiners were comparing apples to oranges by comparing WAFD with lenders that sell their loans, and all of this on a segment of our loan portfolio that we have now exited. We expect to hear the final conclusion within the next week, but are anticipating moving forward with a need to improve rating. With that, it looks like we have four questions in the queue. So, Operator, I'll let you open it up to questions.
Speaker #2: By comparing WAFD with lenders that sell their loans, and all of this on a segment of our loan portfolio that we have now exited.
Speaker #2: We expect to hear the final conclusion within the next week, but we are anticipating moving forward with a need to improve rating. With that, it looks like we have four questions in the queue, so Operator, I'll let you open it up to—
Speaker #2: questions. Thank you.
Operator: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment for questions. Our first question comes from Matthew Clark with Piper Sandler. You may proceed.
Speaker #1: As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again.
Speaker #1: One moment for questions. Our first question comes from Matthew Clark with Piper Sandler. You may proceed.
Operator: You may proceed. Hey, good morning, everyone. First one was around the margin outlook, at least in the near term. What's your plan for that $800 million of borrowings that comes due or reprices within the next three months? Yeah, simple. We will replace that with current borrowings. Not looking to shrink at this point. So we'll replace it, and if the Fed continues to cut rates, that rate will come down. Okay. And then the interest income reversals, just want to double-check the dollar amount. I know you gave the basis points on a spot basis, but just want to verify the dollar amount of interest income reversals this quarter. Kelly, do you want to give that? Certainly. For the quarter, non-accrual interest amounted to just over $5 million. Okay. Yeah, in the ballpark. Okay.
Speaker #1: proceed. Hey, good morning
Matthew Clark: Hey, good morning, everyone. First one was around the margin outlook, at least in the near term. What's your plan for that $800 million of borrowings that comes due or reprices within the next three months?
Speaker #2: Everyone. First one was around the margin outlook, at least in the near term. What's your plan for that $800 million of borrowings that comes due or reprices within the next three—
Speaker #2: months? Yeah, a
Brent Beardall: Yeah, simple. We will replace that with current borrowings. Not looking to shrink at this point. So we'll replace it, and if the Fed continues to cut rates, that rate will come down.
Speaker #3: Simply, we will replace that with current borrowings; we're not looking to shrink at this point. So we'll replace it, and if the Fed continues to cut rates, that rate will come down.
Matthew Clark: Okay. And then the interest income reversals, just want to double-check the dollar amount. I know you gave the basis points on a spot basis, but just want to verify the dollar amount of interest income reversals this quarter.
Speaker #2: Okay. And then the interest income reversals—just want to double-check the dollar amount. I know you gave the basis points on a spot basis, but just want to verify the dollar amount of interest income reversals this quarter.
Brent Beardall: Kelly, do you want to give that?
Speaker #3: Kelli, do you want to give that?
Kelli Holz: Certainly. For the quarter, non-accrual interest amounted to just over $5 million.
Speaker #4: Certainly. For the quarter, non-accrual interest amounted to just over $5 million.
Matthew Clark: Okay. Yeah, in the ballpark. Okay. And then the two new C&I non-accruals, you just give us some color on the types of businesses those relate to and the plans for resolution.
Speaker #2: Okay. Yeah, in the ballpark. Okay. And then the two new CNI non-accruals—can you just give us some color on the types of businesses those relate to, and the plans for them?
Operator: And then the two new C&I non-accruals, you just give us some color on the types of businesses those relate to and the plans for resolution. Yeah. Again, we want to be careful and not to call out any specific borrower. Ryan can talk to you about the types of business, but as we laid out, we're working with the clients and are optimistic at this point that we'll have resolution. Ryan, do you want to discuss a little bit further? Yeah, I would just say very generically, one is in a manufacturing business being impacted by markets, tariff situations, costs of labor, those sorts of things. The other business is a real estate-related entity, commercial real estate. Okay.
Speaker #2: resolution. Yeah.
Brent Beardall: Yeah. Again, we want to be careful and not to call out any specific borrower. Ryan can talk to you about the types of business, but as we laid out, we're working with the clients and are optimistic at this point that we'll have resolution. Ryan, do you want to discuss a little bit further?
Speaker #3: Again, we want to be careful and not call out any specific borrower. Ryan can talk to you about the types of business, but as we laid out, we're working with the clients and are optimistic at this point that we'll have resolution.
