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Operator: Good afternoon, everyone. Thank you for joining us on today's webinar. Before we begin, I'd like to announce that we'll be referring to today's earnings release, which was sent to the newswires earlier this afternoon. I'd also like to remind everyone that this conference call could contain forward-looking statements about Destiny Media Technologies within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based upon current beliefs and expectations of management and are subject to risks and uncertainties, which could cause actual results to differ materially from those forward-looking statements. Such risks are fully discussed in the company's filings with SEC and SEDAR, and the company does not assume any obligation to update information contained in this call. During the webinar, we will discuss certain non-GAAP financial measures. The non-GAAP financial measures are presented in the supplemental disclosures and should not be considered in isolation of or as a substitute of or superior to the financial information prepared in accordance with GAAP and should be read in conjunction with the company's financial statements filed with the SEC and SEDAR. The non-GAAP financial measures used in the company's presentation may differ from similarly titled measures presented by other companies. A reconciliation of the non-GAAP financial measures to the most comparable GAAP financial measures can be found in the earnings press release. Also, I would like to mention that following presentation, there will be a questions-and-answers session. [Operator Instructions] With that, I'd like to turn the call over to your host, Fred Vandenberg, Chief Executive Officer. Frederick Vandenberg: Thanks, Michelle, and thanks to everyone for joining the call. I wanted to talk about a few main things before I hand it over to Assel and Jen for a little bit more detail on the finances and our marketing and sales strategies. The first is the Universal agreement. That shortly after we had the call last quarter or at the year-end, we came to terms with Universal on a longer-term agreement. That has been in the works for a reasonably long time. The core challenge was really aligning the priorities of multiple stakeholders, finance, which is under pressure to reduce costs and the operation promotion teams who are really focused on maintaining the effectiveness and the reach of the platform as well as senior decision-makers above them. Navigating these competing mandates really required a lot of stick handling, but the result is an agreement that we think works across all interests. It provides Play MPE a long-term anchor client that underpins the platform itself, provides revenue stability, opportunities for growth within Universal and future growth initiatives that really strengthens the company's platform and growth trajectory. This really -- this agreement really supports both of us for longer term and expanding and working through as a partnership going forward. And we're really excited about it. I'll go through some of the terms. First, the fees. Ultimately, the structure of the agreement has changed such that the fees now cover use of the existing platform, but excludes any development that they require. And then what we will do is really provide a justification and ROI internally for them if there is any new development that they desire and then fees for that will be separately negotiated. The base fee is $1.6 million annually for the first year with inflation indexes for years 2 and 3. That base fee is 5% lower than the 2023 fees that we had. And this really is a recognition of a longer-term agreement, eliminating the short-term premiums that we had and the cost savings from a reduction in the development requirements for them. We expect that the 2026 revenue will be adversely impacted by about 6.5%. This is really -- this includes a development fee that we've already negotiated on top of the $1.6 million. And we're going through their wish list. So it's currently unknown if we will be able to add any new development fees for them. To make up this difference, we would need to increase independent label revenue by about 14%. And I'll talk about that shortly, what we're doing on the independent front. The -- I think it's worth going through a few more of the terms. As I alluded to above, it's a 3-year agreement. We've never had a 3-year agreement before. We've been in business with Universal for about 20 years now. So we -- it's a long-standing relationship. But this 3-year agreement is the longest agreement we've had, and it really provides a runway to work as a partner with them. The index we have for inflation is there's a 2% increase in 2027 and 2028 on top of that. Again, we've never had an inflation index. We've always -- when we've come to terms, we've always been looking back at a fee that has never indexed for inflation during the years. And so this represents a fairly significant shift in the mentality, recognizing that our costs do rise over time. It also excludes any labels for which UMG does not have a distribution agreement or is currently not owned by UMG. So in the event that they expand their distribution services or expand by acquiring new labels, we can negotiate new fees for that. And it's not articulated in the agreement, but we've had some really productive conversations. The main contact that we -- that I've been negotiating with has returned to distribution -- digital distribution and she's a really tough negotiator, obviously, but she's very pragmatic and she recognizes that where we save them money, where we -- whether it's efficiencies that we can work on or we displace competing platforms that will help us negotiate in the future. So it's an agreement that we're really excited about. Moving on to independent labels. We have been working on a number of things that have started to come together in timing. We mentioned last quarter about the modernization of the platform. That has really 2 main things that we moved Universal over to the online, the web platform and retired the old PC applications. But we also introduced Caster and Caster +. Now Caster + is what we used to brand as Caster, so it can be a little bit confusing there. But Caster is now a fully self-serve platform for labels to sign up and send out content themselves. We have noticed a significant increase in the conversion of leads, and I can talk about marketing in a second. But with that, we've noticed -- we've transitioned people during the quarter to allow them to have the choice between Caster and Caster +. We