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    WTBA
    Earnings call· Jun 2026(Q2 FY26)

    WEST BANCORPORATION INC WTBA

    Jul 23, 2026 Source

    Executive summary

    West Bancorporation Q2 FY26 — Strong Profitability and Pristine Credit Quality

    West Bancorporation delivered a robust second quarter, marked by significant net income growth and a record dividend increase, underpinned by exceptional credit quality. While facing intense deposit competition and a cautious commercial real estate development market, the bank is strategically managing its loan portfolio and expects continued margin improvement from asset repricing. Management is focused on relationship-based banking and core deposit growth to navigate the competitive landscape.

    Highlights

    6

    • Net income increased 37% year-over-year.

    • Quarterly dividend increased to $0.26 per common share, reaching its highest level ever.

    • Year-to-date return on average equity (ROAE) was over 16%.

    • Credit quality remains pristine with 0 loans past due 30 days, no OREO, and no nonaccruals.

    • Net interest income increased $4.1 million or 19% compared to Q2 FY25.

    • Net interest margin (NIM) increased 10 basis points quarter-over-quarter and 42 basis points year-over-year.

    Concerns

    4

    • Deposit competition is fierce across all account types.

    • Commercial real estate development loans declined by over $200 million in H1 FY26 due to developer caution and nonrecourse financing.

    • Spot loan balances were down despite average loans increasing slightly.

    • More loan payoffs are expected to continue into Q3 FY26.

    Guidance & targets

    4
    CategoryTargetConfidence
    Loan Repricing
    $600 million
    medium materiality
    High
    Loan Payoffs
    slow after the third quarter
    medium materiality
    Medium
    Net Interest Margin (NIM)
    continue to grind higher
    high materiality
    Medium
    Noninterest Expense
    no significant fluctuations
    medium materiality
    High

    Operational metrics

    10
    Net income growth
    37%YoY
    Q2 FY26

    Net income increased 37% year-over-year.

    Return on average equity
    16%
    YTD FY26

    Year-to-date return on average equity was a little over 16%.

    Deposit cost decline
    2 basis pointsQoQ
    Q2 FY26

    The cost of deposits declined 2 basis points compared to the previous quarter.

    Deposit cost decline
    46 basis pointsYoY
    Q2 FY26

    The cost of deposits declined 46 basis points compared to the second quarter of last year.

    Noninterest expense growth
    2%YoY
    Q2 FY26

    Noninterest expenses increased 2% from the second quarter of last year.

    Noninterest expense growth
    2.6%YoY
    YTD FY26

    Year-to-date, noninterest expenses were up 2.6% compared to the first half of 2025.

    Watch list decline
    50%QoQ
    Q2 FY26

    Watch list has declined 50% from March 31, 2026.

    Watch list balance
    $0.7 million
    Q2 FY26

    Watch list is currently $0.7 million percent of our loan balance.

    Commercial real estate development loans decline
    $200 million
    H1 FY26

    Over $200 million in developed properties that have either been sold to other investors or have gone to nonrecourse financing in the first 6 months of this year.

    Loan repricing volume
    $600 million
    next 12 months

    Approximately $600 million in loans will reprice over the next 12 months at a weighted average rate in the low to mid 4s.

    Industry KPIs

    11
    MetricValueDetails
    Loans—
    Deposits—
    Rotce ROE16%%
    Capital returns$0.26USD per common share
    Allowance reserves—
    Net interest income$4.1 millionUSD
    Net interest margin—%
    Net charge offs npls0
    Total operating expenses—
    Provision for credit losses0USD
    Efficiency ratio operating leverage—

    Risks & headwinds

    4
    Fierce deposit competitionCurrent

    fiercely competitive

    Mitigation: Leveraging seasoned bankers, relationship-based model, proactive prospecting, focus on business banking and high-value retail deposits.

    Decline in commercial real estate development loansH1 FY26, expected to continue into Q3 FY26

    declined by over $200 million in H1 FY26

    Mitigation: Diversified portfolio, strong underwriting, focus on C&I and large business prospects, strong pipeline to offset.

    Continued loan payoffsExpected to continue into Q3 FY26

    more of those coming

    Mitigation: Strong pipeline of new business to offset.

    Potential for lower short-term interest ratesFuture

    some lower short-term interest rates

    Mitigation: Positioned for balance regardless of rate movement to maintain margins.

    What to watch in Q3 FY26

    4

    Period-end loan growth

    Q3 FY26 / Q4 FY26
    CurrentSpot balances down, average loans up
    TargetPeriod-end loans start to grow

    Why it matters

    Indicates a reversal of the trend of loan payoffs and successful new business generation, impacting asset base.

    I'm not exactly sure if it will come a lot this quarter or the next quarter, but we do see some very good things on the horizon.

    Q&A highlights

    6

    How has the competitive landscape for loans and deposits evolved?

    Deposit competition is fierce, especially in Minnesota, with pressure on all account types. On the lending side, the bank is doing well, but commercial real estate development loans have declined due to developer caution and nonrecourse financing. The bank has a strong C&I pipeline.

    “Well in Minnesota, I can say that the deposit competition is fierce. -- mean that -- from all banks, we see pressure on transactional accounts, money market accounts and CDs.”

    asked by Brendan Nosal · answered by Bradley Peters

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Financial Performance

    West Bancorporation reported a 37% year-over-year increase in net income, reaching $11.1 million for Q2 FY26, with year-to-date return on average equity exceeding 16%. The company also announced a record quarterly dividend increase to $0.26 per share, payable on August 19 to shareholders of record as of August 5, reflecting strong financial health and capital returns.

    02

    Pristine Credit Quality

    Credit quality remains exceptionally strong as of June 30, 2026, with zero loans past due over 30 days, no OREO, and no nonaccruals. The watch list declined 50% from March 31, 2026, to $0.7 million, indicating proactive management of potential credit issues. Management emphasized strong underwriting and diversified portfolios as key factors in maintaining asset quality.

    03

    Net Interest Margin Expansion

    Net interest income grew $4.1 million or 19% year-over-year, driven by a 10 basis point sequential increase in net interest margin and a 42 basis point increase compared to Q2 FY25. This improvement was supported by a decline in deposit costs, which decreased 2 basis points quarter-over-quarter and 46 basis points year-over-year, despite intense competition.

    04

    Loan Portfolio Dynamics and Payoffs

    Average loan outstandings increased slightly compared to Q1 FY26, but spot balances were down. This was primarily due to over $200 million in commercial real estate development loans being sold or refinanced into nonrecourse financing in the first half of the year. Management expects more payoffs in Q3 FY26 but anticipates the pace to slow thereafter, with a strong pipeline of new business.

    05

    Competitive Environment and Deposit Strategy

    The bank faces fierce competition for deposits, particularly in the Minnesota market, with pressure on transactional, money market, and CD accounts. Despite this, West Bancorporation leverages its seasoned bankers and relationship-based business banking model to attract new depositors and capture personal accounts of business owners and executives, driving core deposit growth.

    06

    Expense Management and Future Investments

    Noninterest expenses remained well controlled, increasing only 2% year-over-year and 2.6% year-to-date compared to the first half of 2025, with no unusual items📎 recorded. Management does not foresee any significant expense impacts from large projects for the remainder of 2026, though some investments are being contemplated for 2027 and 2028.

    AI-generated summary of the company’s earnings call. Not investment advice.