Speaker #3: Ryan, do you want to discuss a little bit further?
Ryan Mauer: Yeah, I would just say very generically, one is in a manufacturing business being impacted by markets, tariff situations, costs of labor, those sorts of things. The other business is a real estate-related entity, commercial real estate.
Speaker #5: Yeah. I would just say very generically, one is in the manufacturing business, being impacted by market tariff situations, costs of labor, those sorts of things.
Speaker #5: The other business is a real estate-related entity—commercial real estate.
Speaker #2: Okay, okay. And then last one from me, just on expense growth this year. Kind of where you stand on the build-out of the SBA platform, and whether or not you plan to hire more C&I lenders. Just trying to get a sense for how we should think about overall operating expense growth this year.
Matthew Clark: Okay. And then last one for me, just on expense growth this year, kind of where you stand on the build-out of the SBA platform and whether or not you plan to hire more C&I lenders. Just trying to get a sense for how we should think about overall operating expense growth this year.
Operator: And then last one for me, just on expense growth this year, kind of where you stand on the build-out of the SBA platform and whether or not you plan to hire more C&I lenders. Just trying to get a sense for how we should think about overall operating expense growth this year. Yeah. Obviously, we'll have our annual merit increases, which will go into effect this March quarter, so as you've seen in the past. We will be optimistic or opportunistic as we look at teams out there, but no significant plans for increases of large teams coming over. We think we have the teams in place and the tools in place. And obviously, we'll continue to make investments strategically from a technology standpoint as well. But I think absent the merit increases, I think we're at a pretty good run rate.
Brent Beardall: Yeah. Obviously, we'll have our annual merit increases, which will go into effect this March quarter, so as you've seen in the past. We will be optimistic or opportunistic as we look at teams out there, but no significant plans for increases of large teams coming over. We think we have the teams in place and the tools in place. And obviously, we'll continue to make investments strategically from a technology standpoint as well. But I think absent the merit increases, I think we're at a pretty good run rate. And then as we get production to increase, obviously, bonus compensation will increase from there. But I think we're at a pretty solid run rate right now.
Speaker #3: Yeah, obviously, we'll have our annual merit increases, which will go into effect this March quarter. So, as you've seen in the past, we will be optimistic or opportunistic as we look at teams out there, but no significant plans for increases or large teams coming over.
Speaker #3: We think we have the teams in place and the tools in place. And obviously, we'll continue to make investments strategically from a technology standpoint as well.
Speaker #3: But I think, absent the merit increases, we're at a pretty good run rate, and then as we get production to increase, obviously, bonus compensation will increase from there.
Operator: And then as we get production to increase, obviously, bonus compensation will increase from there. But I think we're at a pretty solid run rate right now. Okay. Thank you. Great. Thank you, Matthew. Thank you. Our next question comes from Jeff Rulis with DA Davidson. You may proceed. Thanks. Good morning. Kelly, you mentioned just wanted to kind of circle back. I think you said the expectation is that you would expect further margin pressure, but yet growth in NII dollars. Is that at least in calendar Q1? Correct, with the current strategy to replace single-family runoff with mortgage-backed securities. And I guess kind of syncing that, and I know that's different time frames, but Brent sort of mentioned the short-term goal to get to a 3% margin.
Speaker #3: But I think we're at a pretty solid run rate right now.
Matthew Clark: Okay. Thank you.
Speaker #2: Okay. Thank
Speaker #1: you Thank
Speaker #1: you Thank .
Brent Beardall: Great. Thank you, Matthew.
Speaker #2: Matthew .
Operator: Thank you. Our next question comes from Jeff Rulis with DA Davidson. You may proceed.
Speaker #3: Thank you. Our next question comes from Jeff Rulis with D.A. Davidson. You may proceed.
Jeff Rulis: Thanks. Good morning. Kelly, you mentioned just wanted to kind of circle back. I think you said the expectation is that you would expect further margin pressure, but yet growth in NII dollars. Is that at least in calendar Q1?
Speaker #4: Thanks .
Speaker #3: Our next question comes from Jeff Ruelas with D.A. Davidson. You may proceed.
Speaker #4: Thanks . Good morning . Kelly , you mentioned just wanted to kind of circle back . I think you said the expectation is that you would expect further margin pressure , but yet growth in NII dollars .
Kelli Holz: Correct, with the current strategy to replace single-family runoff with mortgage-backed securities.
Speaker #4: Is that at least in calendar one? Q.
