Nathan James Race

Nathan James Race with Piper Sandler inquired about several key financial aspects, including the dynamics of loan growth in Q4 2025, particularly elevated payoffs and the loan pipeline outlook, alongside opportunities from M&A activity. He also asked for an update on fixed-rate loans repricing in 2026 and their expected yield pickup. Additionally, Race questioned the significant core deposit growth, potential seasonality, and the outlook for mid-single-digit loan and deposit growth. He also explored the company's strategy for further securities portfolio repositionings and sought a starting point for the net interest margin in Q1 2026, considering recent actions and deposit cost reductions.

Answer

Bank President Brad Winterbottom detailed Q4 loan payoffs, including a $50 million medical office building sale, with similar activity anticipated in Q1 2026. Minnesota Group President Brad Peters highlighted ongoing M&A-driven opportunities from the Bremer merger and Alerus transaction. CFO Jane Funk provided specifics on fixed-rate loans repricing in 2026 (under $400 million, 1.5%-2% yield pickup) and discussed deposit growth uncertainty due to public funds volatility. Funk also stated that additional securities repositionings are regularly evaluated based on liquidity and deployment opportunities, with no set plans for 2026. For the net interest margin, Funk estimated it at around 2.5% for early 2026, expecting further improvement without rate environment changes.

Nathan James Race from Piper Sandler inquired about West Bancorporation's loan growth pipeline, particularly in Minnesota, and the strategy for funding mid-single-digit growth through deposit gathering and investment portfolio cash flows. He also asked about future net interest margin tailwinds from fixed-rate loan repricing, deposit beta assumptions for anticipated Fed rate cuts, the expected go-forward effective tax rate, and the company's capital management and deployment priorities.

Answer

Brad Peters, Minnesota Group President, indicated that the loan pipeline in Minnesota is good but more selective, expecting to maintain a mid-single-digit growth pace. CFO Jane Funk stated the objective is to fund growth primarily through deposit gathering and investment portfolio cash flows, with potential short-term wholesale funding. She noted significant repricing opportunities in the fixed-rate loan portfolio (average rate 4.86%) but cautioned that future deposit betas might be less aggressive due to competitive pressures. Funk clarified that the go-forward tax rate is expected to return to 22-23%, and capital deployment priorities focus on organic growth and good loan opportunities.