have noticed that there are -- it's a high degree of what I would say, a poor quality of distribution. So we have some work ahead of us in terms of training our customers on the platform and/or making it a little bit easier to use, so that we can fully scale so we can fully leverage that. But essentially, we're allowing our customers to -- we're making significant headway in allowing our customers to scale client-led distributions. Last year, we talked a lot about our marketing efforts. That was really focused in on a few different things, SEO improvements, so website improvements, so that we were -- we hit more leads, we generate more leads. We've tracked those leads to identify, which customers we really want to focus in on, which has really helped over the course of the last 12 months, allocate resources internally on things that we think are going to help us more. We've recently begun investing a little bit more in social media. We've had a 10% increase in followers. We've improved our digital advertising, and we've expanded our automated outreach to certain clients. And Jen will expand a little bit more on that. And then also, we -- the last thing we did here is increased pricing in certain areas. One area where we -- it's not really an increase in pricing. It's just that we eliminated volume discounts that we enacted last year that were designed to expand the volume of distributions or grow the average size of a distribution. That really didn't have an effect. We've noticed that customers that are trying to do global distributions through Play MPE aren't that price sensitive. It doesn't help to provide discounts. So we removed those. And we also increased our catalog pricing. The upshot of all these things is that we had almost a 24% increase in lead generation. And that -- those leads are really better qualified leads. The -- we've had a 7.3% increase in Caster customers, which is pushed by a 27% increase in new Caster customers. And during the quarter, that represented almost a 3% increase in independent label revenue. Some of those changes really took effect later in the quarter. So you'll see a bump in November revenue of about 15.5%. That really is starting to flow into Q2 as well. We've seen a very strong December result so far. And lastly, we saw MTR revenue go up by 30.5%. Now MTR is still quite low, and we're working on some things that we think will expand MTR's presence. We are going to be reporting -- MTR is tracking just so for anybody who doesn't know, MTR is tracking the actual airplay of a song that goes through Play MPE. We are incorporating the reporting of that into Caster, which I think just makes MTR more visible. And then shortly after that, we're going to make it, so you can buy MTR directly within Caster. It's really changing our focus on product development into to a narrow focus on things that are really going to directly impact Play MPE revenue. And with that -- sorry, cost reductions. Because of the things we've done over the last year, we've really been able to reduce our costs. During the quarter, we realized a total cost reduction of 1.3%. That includes all costs, cash, noncash and capitalized costs. So it doesn't translate neatly into the financial statements, but it essentially is all of our costs. Salary and wages, these are costs that we've realized during the quarter, so 8.2% reduction. Had we done -- undertaken all of these cost reductions at the beginning of the quarter, they would have translated into a 7.7% reduction in total spending with 14.8% on salaries and wages. With those efficiencies that we've gained and the modernization of the platform, we can further reduce our spending. We think it's about 16% that we can comfortably reduce if we want to maintain our revenue growth, but just reduce our investing in product development and taking advantage of some of these efficiencies. And with that, I will turn it over to Assel. Assel Mendesh: Thank you, Fred. I will now walk you through our financial performance for the quarter, and I'll start from revenue. Revenue for the quarter increased by 1.3%. And if foreign currency adjusted, it's actually 1.6%. The major labels are very materially decreased by $1,500 and independent labels increased by 2.5%. And that was a combination of several factors, as Fred mentioned, increase in the independent customers, it's 7.3% in the quarter. And again, most of the increase came in November, as Fred mentioned. Total releases, total purchases increased by 3.7%. Average spend declined by 2.4% per customer. However, this is mostly from our new customer acquired, where we see new customers spending less and while we see older customers spending more. So we believe that as these customers, new customers return once they see the success using our platform effectiveness and leveraging our automated marketing campaigns and sales outreach that we will have a chance to move those customers into a greater spend. And the last one was pricing changes. As Fred mentioned, we reduced volume discounts that we had enacted in the prior year to induce larger distributions. We found that these were not working as large international distributions are not really that price sensitive. And we also increased our price for the annual year-end catalog distribution. So that was for independent labels and the MTR is still less than 1%, very close to 1% of the total revenue, but it keeps growing. So the increase was around 30%. And the revenue continues to be mostly U.S. dollar-denominated, 94.5% this quarter. And next one, but let's move to the overall results. Thank you. As you can see from the table, the adjusted EBITDA for the quarter was $252,50, which is a slight decrease from paper of less than 35,000. However, this decline is mostly just a capitalizable activity during the quarter. So this quarter, we only capitalized a pretty small amount of less than $30,000. And turning to liquidity. The cash balance increased significantly, as you can see, by $244,50, 22% and it's mostly, as Fred mentioned, driven by the several cost reduction initiatives we had during the quarter, which translated into higher operating cash flow. And the last point, the company continues to operate with no debt and no material capital expenditure commitments. So with that, I'll pass to Jennifer to cover sales and marketing portion of today's call. Jennifer Rainnie: Thank you, Assel. I'm going to start off with our sales highlight for Q1. We had a focus on major account engagement and reporting for Q1. Our goal was to really engage with our major accounts, aiming for regular strategic review meetings for