West Bancorporation (NASDAQ:WTBA) reported stronger second-quarter 2026 earnings, higher net interest income and continued solid credit quality, while executives said loan growth remains affected by commercial real estate payoffs and a competitive deposit environment.
On the company’s earnings call, CEO and President Dave Nelson said West Bancorporation had “another very strong quarter,” citing a 37% year-over-year increase in net income on a year-to-date basis and a return on average equity of a little over 16% for the first half of 2026. Nelson also noted that the board approved an increase in the company’s quarterly dividend to $0.26 per common share, payable Aug. 19 to shareholders of record as of Aug. 5.
Net Income and Margin Improve
Jane Funk, executive vice president, treasurer and chief financial officer, said net income totaled $11.1 million in the second quarter, up from $8 million in the second quarter of 2025. She said that represented a 39% increase for the quarter. For the first six months of 2026, net income was 37% higher than the same period in 2025.
Funk attributed the improvement in part to stronger net interest income, which increased $4.1 million, or 19%, from the second quarter of last year. She said the company’s net interest margin rose 10 basis points from the prior quarter and 42 basis points from the year-ago quarter.
Deposit costs declined 2 basis points from the previous quarter and 46 basis points from the second quarter of 2025, Funk said. However, during the question-and-answer portion of the call, she said the company does not see “much relief on the funding side” because of ongoing deposit pricing competition.
Asked by Piper Sandler analyst Nathan Race whether the margin could continue to move higher, Funk said that was a fair assessment, though the pace may not match the second quarter. She said West Bancorporation has about $600 million in loans repricing over the next 12 months, with the repricing weighted more toward the first half of 2027. Those loans currently carry weighted average rates in the low- to mid-4% range.
Credit Quality Remains Strong
Harlee Olafson, executive vice president and chief risk officer, said credit quality remained very strong as of June 30. He said the company had no loans more than 30 days past due, no other real estate owned and no nonaccrual loans.
Olafson said the watch list declined 50% from March 31 and stood at 0.7% of the loan balance. He said West Bancorporation’s bankers have been proactive in recognizing possible credit issues and either working with customers to improve credit quality, encouraging refinancing elsewhere or pursuing asset or business sales when appropriate.
“Our commercial real estate portfolio is seasoned, strong, and continues to perform as expected,” Olafson said. He added that the portfolio is diversified by size and location and supported by underwriting standards and customers with cash flow and liquidity.
In response to a question from Hovde Group analyst Brendan Nosal about criticized asset migration, Olafson said the company resolved a fairly large credit that came off the watch list. He said two credits experienced deterioration and moved to substandard, but both were well secured. Olafson said the borrowers were dealing with cash flow difficulties, but the company was not concerned about losses on those credits.
Loan Growth Pressured by Payoffs
Todd Mather, Central Iowa market president, said average loan outstandings increased slightly compared with the first quarter, even as the company experienced several larger payoffs from asset sales and refinancing into the secondary market. He said West Bancorporation did not lose customers, and most of the assets that paid off had been priced below the current rate environment.
Olafson said that in the first six months of 2026, more than $200 million in developed properties were either sold to other investors or moved into non-recourse financing. He said the company is booking new credit, but production has been offset by those payoffs.
“We’re pedaling pretty hard on the production side,” Olafson said, adding that the loan pipeline should help the trend move in the other direction, though he did not specify whether the improvement would occur in the current quarter or the following quarter.
Mather said additional payoffs are likely in the third quarter, depending in part on Treasury rates, but he expects that activity to slow after the quarter. He also said the company has “a lot of good things in the pipeline” to help offset those payoffs.
Deposit Competition Remains Intense
Executives described deposit gathering as a continuing focus. Mather said West Bancorporation has been successful in attracting new depositors and that bankers continue to prospect for new opportunities. He said the new business pipeline improved during the quarter as a result of a disciplined and consistent approach.
Brad Peters, director and Minnesota group president, said deposit competition in Minnesota is “fierce,” with pressure on transactional accounts, money market accounts and certificates of deposit. He said the company’s advantage lies in seasoned bankers and relationship-building skills.
Peters also discussed West Bancorporation’s Minnesota expansion, which began in Rochester in 2016 and later extended to St. Cloud, Mankato and Owatonna in 2019. He said those locations are in strong regional centers with diverse economies. Peters said West Bancorporation continues to introduce West Bank to those communities and has benefited from national banks reducing local presence and from disruption tied to merger-and-acquisition activity.
He said the company expects continued core deposit growth and is positioned to expand business banking market share as the economy improves.
Expenses Expected to Stay Stable
Funk said non-interest expenses remained controlled, rising 2% from the second quarter of 2025 and 2.6% for the first half of 2026 compared with the same period last year. She said there were no unusual items in non-interest income or non-interest expenses during the quarter.
Asked about the expense outlook, Funk said she does not expect any significant expense impact for the rest of 2026. She said the company is evaluating some items that could affect 2027 and 2028, but no large projects are expected to materially affect non-interest expense this year.
During the call, executives were also asked about potential Federal Reserve policy changes. Nelson said he anticipates lower short-term interest rates, which he said could act as a catalyst for some expansion and loan demand. Olafson said the company has worked to position itself so that it can maintain margins whether rates rise or fall.
About West Bancorporation (NASDAQ:WTBA)
West Bancorporation, Inc is the bank holding company for West Town Bank and Trust, a full-service community bank headquartered in Chicago, Illinois. Through its subsidiary, the company offers a comprehensive suite of commercial and consumer banking products, including deposit accounts, residential and commercial mortgages, business loans and treasury management services. West Bancorporation focuses on delivering personalized financial solutions to small- and medium-sized businesses, real estate developers and individual customers within its urban market.
Since launching operations in 2006, West Town Bank and Trust has steadily expanded its presence across the Chicago metropolitan area.
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