Jeff Rulis: And I guess kind of syncing that, and I know that's different time frames, but Brent sort of mentioned the short-term goal to get to a 3% margin. Just, I guess, if you could kind of meet the two, I guess, the balance of calendar 2026, is this sort of a near-term little headwind and then hope to kind of lift from there? Any color on the trajectory?
Speaker #5: . Correct With the strategy to current replace single family runoff with mortgage backed securities ?
Speaker #4: And I guess kind of thinking that and I know that's different time frames , but Brent sort of mentioned the short term goal to get to a 3% margin just I guess if you could kind of meet the two , I guess the balance of of calendar 26 is this sort of a near little headwind .
Operator: Just, I guess, if you could kind of meet the two, I guess, the balance of calendar 2026, is this sort of a near-term little headwind and then hope to kind of lift from there? Any color on the trajectory? Yeah. So again, want to be very careful not to provide guidance going forward. But clearly, this quarter was impacted by the increase in non-accruals. Likewise, as this was impacted negatively, a quarter from now or two quarters from now, it could go the other way, which would be meaningful for us. Not only the catch-up of the previous accrued interest that wasn't counted, but then the ongoing accrual could be very positive for us, as well as the continued shift in terms of our balance sheet, as you saw, to lower cost deposits. So that's where we see the optimism to get to 3% margin over the short term.
Brent Beardall: Yeah. So again, want to be very careful not to provide guidance going forward. But clearly, this quarter was impacted by the increase in non-accruals. Likewise, as this was impacted negatively, a quarter from now or two quarters from now, it could go the other way, which would be meaningful for us. Not only the catch-up of the previous accrued interest that wasn't counted, but then the ongoing accrual could be very positive for us, as well as the continued shift in terms of our balance sheet, as you saw, to lower cost deposits. So that's where we see the optimism to get to 3% margin over the short term.
Speaker #4: And then, and then hope to kind of lift from there. Any color on the trajectory?
Speaker #2: Yeah. So, I again want to be very careful not to provide guidance going forward. But clearly, this quarter was impacted by the increase in non-accruals.
Speaker #2: Likewise, as this was impacted negatively a quarter from now or two quarters from now, it could go the other way, which would be meaningful for us.
Speaker #2: Not only to catch up with the previous accrued interest . It wasn't counted , but then the ongoing accrual could be very positive for us as well as the continued shift in terms of our balance sheet , as you saw , to lower cost deposits .
Operator: Okay. Thanks. And then just on the loan portfolio, is the inactive runoff this quarter, is that a pretty fair number to use in terms of maybe $200 to 250 million a quarter in terms of that shrinkage offset by, Brent, I think you said active, hope to get to 8% to 10% growth? Yeah. Yes. Very much so. And I would just say the inactive could spike up for us if we have a reduction in long-term rates, right? So there's no refi boom going on whatsoever. And if we get to a point that we have long-term mortgage rates go down, you could see that number spike up significantly. And we also have a meaningful amount of discount remaining on the Luther book that would accrete into income if and when that happens. Okay. Thanks.
Jeff Rulis: Okay. Thanks. And then just on the loan portfolio, is the inactive runoff this quarter, is that a pretty fair number to use in terms of maybe $200 to 250 million a quarter in terms of that shrinkage offset by, Brent, I think you said active, hope to get to 8% to 10% growth?
Speaker #2: So that's where we see the optimism to get to a 3% margin over the short term.
Speaker #4: Okay . Thanks . And then the just on the on the loan portfolio is the inactive runoff . This quarter . Is that pretty fair number to use in terms of maybe maybe 200 , 250 million a quarter in terms of that .
Speaker #4: Shrinkage offset by Brent, I think you said active hope to get to 8% to 10% growth.
Brent Beardall: Yeah. Yes. Very much so. And I would just say the inactive could spike up for us if we have a reduction in long-term rates, right? So there's no refi boom going on whatsoever. And if we get to a point that we have long-term mortgage rates go down, you could see that number spike up significantly. And we also have a meaningful amount of discount remaining on the Luther book that would accrete into income if and when that happens.
Speaker #2: Yeah . Yes , very much so . And I would just say the inactive could spike up for us if we have a reduction in long term rates .
Speaker #2: Right . So it's there's no refi boom going on whatsoever . And if we get to a point that we have long term mortgage rates go down , you could see that number spike up significantly .