long-term growth. We were able to conduct in-person platform presentations with RCA, Epic and Virgin to reengage accounts and reinforce system value. We also felt like we have a lot to share with these accounts with so many enhancements that had been seen in fiscal 2025. The results from these meetings were 180% increase in RCA usage and Epic reactivating on the platform for the first time in 2 years. We also presented an updated enhanced reporting overview to UMG to both their hubs, their Europe hub and L.A. teams, providing all labels with a deeper and more actionable promotional data. Staff training and enablement, we developed and implemented a standardized training syllabus for new major account onboarding. And we delivered this training both virtually and in office on site with Warner promotional teams and other major independent labels. On the side of independent label growth, our India business revenue significantly increased in Q1, particularly a sharp 15.5% rise in November. And growth was driven by an improved pricing strategy that we had previously mentioned, also a targeted marketing campaign encouraging holiday releases, plus our sales team upselling compatible lists. This led to a strong Q2 interest, better lead generation and improved conversion rates overall in Q1. For sales tools and list add-ons, we've been continuing to develop sales tools to boost our platform usage. We launched a new list brochure detailing expanded contact database offering. And we've had strong adoption of list add-ons. So we've been focused on supporting the list team and offering to upgrade from domestic to international holiday packages during our holiday campaign as well as adding multi-supervisor lists. And all of these add-ons will significantly increase average order value per campaign. We're going to be continuing to do this going forward. Some of our marketing highlights. So our holiday campaign focus was really what we focused on in Q1. Marketing really centered on the annual holiday format campaign. We saw a significant increase in holiday releases, and we were provided with a healthy year-over-year revenue increase. I think a key success factor in this was an earlier marketing push. Internally, our e-mails launched on August 27, and then we followed up with October 6, October 20 and a November 17 push. These were a month ahead of our marketing last year for our holiday initiative. The promotion ran in Q1 and also into Q2. And our content also doubled during the holiday campaign with active users and visitor rates compared to last year. And just in general, our social media growth has been strategically focused on authentic content and partnerships, resulting in a 35% increase in organic Facebook views and a 10% year-over-year increase in followers. And then finally, I'll touch on our operations and list management highlights for Q1. Overall, we've seen an improved communication and strategic planning between list management and marketing. We really saw the impact of this with the boosted campaign results in Q1 and moving into Q2 with our holiday campaign. Also, the list team have been busy working on introducing a new satellite radio list in Q1. This is going to be offering channel and show-specific content across various genres. The satellite radio offers significantly higher royalties. So basically 10x more per spin than a terrestrial broadcast, creating a strong value proposition. We feel like these trackable lists offer a direct spend tied to measurable ROI, making them an ideal selling tool for independent artists and labels. And our new satellite radio lists are soft launching in Q2. We're expecting -- sorry, a high client interest in these new lists. And that ends my highlights for Q1. I will turn it back over to you, Michelle. Operator: Thank you, Jennifer. [Operator Instructions] Our first question today is from Olivier. After years of saying revenues with snowball and repeated software iterations, growth still hasn't materialized. No buyback to support the share price and ROIC is now negative. Any updates from the consultant engaged to unlock shareholder value? Frederick Vandenberg: The consultant engaged didn't provide anything regulatory, but the -- I mean, we do see a very promising increase in independent revenue in November, and that's continued into December. So I think with growth in independent revenue and cost reductions, we'll see profitable results going forward. As far as the buyback or returning capital to investors, we'll have to decide on what we do with that surplus going forward. Operator: Our next question is from Gerry asking for a breakdown of revenue percent by product segment in Q1. Frederick Vandenberg: We break down our segments into customer type and what we talk about publicly is really independent versus major labels, and then we break that into geography. In the United States -- United States or internationally, we break that down further into music format. And now with MTR, we have an additional product that we bring attention into. MTR, again, is a little bit less than 1% of revenue. So it's still pretty small. But it grew by 30%, and we are working on things going forward that we think will improve that revenue growth. One is making it a little bit easier to purchase by putting it really in front of our Play MPE customers in Caster and making it easy to buy as you buy a Caster promotion. But we're also doing an ad tracking test. I believe it's this month or at least this quarter. We are looking at more global tracking and also more volume tracking for MTR. For other groups worth talking about where there's been significant change, there was reasonable growth with U.S. independent in Q1, where it was a little over 4%. Canadian independent growth was in excess of 50%. That was offset by some reductions in major label use. What you've seen -- what we've seen is that periodically, labels -- major labels go through cost-cutting initiatives where they cut senior staff. And we think it's going on right now. It has gone on recently. And that's why you see Jen was talking about certain things about onboarding new people at major labels, training them, getting them engaged in the platform. That really is a function of the turnover we're seeing at the major labels. So we think that, that reduction is temporary. So those are the major changes in segments. Operator: I see here that Gerry has raised his hand. Gerry, you can go ahead and unmute your mic. Gerry Wimmer: Can you hear me? So a couple of questions here. You talked about OpEx savings of 7.7%. Those -- will those be fully reflected in your fiscal