West Bancorporation: Riding Asset Repricing to Record Results Amid a Fierce Deposit War
Pristine credit and margin expansion deliver a 37% net income jump, but secondary-market loan payoffs keep a lid on growth.
WTBA · Earnings Call · 2026-07-23
Strong Quarter, Bullish Signals
West Bancorporation (WTBA) kicked off its Q2 2026 report with a clear message: momentum is accelerating. “We had another very strong quarter. Year-over-year net income increased 37% and we announced an increased dividend, which is now at the highest level ever in our history.” — David Nelson, Chief Executive Officer · 2026-07-23 The stock has responded—up 13.5% over the past 90 days and sitting just 4.9% below its August 13 peak. The numbers back up the optimism. Net income reached $11.1 million, up 35% year over year, and return on average equity came in just above 16% for the first half of 2026.
All financial metrics are strong. 2026 year-to-date return on average equity is a little over 16% and a strong balance sheet with higher levels of liquidity and capital and credit quality remains pristine with 0 loans past due 30 days.
The company’s fundamental health is evident across the board. Net interest income rose 17% to $24 million, while the efficiency ratio held at a lean 27%, down from 43% a decade ago. Efficiency ratio improvements have been a consistent driver of profitability.
Margin Expansion: The Repricing Engine
The heart of the quarter’s strength is net interest margin expansion, which improved 42 basis points year over year. The cost of deposits declined 2 basis points sequentially and 46 basis points from a year ago—but management is quick to note that funding-cost relief is running into a wall of competition. “Well in Minnesota, I can say that the deposit competition is fierce” — Bradley Peters, Bank Executive · 2026-07-23 – that from Brad Peters, who leads the Minnesota group. The bank continues to win on the asset side, where a substantial backlog of loans is poised to reprice higher. CFO Jane Funk provided a concrete figure: “But over the next 12 months, we've got probably about $600 million that we'll reprice over the next 12 months. And those are in the low to mid 4s for a weighted average rate.” — Jane Funk, Chief Financial Officer · 2026-07-23
This is a direct continuation of a theme that has been building since last year. In the April 2026 call, Funk already highlighted “we've got a fair amount of opportunity with asset repricing” — Jane Funk, Chief Financial Officer · 2026-04-23, and the pipeline has only grown since. The secondary market refinancing wave, which has been a persistent source of loan payoffs, is part of the same story: as fixed-rate assets mature and get replaced at today’s higher yields, the margin benefits, even if period-end loan growth remains choppy.
Credit Pristine but Loan Growth Stalled
Credit quality remains a differentiator for West Banc. The watch list is down 50% from March 31, 2026, and total past dues stand at zero. “Our watch list has declined 50% from March 31, 26 and is currently $0.7 million percent of our loan balance.” — Harlee Olafson, Chief Risk Officer · 2026-07-23 The watch list reduction reflects both the resolution of problem credits and the sale of well-performing properties. Still, loan inflows are not keeping pace with payoffs. CEO Harlee Olafson explained that more than $200 million in developed properties were sold or refinanced in the first half of the year, and that momentum is expected to continue through the third quarter before fading. Todd Mather, Central Iowa Market President, added: “We still have more of those coming. I expect most of that will probably happen in the third quarter depending upon what happens to treasury rates.” — Todd Mather, Central Iowa Market President · 2026-07-23
The loan growth engine is thus idling even as the bank’s real estate portfolio remains seasoned and high-quality. Management’s pipeline, however, is building. The bank’s Minnesota expansion continues to exceed expectations—Brad Peters noted in the October 2025 call, “I think I can say with confidence we've exceeded expectations to this point. Each of the markets have contributed to the bottom line” — Bradley Peters, Minnesota Group President · 2025-10-23—and the disruption from M&A among larger banks is opening doors to both core deposit relationships and business banking market share.
Outlook: Competition and Opportunities
Looking ahead, the margin should continue to grind higher, albeit at a slower pace, as long as the Fed stays on hold. Deposit pricing pressure, however, remains the biggest headwind. The bank is managing expenses tightly; CFO Jane Funk indicated no major investment projects are planned for 2026, and the tax rate should normalize after a volatile quarter.
What really stands out in this report is the combination of pristine credit quality and disciplined margin management, set against a loan book that is being actively recycled through the secondary market. The bank is not firing on all cylinders, but it is collecting a record dividend and building capital while waiting for the next leg of organic growth. With the stock near its all-time high, the market is betting that the repricing tailwind and the eventual stabilization of loan payoffs will deliver another year of double-digit earnings growth.