Speaker #2: We also have a meaningful amount of discount remaining on the Luther book. That would accrete into income if and when that happens.
Jeff Rulis: Okay. Thanks. And then just the last one, Brent, on that buyback, your sub-tangible book certainly pencils, I guess, with shares maybe 10% plus above that average buyback price last quarter. How price-sensitive are you? And then maybe balance that with capital. What levels do you think you could be comfortable lowering to if you remain pretty active on buyback?
Operator: And then just the last one, Brent, on that buyback, your sub-tangible book certainly pencils, I guess, with shares maybe 10% plus above that average buyback price last quarter. How price-sensitive are you? And then maybe balance that with capital. What levels do you think you could be comfortable lowering to if you remain pretty active on buyback? Yeah. I don't think you'll see us meaningfully shift our capital ratios at this point, right? We're not looking to meaningfully cut into those. Obviously, we're producing a large amount of income, and absent growth, repurchase of shares is our best alternative. And I would just say, as you've seen us in the past, the closer we are to tangible book value, the more aggressive we'd be. I still believe at 1.1x tangible, that's the best investment we can make today. I appreciate it. Thank you. Thank you, Jeff. Thank you.
Speaker #4: Okay . Thanks . And then just the last one , Brent on the on that buyback , you know , some tangible book certainly pencils I guess with shares maybe 10% plus above that average buyback price last quarter .
Speaker #4: How price sensitive are you . And then maybe balance that with capital . How how what what levels do you could think you be comfortable lowering to if you were if you remain pretty active on on buyback ?
Brent Beardall: Yeah. I don't think you'll see us meaningfully shift our capital ratios at this point, right? We're not looking to meaningfully cut into those. Obviously, we're producing a large amount of income, and absent growth, repurchase of shares is our best alternative. And I would just say, as you've seen us in the past, the closer we are to tangible book value, the more aggressive we'd be. I still believe at 1.1x tangible, that's the best investment we can make today.
Speaker #2: You Yeah . know , I don't think you'll see us meaningfully shift our capital ratios at this point . Right . We're not looking to , meaningfully cut into those .
Speaker #2: Obviously , we're producing a large amount of income and absent growth , you know , repurchase shares is is our best alternative . And I would just say , as you've seen us in the past , the closer we are to tangible book value , the more aggressive we'd be .
Jeff Rulis: I appreciate it. Thank you.
Brent Beardall: Thank you, Jeff.
Speaker #2: I still believe at 1.1 times tangible, it's the best investment we can make today.
Operator: Thank you. Our next question comes from Andrew Terrell with Stephens. You may proceed.
Operator: Our next question comes from Andrew Terrell with Stephens. You may proceed. Hey, good morning. Good morning, Andrew. Morning. If I could just start and just to clarify on the margin, I totally get the kind of mechanics and why there might be some pressure moving into investments. But when you're referencing the near-term kind of expectations, I would assume the margin resets higher in calendar Q1 just based off of your lapping the nine basis point headwind of interest reversal this past quarter. So I guess, is the margin expected to decline from the reported amount or from the spot rate that you gave? I think it was 277 at 31 December. I think we're referring to the spot rate, not the reported amount. Got it. Okay.
Speaker #4: I it thank you .
Speaker #2: Thank you Jeff .
Speaker #3: Thank you. Our next question comes from Andrew Turel with Stephens. You may proceed.
Andrew Terrell: Hey, good morning.
Brent Beardall: Good morning, Andrew.
Andrew Terrell: Morning. If I could just start and just to clarify on the margin, I totally get the kind of mechanics and why there might be some pressure moving into investments. But when you're referencing the near-term kind of expectations, I would assume the margin resets higher in calendar Q1 just based off of your lapping the nine basis point headwind of interest reversal this past quarter. So I guess, is the margin expected to decline from the reported amount or from the spot rate that you gave? I think it was 277 at 31 December.
Speaker #6: Hey . Good morning . Morning . If I could just start and just to clarify on the margin , I totally get the kind of mechanics and why be some there might pressure moving into investments .
Speaker #6: But when you're referencing , you know , the near-term kind of expectations , you know , I would I would assume the margin resets higher in calendar one .
Speaker #6: Q just based off of the , you know , your your lapping the the nine basis point headwind of of interest reversal this this past quarter .
Speaker #6: So I guess, is it the margin expected to decline from the reported amount or from the spot rate that you gave?