Q2? Frederick Vandenberg: They should be. Yes, that's right. I mean, barring any other changes, but yes, that's effectively what we're talking about. Gerry Wimmer: And you also mentioned that you believe there are additional cost savings to be had, taking the total cost savings up to 16%. Frederick Vandenberg: The 16% was on top of the 7%... Gerry Wimmer: It was on top of the 7%... Frederick Vandenberg: No, those changes have not been made, but those are -- that's what's available and what we're looking at, we're considering right now. Gerry Wimmer: And when do you anticipate -- if you decide those changes to take. When would they be reflected? Frederick Vandenberg: It's really what we're looking at internally. And I would expect that we will go one way or the other. And if they -- those -- that decision will be made very shortly, I believe. Gerry Wimmer: Okay. Can you talk about your capital allocation priorities for fiscal 2026? Does it include any acquisition plans? Frederick Vandenberg: Okay. That's a good question, Gerry. We are capable of generating, I think, significant cash. We have about $0.14 per share in cash right now. There are acquisition opportunities available to us, and we are looking at them. And I think they are becoming more and more attractive as time moves on. One in particular where we're showing a significant headway in Canada, and I think we can move forward there potentially. As far as the other capital expenditures, it's really always been software development. That's what we capitalize costs for. And with the modernization of the platform, we've significantly reduced those. That's what we've been talking about with the cost reductions. Gerry Wimmer: In your press release, you talked about momentum heading out of Q1. How should investors quantify that momentum to revenue growth? What should we be looking for? Or what should we be seeing? Or maybe clarify what that momentum -- how should we quantify the momentum? Frederick Vandenberg: I mean that's a good question. We talked about momentum in November, where we saw independent revenue growth by 15.5% that growth has -- we've seen pretty strong growth into December. In fact, it's wildly outstripped the 15%. Some of that is seasonal. So we don't expect this kind of growth. But it was really -- we had a really strong continuation after the quarter. We generate -- I would say, about 1/3 of our customers are -- in any particular time are new customers, but they generate about 7% of our revenue. The new customers are really ones that are smaller, our customer purchasing demand is highly variable. It's not -- you're not buying a software package or something that people use every month and use at the same level. We're looking at customers that are small independent label to Universal, which is the largest collection of record labels in the world. So our marketing approach really has moved customers into customer buckets, personas as we call them. And our approach is really to align our marketing efforts where we attract customers that we believe are going to be larger in spend. And then secondarily, so we're tracking bigger customers, and we're encouraging customers that we do attract to spend more. So there's things that we're working on where we leverage expanded analytics that we've worked on to market to these people what we've seen for example, we see that typically, if an artist sends out a song, they tend to get greater results the more they send out. So we leverage analytics like that to programmatically e-mail out or market to rather those kinds of customers to grow use. As far as projecting it. I mean, we've really had a really strong December. And I mean, I think our marketing approach is the right way to go. So we're just -- combined with the cost savings, I think in terms of our value, we're really looking at profitable runways forward where we can maintain our ability to grow sales while at the same time, generating a positive net margin. Gerry Wimmer: Final question, Fred. You mentioned the renewal of the Universal agreement. I think you mentioned that the annual fee or reoccurring fee over 3 years will be 6% lower on an annual basis. Is that correct? Frederick Vandenberg: That's how it will impact this year, Yes. We -- it's really a restructuring of the agreement so that we -- they're going to pay separately for development. If we can negotiate new development fees, that will eat into the impact, plus as we move forward, inflation will grow by 2% per year. Gerry Wimmer: Do you still anticipate for fiscal 2026 that as a result of the new agreement that you will be in a net revenue growth position? Frederick Vandenberg: That's a good question. If we continue on the results of November and December, we will easily grow revenue. We have to continue that strong performance over the last couple of months. Yes. But the cost reductions that we have or can consider will ensure that we will be -- will have a positive net margin. As far as where we end up revenue, I would really probably like to see a few more months where I can see how our revenue is growing. The revenue that we -- the reason -- sorry, I'm fumbling with this question, but the revenue growth that we've seen in independents is coming from a number of different sources. So we've got increased lead generation, increased lead conversion. That conversion rate is -- sorry, the conversion rate is increasing, but it's also the speed with which it's converting is improving. The reengaging older customers. The price changes that we had are not inconsequential. And so it's not just one thing that's impacting our independent revenue growth. It's a few different things. So I'm pretty optimistic about how it's going to play out. Whether that overshoots the cost reduction of UMG, it's hard to predict at this stage. I would like a little bit more run room before I predict it. Gerry Wimmer: Okay. And Fred, my last question, you talked about reengaging with some acquisition targets or target. How should investors look at the size of acquisitions you're capable or willing to make from an annual revenue contribution that these acquisitions could bring? Is it $1 million, $2 million, $4 million? Just try to quantify what type of acquisition would you be willing to digest and scale? Frederick Vandenberg: Willing to digest. Our ability to service the customers that would result from an acquisition is very -- is strong. It's easy to -- easy to incorporate that growth. So it's a very high-margin purchase of customers, essentially what it would be. It's whether or not we can purchase it at a price that is appropriate. We have -- I