Financial Data and Key Metrics Changes - 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, compared to $0.54 per share for the first quarter of fiscal 2025 and $0.72 per share for the September 2025 quarter, reflecting a $0.07 increase in earnings per share [7] - Total non-interest income increased by $1.9 million compared to the prior quarter, reaching $20.3 million, driven by a $3.2 million gain on the sale of a branch property [11] - The net interest margin was 2.7% in the December quarter, slightly down from 2.71% in the September quarter, with a yield on interest-earning assets at 5.05% and the cost of interest-bearing liabilities at 2.76% [10] Business Line Data and Key Metrics Changes - Loan originations for active loan types were $1.1 billion, while repayments and payoffs were $1 billion, indicating a positive trend in loan production [8] - Loans receivable decreased by $240 million during the quarter, primarily due to a decrease in inactive loan types [7] - Total investments and mortgage-backed securities increased by $728 million during the quarter, funded primarily by an increase in borrowings of $671 million [8] Market Data and Key Metrics Changes - Total deposits decreased by $21 million during the quarter, with non-interest-bearing deposits increasing by $125 million or 4.9% and interest-bearing deposits increasing by $434 million or 4.5% [9] - The loan-to-deposit ratio ended the quarter at 92.7%, down from over 110% two years ago [9] Company Strategy and Development Direction - The strategic plan, BUILD 2030, aims to increase non-interest-bearing deposits from 11% last year to 20% by 2030, currently sitting at 12.6% [20] - The company is focusing on serving small businesses to achieve a lower cost of funds, with a goal of growing active loan portfolios by 8%-12% over the next one to two years [21][24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future prospects, noting a 10% linked quarter EPS growth and a 40% year-over-year growth [20] - The current economic environment, characterized by elevated interest rates and uncertainty, is impacting credit quality, but management believes the interest rate environment may ease in the near term [18][19] Other Important Information - The company repurchased 1.95 million shares of common stock at a weighted average price of $29.75, impacting earnings per share by $0.02 for the quarter [12] - The allowance for credit losses provides coverage of 1.05% of gross loans, compared to 1% in December 2024 [18] Q&A Session Summary Question: Margin outlook and plans for $800 million of borrowings - Management plans to replace the $800 million of borrowings with current borrowings and expects rates to decrease if the Fed cuts rates [29] Question: Interest income reversals dollar amount - Non-accrual interest amounted to just over $5 million for the quarter [31] Question: Types of businesses related to new C&I non-accruals - One business is in manufacturing affected by market conditions, and the other is a real estate-related entity [33] Question: Expense growth and SBA platform build-out - Management indicated no significant plans for large team increases but will continue strategic investments in technology [35] Question: Further margin pressure and growth in NII dollars - Management expects further margin pressure but growth in net interest income dollars due to the current strategy [40] Question: Inactive runoff and active loan growth - Inactive runoff could be around $200 million-$250 million per quarter, with hopes for 8%-10% growth in active loans [42] Question: Buyback price sensitivity - Management indicated they would be more aggressive with buybacks as they approach tangible book value [43] Question: Expectations for growth in the active portfolio - Growth in the active portfolio is expected to be 6%-10% for fiscal year 2026, with higher growth anticipated in fiscal 2027 [61]