Brent Beardall: I think we're referring to the spot rate, not the reported amount.
Speaker #6: I think it was 277 at 12:31.
Andrew Terrell: Got it. Okay. If I just think about mix of the balance sheet, securities, roughly around that 18% of assets today, is there a target mix of the balance sheet, or specifically, is there a level where you wouldn't want to build the bond book anymore?
Speaker #2: I think we're referring to the spot rate, not the reported amount.
Operator: If I just think about mix of the balance sheet, securities, roughly around that 18% of assets today, is there a target mix of the balance sheet, or specifically, is there a level where you wouldn't want to build the bond book anymore? Yeah. If you compare us to our peers, I think we're still relatively light in terms of our bond book compared to others. And as we've talked about, we kind of think of our single-family mortgages as a bond book. They're just not securitized. So I'm not looking to put $8 billion additionally into bonds as we get out of that, but there's certainly room for us to grow the bond portfolio. I don't think we've announced anything. I'd say over the longer term, 25% to 30% wouldn't be out of the question.
Speaker #6: Got it . Okay . And if I just think about mix of the balance sheet , you know , securities roughly around that , you know , 18% of assets today , is there a target mix of the balance sheet or specifically is there a level where you know you wouldn't want to build the bond book anymore ?
Brent Beardall: Yeah. If you compare us to our peers, I think we're still relatively light in terms of our bond book compared to others. And as we've talked about, we kind of think of our single-family mortgages as a bond book. They're just not securitized. So I'm not looking to put $8 billion additionally into bonds as we get out of that, but there's certainly room for us to grow the bond portfolio. I don't think we've announced anything. I'd say over the longer term, 25% to 30% wouldn't be out of the question. But over the short term, you'll see us kind of ratchet that up over time, depending on the opportunities, what the investments are available to us in the market.
Speaker #2: Yeah . If compare us to our peers , I think we're still relatively light in terms of our our bond . But compared to others , and as we've talked about , we kind of think of our single family mortgages as as a bond book .
Speaker #2: They're just not securitized. So I'm not looking to put $8 billion additionally into bonds as we get out of that.
Speaker #2: But there's certainly room for us to grow the bond portfolio. I don't think we've announced anything. I'd say over the longer term, 25% to 30% wouldn't be out of the question.
Operator: But over the short term, you'll see us kind of ratchet that up over time, depending on the opportunities, what the investments are available to us in the market. Yep. Understood. Okay. And just last one for me. I mean, the transactional deposit growth was really strong this quarter, both in IB deposits, and interest checking as well. I was hoping you could maybe just give a little more color on what you saw that kind of drove that throughout the quarter. Is it just reflective of early momentum from the changes you've made earlier in 2025? Anything unusual in the pace of deposit growth this quarter? Just wanted to maybe unpack the core deposit growth this quarter. Yeah. So I would attribute it to two things. The momentum that we're getting in terms of our business shift or mix shift towards more C&I and treasury management.
Speaker #2: But over the short term , you'll see us kind of ratchet that up over time . It depending . Excuse me , depending on the opportunities , what the investments are available to us in the market .
Andrew Terrell: Yep. Understood. Okay. And just last one for me. I mean, the transactional deposit growth was really strong this quarter, both in IB deposits, and interest checking as well. I was hoping you could maybe just give a little more color on what you saw that kind of drove that throughout the quarter. Is it just reflective of early momentum from the changes you've made earlier in 2025? Anything unusual in the pace of deposit growth this quarter? Just wanted to maybe unpack the core deposit growth this quarter.
Speaker #6: Yep . Understood . Okay . And just last one for me . I mean , the the transactional deposit growth was was really strong this quarter .
Speaker #6: Both , you know , in IB deposits and interest checking as well . I was hoping you could maybe just give a little more color on on what you saw .
Speaker #6: That kind of drove that throughout the quarter. Is it just reflective of, you know, early momentum from the changes you've made earlier in 2025?
Speaker #6: Anything unusual in the pace of deposit growth this quarter? Just wanted to maybe unpack the core deposit growth this quarter.
Brent Beardall: Yeah. So I would attribute it to two things. The momentum that we're getting in terms of our business shift or mix shift towards more C&I and treasury management. But also, we need to acknowledge that it's the cyclicality, the seasonality towards calendar year-end. Those deposits tend to build up a little bit, and the credit cards come due and bills come due. And typically, in the first calendar quarter, you see that shift out. So we will see with the results of this quarter. But to your point, a significant runoff in terms of CDs, and that was really offset by increasing our transaction accounts that we're very pleased. So time will tell, but we're optimistic.