believe we are the largest -- we're obviously a small company, but I believe that we're the largest in the world at what we do. I believe we're the best in the world at what we do. And I think that Universal's contract renewal is a clear indication of that. Whether we can acquire customers at a price is really a negotiation by negotiation endeavor. We see some competitors with international presence. But generally, they are within a particular geography, and there's a number of them. And I think we can look at acquisitions. So the size of the acquisition varies tremendously, I believe. We're the largest in the world. So if you look at that, then anything that we acquire would be smaller, but there's a few of them out there that we could acquire. And it's just a matter of whether the price is right. And we do have enough cash, I think, to make some cash offers on those. So... Operator: Thank you, Gerry. Our next question was submitted by Andy. What is the company doing with the cash on hand it has? Is it invested? Will the company be issuing dividends? Frederick Vandenberg: Yes. Cash on hand is invested. It's a reasonably -- well, it's a very safe investment. So the returns are small. As far as -- I mean, we have a decision facing us right now, whether we focus in on maximizing cash to grow -- growing cash or we continue to invest in the platform to accelerate revenue growth. The -- if we decide to maximize cash flow, I mean, I think we can be profitable as it is. Then we have a choice of what to do with that cash, whether we use it to make acquisitions or not is one question. But then -- as far as growing investor value, we have to be -- I mean, we have to consider what's best -- in our best interest of our investors. We can issue dividends or initiate a buyback. The issuing a dividend is not a costly endeavor. I mean it's something -- it's a fairly simple process. But there's a few things that we need to be careful of, just the mechanics of moving profit around in the company, getting dividends from -- profit from a Canadian company through a U.S. parent. We have to be careful about how we do that. And also, there's a choice between providing our investors liquidity or the choice between how dividends are taxed in their hands versus gains, capital gains. And that all of that -- all of those decisions have to be made in the context of the stock price. If we're generating positive margins, positive net margins, even though we're a small company, the margins can be significant considering the stock price. We have, I think, roughly about $0.14 a share in cash, and we can generate a reasonable amount of per share earnings that we then will have to decide whether or not we do buybacks or dividends to investors. Operator: We have another question from Andy. Are you able to provide the revenue based on geographical region? How much is North America compared to non-North America? Frederick Vandenberg: That's right in the 10-Q, I believe. Assel. Is that fair? Assel Mendesh: Yes. Frederick Vandenberg: We've used -- Universal is allocated to one territory, and we've moved that from a euro-based contract to a U.S. dollar contract. There's a little bit less risk, I suppose, in terms of fluctuations. And our -- going forward, we're probably focused more on the U.S., but I'm not sure exactly what the breakdown is off the top, but I think it's right in the quarter. Assel, sorry, I probably interrupted you there. Assel Mendesh: Yes, it's Note #8 in the 10-Q. But again, UMG contract is in North America. Frederick Vandenberg: Yes, it's not as simple, I guess, to show UMG because UMG distributes with us around the world, Africa, Asia, Europe, everywhere, but Antarctica, I suppose. Operator: It looks like we have 1 more question here from Thomas, who's raised the hand to speak. Thomas, you can go ahead and unmute your mic. Unknown Analyst: I'm not sure if you can give more color on the litigation proceeds, if I can say it like that. I know it hasn't been too long since Q4, but did you guys have any updates or? Frederick Vandenberg: Well, there's no -- nothing to really update. We won the litigation, so we're getting an award of costs. That hasn't been established yet. I suppose that would be established soon. And there's a question of collectibility. We would think it's fairly significant, so we would probably pursue the collection of it. He has filed a notice of appeal that's an intention to appeal. It's not actually an appeal. And I don't think you'll actually follow through on it. I don't want to dare them to it by saying that. But I don't think that there will be an appeal. It's good money after bad for that, for sure. Unknown Analyst: Last call, you disclosed like the growth of MTR revenue. Was that on a year-over-year basis or on a quarterly basis? Was it like for Q4 or for the full year when you disclosed it? Not sure if I remember. Frederick Vandenberg: We disclosed -- sorry, what did we disclose? Unknown Analyst: MTR revenue during the Q4 call, like 2 months ago. Frederick Vandenberg: I don't think we actually disclosed the dollar amount. We just disclosed the percentages. Unknown Analyst: Yes, the percentage and the absolute growth. Was that for Q4 or for the whole year? I think it was for full. Frederick Vandenberg: That was for the full year. The 30% this quarter -- this quarter versus last year's quarter, yes. Unknown Analyst: Okay. And then on the Universal contract, so it's 1.6 plus how much for fees that have been already like agreed upon for this year. Frederick Vandenberg: 35,000 for this year. That's just with 1 product -- 1 project. Unknown Analyst: So I have a hard time figuring out how is it 6%? If -- so Universal was like, what, 2.1 million last 12 months. If we add up 4 quarters. It's about $500,000. Frederick Vandenberg: Yes, it's what will impact this year. So we've had some premiums for the first 4 months of the year. So it's after those premiums. So 6.5% for this year, it will be a reduction on an annual basis. I'd have to figure that out, but it's -- the premiums were -- the short-term premiums that we had were reasonably significant and those have been eliminated, so. Unknown Analyst: Okay. And why did we not know about this, about those premiums? I mean I asked you in April, I guess, about that contract and you told me it's on like on a rolling basis, you won't -- we won't fix anything that's broken and like there was no plans to fix it. We would like to change it. And like -- I mean, we're kind of blindsided by those -- by that new contract, I guess? Frederick Vandenberg: Well, I mean it's -- I have to sort of negotiate what