Speaker #2: Yeah. So I would attribute it to two things: that momentum that we're getting in terms of our business shift, or mix shift, towards more C&I and Treasury management.
Operator: But also, we need to acknowledge that it's the cyclicality, the seasonality towards calendar year-end. Those deposits tend to build up a little bit, and the credit cards come due and bills come due. And typically, in the first calendar quarter, you see that shift out. So we will see with the results of this quarter. But to your point, a significant runoff in terms of CDs, and that was really offset by increasing our transaction accounts that we're very pleased. So time will tell, but we're optimistic. Great. Thanks for taking the questions. Thanks, Andrew. Thank you. And as a reminder, to ask a question, please press star 11 on your telephone. Our next question comes from Kelly Motta with KBW. You may proceed. Hey, good morning. Thanks for the question. I did want to ask a follow-up, maybe, Kelly, on the MBS purchases.
Speaker #2: But also we need to acknowledge that it's the cyclicality , the seasonality towards , you know , calendar year end . Those deposits tend to build up a little bit .
Speaker #2: The credit cards come due and bills come due, and typically in the first calendar quarter, you see that shift out.
Speaker #2: So we will see with the results of this quarter . But it to your point , a significant run off in terms of CDs and that that was , you know , really offset by increasing our transaction counts that we're very pleased .
Andrew Terrell: Great. Thanks for taking the questions.
Brent Beardall: Thanks, Andrew.
Speaker #2: So time will tell, but we're optimistic.
Operator: Thank you. And as a reminder, to ask a question, please press star 11 on your telephone. Our next question comes from Kelly Motta with KBW. You may proceed.
Speaker #6: Great. Taking the time, thanks for the questions.
Speaker #4: Thanks .
Speaker #2: Andrew .
Speaker #3: Thank you. And as a reminder, to ask a question, please press star one one on your telephone. Our next question comes from Kelly Motta with KBW.
Kelly Motta: Hey, good morning. Thanks for the question. I did want to ask a follow-up, maybe, Kelly, on the MBS purchases. It was my understanding last quarter that the inactive runoff would be in part to fuel those purchases. It looks like you did a bit more and took out some borrowings, which again drove NII growth, but at the expense of some margin. As you look ahead, is that still a fair way to think about the growth in the securities portfolio? And how should we be thinking about that use of borrowings and potentially using those with that trade ahead? Thank you.
Speaker #3: You may proceed .
Operator: It was my understanding last quarter that the inactive runoff would be in part to fuel those purchases. It looks like you did a bit more and took out some borrowings, which again drove NII growth, but at the expense of some margin. As you look ahead, is that still a fair way to think about the growth in the securities portfolio? And how should we be thinking about that use of borrowings and potentially using those with that trade ahead? Thank you. Certainly. We did accelerate some of our mortgage-backed securities purchases in excess of, as you mentioned, of the runoff in the single-family intentionally this quarter to get a head start on it. But absent any meaningful loan growth, we would use potentially borrowings and deposit growth to continue to grow the balance sheet for investments if they make sense for us. Got it. That's helpful.
Speaker #7: Hey good Thanks for the question . I just want to ask a follow up . Maybe Kelly on the MBS purchases . It was my understanding last quarter that the the inactive run off would be in part to fuel those purchases .
Speaker #7: And it looks like you did a bit more and took out some borrowings, which again drove NII growth, but at the expense of some margin.
Speaker #7: As you look ahead , is that still a fair way to think about the growth in the securities portfolio ? And how should we be thinking about that that , use of borrowings and potentially using those with that , that trade ahead ?
Kelli Holz: Certainly. We did accelerate some of our mortgage-backed securities purchases in excess of, as you mentioned, of the runoff in the single-family intentionally this quarter to get a head start on it. But absent any meaningful loan growth, we would use potentially borrowings and deposit growth to continue to grow the balance sheet for investments if they make sense for us.
Speaker #7: Thank you .
Speaker #5: Certainly we did accelerate some of our mortgage backed securities purchases in excess of , as you mentioned , of the run off in the single family intentionally this quarter to get a head start on it .
Speaker #5: But absent any meaningful loan growth, we would potentially use borrowings and deposit growth to continue to grow the balance sheet for investments.