is in the best interest of the company. And it's not -- we were -- we disclosed that we were charging them short-term premiums. We've disclosed that in the past. The growth was there. Universal has global mandate to reduce costs and negotiating those fees was a long process and it, I think, really reflects our ability to reduce our costs associated with that. So it's a net reduction in our revenue for sure, but we can also reduce our costs to support that contract. Unknown Analyst: Yes. I mean it's not really the result. It's more the way it's being communicated and all of that, like where was those, like I'm following the company pretty closely, okay? And like where was it disclosed that there's premiums in our contract with UMG like in an 8-K somewhere? Or I can't remember seeing one in. Frederick Vandenberg: It wouldn't be in these calls here. Unknown Analyst: It would be during the call that it says that our annual contract currently has premiums. Frederick Vandenberg: I would have to go back and see what -- but it is on a month-to-month basis, and we've discussed that before, for sure. Unknown Analyst: And like what's the difference between -- or like why are we happy about an inflation hike if there was already an annual price hike, if I refer to what you told me in April last year? Like what's the difference between last year having annual price hikes and inflation. Are they the same? Or will you still have different annual price hikes? Frederick Vandenberg: Look, the price hike for the month to month, we had a price hike that kicked in just last month. The long term -- I guess if you look at whenever we've had a longer-term deal, this is the first time that they've offered an inflation index for it. This was a month-to-month agreement, so they could cancel at any time. So this is the first time that they've actually committed to a locked-in price increase. Unknown Analyst: Okay. Yes. I mean, again, it's not -- I mean, the result is disappointing, but I understand why -- it's just -- I don't know how it's communicated, I guess, like, I don't know, I would have told that there's somehow negotiations to have a longer-term contract, no matter what the price it is, I guess, like you were not able to disclose it, but just like why not kind of tell us in advance that it's in the works? I guess it reduced the risk of being an investor, right, because it's not like they're going to just disappear the next month like it could have been. I don't know I just a bit disappointed with how it's being communicated. Same thing for cost reductions. Like why was it not communicated last quarter, like for Q1, I mean, Q1 was basically over. You could have told us that there would be cost reductions in Q1. And I mean this is kind of positive, right? It's just what can be done to better communicate to investors, positive things and negative things. They could be -- I don't know. I'm just like thinking of that. Frederick Vandenberg: Well, I mean, I'll take the criticism. I believe we did communicate that we would have cost reductions. We are considering more. So it's not written in stone yet. The -- I mean when we were talking, we didn't provide numbers, I know that. But we did communicate during the year-end call that we had reduced -- we had the capacity to reduce costs associated with product development, simply because of the retirement of the old PC application and some efficiencies that we've got. So now I've got harder numbers on it. Unknown Analyst: Yes. I mean don't always need to provide hard numbers. I guess it's just, I don't know, a good way of telegraphing what's coming up. Frederick Vandenberg: Yes. I mean, fair enough. The -- I mean the Universal agreement, they've been wanting to reduce their fees with us for some time. It's just a matter of -- I mean, there was silent on the agreement for the better part of, well, probably more than a year. And I think things have changed internally for them. So it didn't have much indication from them that they were still considering a longer-term agreement. And I think we -- when we started talking with them a few months ago, again, started talking with them, we're always talking to them. But when we started talking about this specific renewal, the longer-term renewal we got into certain things that I think ultimately really work for us. Obviously, we considered a bunch of different things, and we didn't know where it would end up. The fees, I would like them to be higher, obviously. But I think it's something we can work with. It provides -- it does provide us a long-term sort of anchor tenant and the costs associated with supporting that are lower. And we just can reflect that in our costs to support them. Their need to reduce cost, I think, is really a reflection of the finance mandate to become more profitable. They went public in September of 2021, and that their initiative to force that reduction maximize profit has been going on since then. And they're universal. I mean I think this is a good result for us. I think it's a great result for us. I wish it was higher fees. But ultimately, we're a small company that can be -- provide a positive net margin in this context. Unknown Analyst: Yes, yes. And I mean, yes, it is disappointing. But like I understand the context and you can take my suggestion or not of just like communicating, I guess, more in advance just so it attracts investors of knowing what's to come so they can better, I guess, model what could come up and see that it's a good opportunity, but, yes. Frederick Vandenberg: Understood. Unknown Analyst: And last point, I mean, it's kind of -- yes, I'm not even sure if I may have touched it, but like there's someone that reported selling 1% of the business on the same date that the contract was signed, and it doesn't look good. But I know like that person is considered an insider, even though he's not on the Board, it does look weird. But... Frederick Vandenberg: That was a tax loss selling, and I was aware of that. I was a bit surprised at the timing of it, but that was just a pure coincidence. Unknown Analyst: I know. I know it just -- it does look bad. It's for someone just looking at it like highest volume day in like 5 years, and then it's someone that needs to declare this transaction. But anyway, yes, I figure it looks... Frederick Vandenberg: I mean I can't control that, obviously. I know it was a tax loss selling endeavor. I'm not even sure if I should say that actually, but it wasn't a reflection of the contract or the company. Unknown Analyst: Yes. I was just needed to voice it. All right. Thank you. Frederick Vandenberg: Thanks Thomas. Operator: Thank you, Thomas. That concludes all the questions for today. Thank you very much, everyone. Frederick Vandenberg: Yes. Thanks very much, everyone. And thanks to Michelle, who is joining us from Turks and [ Caicos ] on her vacation. Thanks. I really appreciate you helping us out. Thanks, everyone. Operator: Thank you. Goodbye.