Kelly Motta: Got it. That's helpful. And then I did want to get a point of clarification, Brent, if I may, on your expectations for growth in the active portfolio. I think you said 8% to 12% over two years versus I think we were thinking that amount in 2026. Is that the right way to think about it? So maybe a slower run-up to that 8% to 12% as that pipeline pulls through. Just trying to kind of square that commentary of whether 8% to 12% over fiscal year 2026 is still in the realm of possibility.
Operator: And then I did want to get a point of clarification, Brent, if I may, on your expectations for growth in the active portfolio. I think you said 8% to 12% over two years versus I think we were thinking that amount in 2026. Is that the right way to think about it? So maybe a slower run-up to that 8% to 12% as that pipeline pulls through. Just trying to kind of square that commentary of whether 8% to 12% over fiscal year 2026 is still in the realm of possibility. Yeah. I'd say in fiscal year 2026, we're probably 6% to 10%, and then we're thinking in fiscal 2027 on the higher end of that range as we really turn things back on, open them up. And the most optimistic sign on that is what we're seeing in the pipeline.
Speaker #5: If they make sense for us.
Speaker #7: Got it . That's helpful . And then I did want to get a point of clarification , Brent , if I may , your on expectations for growth in the active portfolio , I think you said 8 to 12% over two years versus I think we were thinking that amount in 2026 .
Speaker #7: Is that is that the right way to think about it ? So maybe a slower , slower run up to that , that 8 to 12% as that pipeline pulls through ?
Speaker #7: Just just trying to kind of square that commentary of whether , you know , 8 to 12% over fiscal year 2026 is , you know , still in the realm of possibility .
Brent Beardall: Yeah. I'd say in fiscal year 2026, we're probably 6% to 10%, and then we're thinking in fiscal 2027 on the higher end of that range as we really turn things back on, open them up. And the most optimistic sign on that is what we're seeing in the pipeline. So this next quarter should be a good quarter for us from a loan production standpoint. Now we have to prove it.
Speaker #2: Yeah , I'd .
Speaker #8: Say in fiscal year we're 2026 , probably , you know , 6 to 10% . And then we're .
Speaker #2: Thinking in fiscal 2027 on the higher end of that range, as we really turn things back on, open them up.
Operator: So this next quarter should be a good quarter for us from a loan production standpoint. Now we have to prove it. Got it. That's helpful. And you noted your CRA, your "needs to improve" rating. You've taken it to the highest level with the expectation that these are very difficult to overturn. Is there anything that getting that lifted would unlock in terms of your ability to look ahead? It seems like you're working SBA trying to get these active portfolios going, but just wondering if there's kind of any additional opportunity that could be unlocked when you think through that CRA needs to improve. Yeah. Really, the most of it is around branching and how easy or difficult it is to do branching activities.
Speaker #2: And the most optimistic sign on that is what we're seeing in the pipeline . So spring should this next quarter should be a good quarter for us from a loan production standpoint .
Kelly Motta: Got it. That's helpful. And you noted your CRA, your "needs to improve" rating. You've taken it to the highest level with the expectation that these are very difficult to overturn. Is there anything that getting that lifted would unlock in terms of your ability to look ahead? It seems like you're working SBA trying to get these active portfolios going, but just wondering if there's kind of any additional opportunity that could be unlocked when you think through that CRA needs to improve.
Speaker #2: Now we have to prove it.
Speaker #7: Got it. That's helpful. And you noted your CRA, your needs to improve, you've taken it to the highest level with the expectation that these are very difficult to overturn.
Speaker #7: Is there anything that , you know , getting that lifted would unlock in terms of your ability to look ahead ? It seems like , you know , you're you're working SBA , trying to get these active portfolios going , but just wondering if there's kind of any additional opportunity that could be unlocked when when you think through that CRA needs to improve .
Kelly Motta: Yeah. Really, the most of it is around branching and how easy or difficult it is to do branching activities.
Operator: With over 200 branches, you might imagine we have branches all the time that we need to move as leases expire, so forth. Right now, there are all kinds of hurdles we have to jump through if we can get those moved at all. It's also with regards to mergers and acquisitions, and we're not actively looking to do deals at all. We need to show that the Luther Burbank was worthwhile, but we like having the options, and having a need to improve doesn't preclude you from doing a merger and acquisition. It just makes it much more difficult. If we got out of that, that would be welcome news from our perspective. Got it. Got it. That's helpful. Then just maybe one more high-level question for me on that 3% margin trajectory.