Operator: Good day, and thank you for standing by. Welcome to WaFd, Inc.'s Fiscal First Quarter 2026 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Brad Goode, Chief Marketing and Investor Relations Manager. Brad Goode: 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. 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 September 30, 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. Brent Beardall: Thank you, Mr. Goode, and good morning, everyone, and happy new year. This morning, we will cover 4 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 nonaccrual 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 6. This table details our largest categories of assets and liabilities, what percentage of each is fixed versus variable, then the cumulative amount of repricing and quarterly increments over the next 2 years. Please note that this table takes into account both the 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. 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 December 31, 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 '25 quarter. 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 noninterest income as well as an overall decrease in total noninterest 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. 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 noninterest-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%. Noninterest-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. As you may recall, our loan-to-deposit ratio just 2 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 2 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%. Comparing the spot rate at September 30, which was 2.82%, to our December quarter margin realized at 2.7%, 9 basis points of the difference relates to nonaccrual interest, one-time reversals when loans go nonaccrual and also interest income not being recognized going forward from the nonaccrual date. The 3 remaining basis points relates 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 balance is 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 increased net interest income. Total noninterest income increased $1.9 million compared to the prior quarter at $20.3 million, contributing to the noninterest 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 noninterest 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 rate purchases 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. 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. 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 of 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. Nonperforming 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 nonaccrual loans increasing by $62.7 million or 49% since September 30, 2025. This was offset by a decrease in REO of $2.3 million during the same time frame. 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. 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 nonperforming assets were largely impacted by 2 commercial relationships over 90 days past due. Outstanding balances to these relationships amount to $58 million collectively. Although appropriately placed on nonaccrual per policy, there was no charge-off taken upon revaluation, and we are actively collaborating with both borrowers to resolve the issues. If nonperforming 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 and negative migration of criticized and nonperforming loans, and $3.7 million of net charge-offs taken during the quarter. Net loan charge-offs for the quarter represented a nominal 7 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. For reference, over the last 10 years, net charge-offs have averaged a recovery of 2 basis points per year. And over the last 3 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 December 31, 2025, compared to 1% in December of 2024. For the commercial loan portfolio, the allowance represents 1.33% of net loans compared to 1.26% as of December of 2024. Credit metrics at December quarter end, while elevated from prior quarters, remain at healthy levels overall and have been impacted by 2 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. 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, disciplined effort and comes with specific goals. The most important goal is increasing our noninterest-bearing deposits to total deposits from 11% last year, up to 20% by 2030, 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. 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 3 segments -- 3 teams to kick off Build 2030. During that time, we've become a preferred SBA lender and 98% of our branch managers who formally specialized in mortgage lending have now passed our small business credit certification process. Our 3 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 9 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. 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 2 years. Everything else being equal, return on intangible 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. We believe that we have the products and teams in place to grow our active loan portfolios by 8% to 12% over the next 1 to 2 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 remained challenging. 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 while deposits remain fairly flat. Looking at the number of accounts. In the last year, noninterest-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. 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 August 31 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 2 years and then go from there. Early indications are very positive. Assets under management amounted to just over $400 million as of December 31, 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 noninterest 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. We repurchased 2 million shares at a price of $29.75 or 99% of tangible book value. Over the last 7 quarters, your company has repurchased 5.8 million shares at a weighted price of $29.45. 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. Based on current trading, I think our stock today is trading at about 1.1x 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. 