Brent Beardall: With over 200 branches, you might imagine we have branches all the time that we need to move as leases expire, so forth. Right now, there are all kinds of hurdles we have to jump through if we can get those moved at all. It's also with regards to mergers and acquisitions, and we're not actively looking to do deals at all. We need to show that the Luther Burbank was worthwhile, but we like having the options, and having a need to improve doesn't preclude you from doing a merger and acquisition. It just makes it much more difficult. If we got out of that, that would be welcome news from our perspective.
Speaker #2: Yeah , really the most of it is around branching . And how easy or difficult it is to do branching activities . And with over 200 branches , you might imagine we have branches all the time that we need to move as leases expire , so forth .
Speaker #2: And right now, there are all kinds of hurdles we have to jump through if we can—if we can get those moved at all.
Speaker #2: But it's also with regards to mergers and acquisitions, and we're not actively looking to do deals at all. We need to show that the Luther Burbank was worthwhile, but we like having the options, and having a 'needs to improve' doesn't preclude you from doing a merger.
Kelly Motta: Got it. Got it. That's helpful. Then just maybe one more high-level question for me on that 3% margin trajectory. In your expectation or wish to move towards that over the intermediate term, are you baking in any additional rate assumptions? Said another way, you've added some borrowings and have some higher cost money that needs to work down. Would rates be some sort of an element needed to get you there? And maybe if you could just kind of help us out with how you guys are thinking about the kind of recipe in order to get to that 3%.
Speaker #2: And acquisition . It just makes it much more difficult . So if we got out of that , that would be . Welcome news from our perspective .
Speaker #7: Got it , got it . That's helpful . And then just maybe one more high level question for me on that 3% margin trajectory in your , you know , expectation or wish to to move towards that over the intermediate term , are you any additional baking in rate assumptions .
Operator: In your expectation or wish to move towards that over the intermediate term, are you baking in any additional rate assumptions? Said another way, you've added some borrowings and have some higher cost money that needs to work down. Would rates be some sort of an element needed to get you there? And maybe if you could just kind of help us out with how you guys are thinking about the kind of recipe in order to get to that 3%. Yeah. We're really kind of looking at the combination of the forward curve versus what our gut tells us and kind of baking in one to two cuts this year into that assumption. Got it. Thank you so much. That's helpful. Thank you, Kelly. Appreciate it. Thank you. I would now like to turn the call back over to Brad Goode for any closing remarks. Josh, thanks so much.
Speaker #7: Set another way . You know , you you've added some some borrowings and have some higher cost money that needs to work down .
Speaker #7: Would rates be some sort of an element needed to get you there? And maybe if you could just kind of help us out with how you guys are thinking about the kind of recipe in order to get to that 3%.
Brent Beardall: Yeah. We're really kind of looking at the combination of the forward curve versus what our gut tells us and kind of baking in one to two cuts this year into that assumption.
Speaker #9: Yeah .
Speaker #2: We're really kind of looking at a combination of the forward curve versus what our gut tells us. And we're kind of baking in one to two cuts this year into that assumption.
Kelly Motta: Got it. Thank you so much. That's helpful.
Brent Beardall: Thank you, Kelly. Appreciate it.
Operator: Thank you. I would now like to turn the call back over to Brad Goode for any closing remarks.
Speaker #7: Got it. Thank you so much. That's helpful.
Brad Goode: Josh, thanks so much. Hey, thanks everybody for joining this morning's call, our second call with you all. Please contact me if you have any further questions, and we hope you have a great day and a great weekend. Go Hawks.
Speaker #2: Thank you, Kelli. I appreciate it.
Operator: Hey, thanks everybody for joining this morning's call, our second call with you all. Please contact me if you have any further questions, and we hope you have a great day and a great weekend. Go Hawks. Thank you, everyone. Go Hawks. See you. Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.
Speaker #3: Thank you. I would now like to turn the call back over to Brad Goode for any closing remarks.
Speaker #10: Josh , thanks so much . Hey , thanks everybody for joining this morning's call . Our second call with you all . Please contact me if you have any further questions , and we hope you have a great day and a great weekend .
Brent Beardall: Thank you, everyone. Go Hawks. See you.
Brad Goode: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.
Speaker #10: And go , Seahawks .
Speaker #2: Thank you, everyone. Go Seahawks. See you.