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 the Needs to Improve rating. With that, it looks like we have 4 questions in the queue. So operator, I'll let you open it up to questions. Operator: [Operator Instructions] And our first question comes from Matthew Clark with Piper Sandler. Matthew Clark: 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 3 months? Brent Beardall: Yes. Simple, we will replace that with current borrowers 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 reversal, I just want to double check the dollar amount. I know you gave the basis points on a spot basis, but I just wanted to just verify the dollar amount of interest income reversal this quarter. Brent Beardall: Kelli, do you want to give that? Kelli Holz: Certainly, for the quarter, nonaccrual interest amounted to just over $5 million. Matthew Clark: Okay. Yes, in the ballpark. Okay. And then the 2 new C&I nonaccruals, can you just give us some color on the types of businesses those relate to and the plan for resolution? Brent Beardall: Yes. 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? Ryan Mauer: Yes, I would just say, very generically, one is in manufacturing business being impacted by markets tariff situations, cost of labor, those sorts of things. The other business is a real estate-related entity -- commercial real estate. 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? I'm just trying to get a sense for how we should think about overall operating expense growth this year. Brent Beardall: Yes. Obviously, we'll have our annual merit increases, which will go into effect this March quarter. So as you've seen in the past, and 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. Operator: Our next question comes from Jeff Rulis with D.A. Davidson. Jeff Rulis: Kelli, 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 1Q? Kelli Holz: Correct. With the current strategy to replace single-family runoff with mortgage-backed securities. Jeff Rulis: And I guess kind of sinking 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 2, I guess, the balance of calendar '26, is this sort of a near-term little headwind and then hope to kind of lift from there? Any color on the trajectory? Brent Beardall: Yes. So again, I want to be very careful not to provide guidance going forward. But clearly, this quarter was impacted by the increase in nonaccruals likewise, as this was impacted negatively a quarter from now or 2 quarters from now, it can go the other way, it would be meaningful for us, not only the catch-up of the previous accrued interest that wasn't counted, but then the ongoing accrual to 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. Jeff Rulis: Okay. And then the -- just on the loan portfolio, is the inactive runoff this quarter, is that a pretty fair number to use in terms of maybe $200 million, $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? Brent Beardall: Yes, yes, very much so. 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 after spike up significantly. And we also have a meaningful amount of discount remaining on the Luther book that was accretive to income if and when that happens. Jeff Rulis: Okay. 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? How -- what levels do you think you could be comfortable lowering to if you were -- if you remain pretty active on buyback? Brent Beardall: 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. 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 that 1.1x tangible, it's the best investment we can make today. Operator: Our next question comes from Andrew Terrell with Stephens. Andrew Terrell: If I could just start and just 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 reset is higher in calendar 1Q just based off of the -- you're lapping the 9 basis point headwind of interest reversal this past quarter. So I guess, is it -- is the margin expected to decline from the reported amount or from the spot rate that you gave, I think it was 2.77% at 12/31. Brent Beardall: I think we're referring to the spot rate, not the reported amount. Andrew Terrell: Got it. Okay. And 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? Brent Beardall: Yes. 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 that -- 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. Andrew Terrell: Yes. Understood. Okay. And just last one for me. I mean the transactional deposit growth was really strong this quarter, both NIB 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. Brent Beardall: Yes. I would attribute it to 2 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 those 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 counts that we're very pleased. So time will tell, but we're optimistic. Operator: [Operator Instructions] Our next question comes from Kelly Motta with KBW. Kelly Motta: I did want to ask a follow-up maybe, Kelli, on the MBS purchases. Is 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? Kelli Holz: Certainly, we did accelerate some of the 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. 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 2 years versus -- I think we're seeing 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 of commentary whether 8% to 12% over fiscal year 2026 is still in the realm of possibility? Brent Beardall: Yes. 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 spring should -- this next quarter should be a good quarter for us from a loan production standpoint. Now we have to prove it. Kelly Motta: Got it. That's helpful. And you noted your CRA, you Needs to Improve, your fight, 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? Brent Beardall: Yes. 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 and so forth. And right now, there are all kinds of hurdles we have to jump through if we can get those moved at all. 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 and acquisition, it just makes it much more difficult. So if we got out of that, that would be welcome news from our perspective. Kelly Motta: 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 [ 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 funding that needs to work down, would rates be some sort of an element to 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: Yes. We're really kind of looking at the combination of the forward curve versus what our gut told us, and we're kind of baking in 1 to 2 cuts this year into that assumption. Operator: Thank you. I would now like to turn the call back over to Brad Goode for any closing remarks. 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, and go Seahawks. Brent Beardall: Thank you, everyone. Go Seahawks. See you. Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.