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    correspondence.htm

June 7, 2010

VIA EDGAR SUBMISSION

Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549

Attention: Michael Clampitt, Senior Counsel

Re:          West Bancorporation, Inc.

Form 10-K for fiscal year ended December 31, 2009

File Number 000-49677

Dear Mr. Clampitt:

We are writing in response to the request contained in the Staff’s comment letter dated May 21, 2010, (the “Comment Letter”) with respect to the Form 10-K of West Bancorporation, Inc. (the “Company”), as filed with the SEC on March 12, 2010.

For the convenience of the Staff, we have set forth the comments contained in the Comment Letter along with the responses of the Company.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Loan Portfolio, page 18

1. We note that your real estate - construction, land and land development loan portfolio totaled $148.5M as of December 31, 2009 which represented about 15% of your total loan portfolio.  We also note that it appears that this portfolio has a relatively high amount of credit risk.  Please tell us and revise future filings to disclose the following information related to loan portfolio with interest reserves, as applicable:

·

Disclose the amount of such loans and the accompanying interest reserves as of each period-end;

·

Disclose how you monitor such projects throughout their lives to make sure the properties are moving along as planned such that it is appropriate to continue to capitalize the interest on the loan;.

·

Disclose whether you have ever extended, renewed or restructured terms of the related loans. and the reasons for the changes;

·

Describe your underwriting process for loans with interest reserves, and any specific differences in how your underwrite loans with interest reserves, and loans that do not have interest reserves; and

·

Disclose whether any of your loans with interest reserves are currently on nonaccrual status.

Response:

We do not utilize interest reserves as part of our construction lending activities.  We allow borrowers to fund interest payments directly via the line of credit related to the project, but do not set aside specific cash deposits (bank or borrower funded) to make interest payments during the construction phase.  Our lines of credit would be subject to the loan to value restrictions outlined in Part 365 of the FDIC Rules and Regulations.  The guidelines are provided below.  We monitor construction projects routinely to ensure that funds advanced have been invested in the project being financed, and that our loan to value is being maintained throughout the construction of the project.

1

Part 365 LTV Guidelines

Loan Category

Loan-to-value limit (percent)

Raw land

65

Land development

75

Construction:

Commercial, multifamily (1), and other nonresidential

80

1 to 4 family residential

85

Improved property

85

Owner-occupied 1 to 4 family and home equity

(1)

(1)  A loan-to-value limit has not been established for permanent mortgage or home equity loans on owner-occupied, 1 to 4 family residential property. However, for any such loan with a loan-to-value ratio that equals or exceeds 90 percent at origination, an institution should require appropriate credit enhancement in the form of either mortgage insurance or readily marketable collateral.

Risk Elements, page 21

2. We note your disclosure on page 21 that outstanding loans of $46.727M were placed on nonaccrual during 2009.  We also note your disclosure of the ending balance of nonaccrual loans and the amount of charge-offs recorded during the year related to nonaccrual loans.  Please tell us and revise future Form 10-K filings to provide a tabular roll forward of your nonperforming loans and assets, which include nonaccrual loans, similar to that provided on page 30 of your Form 10-Q for the period ended March 31,2010.

Response:

The following table sets forth the activity within each category of nonperforming assets for the year ended December 31, 2009.

(dollars in thousands)

Nonaccrual

Loans Past Due 90 Days and Still Accruing Interest

Troubled

Debt Restructured

Total Nonperforming Loans

Other Real Estate Owned (OREO)

Nonaccrual lnvestment Securities

Total Nonperforming Assets

Balance at beginning of period

$
21,367

$
92

$
7,376

$
28,835

$
4,352

$
2,575

$
35,762

Change in fair market value

-

-

-

-

-

(831
)

(831
)

Additions

39,768

1,150

13,952

54,870

144

183

55,197

Transfers:

Past due to nonaccrual

92

(92
)

-

-

-

-

-

Restructured to nonaccrual

7,466

-

(7,466
)

-

-

-

-

Nonaccrual to OREO

(26,032
)

-

-

(26,032
)

26,032

-

-

Upgrade in classification

(253
)

-

(211
)

(464
)

-

-

(464
)

Sales

-

-

-

-

(5,095
)

(250
)

(5,345
)

Charge-offs

(16,791
)

-

-

(16,791
)

-

-

(16,791
)

Subsequent writedowns

-

-

-

-

(83
)

-

(83
)

Other than temporary impairment

-

-

-

-

-

(346
)

(346
)

Payments

(13,267
)

-

(834
)

(14,101
)

-

(49
)

(14,150
)

Balance at end of period

$
12,350

$
1,150

$
12,817

$
26,317

$
25,350

$
1,282

$
52,949

Future Form 10-K filings will disclose this same level of detail for all categories of nonperforming assets.

2

3. As a related matter, please revise future filings to present your nonperforming loans included within your nonperforming assets table disaggregated by each loan type.  Please also provide us this information as of March 31, 2010 and December 31, 2009.

Response:

The nonperforming assets table for the requested periods has been updated to include the breakdown by loan category as requested:

(dollars in thousands)

March 31, 2010

December 31, 2009

Change

Nonaccrual loans:

Commercial

$
7,125

$
9,846

$
(2,721
)

Real estate:

Construction, land and land development

296

1,399

(1,103
)

1-4 family residential

505

863

(358
)

Commercial

2,306

214

2,092

Consumer and other loans

1,218

28

1,190

Total nonaccrual loans

11,450

12,350

(900
)

Loans past due 90 days and still accruing interest:

Commercial

-

-

-

Real estate:

Construction, land and land development

-

-

-

1-4 family residential

169

-

169

Commercial

-

-

-

Consumer and other loans

4

1,150

(1,146
)

Total past due 90 days and still accruing interest

173

1,150

(977
)

Troubled debt restructured loans:

Commercial

6,271

6,168

103

Real estate:

Construction, land and land development

81

84

(3
)

1-4 family residential

667

523

144

Commercial

9,375

6,024

3,351

Consumer and other loans

160

18

142

Total troubled debt restructured loans

16,554

12,817

3,737

Total nonperforming loans

28,177

26,317

1,860

Other real estate owned

26,974

25,350

1,624

Nonaccrual investment securities

1,310

1,282

28

Total nonperforming assets

$
56,461

$
52,949

$
3,512

Nonperforming loans to total loans

2.84
%

2.58
%

0.26
%

Nonperforming assets to total assets

3.34
%

3.36
%

-0.02
%

Future filings will contain this same level of detail for nonperforming assets.

3

Item 8. Financial Statements and Supplementary Data

Note 1. Organization and Nature of Business and Summary of Significant Accounting Policies, Loans, page 43

4. We note your disclosure that a loan is classified as restructured when the interest rate is materially reduced or the term is extended beyond the original maturity date because of the inability of the borrower to service the loan at market terms.  We also note that restructured loans have increased from $12.8M as of December 31, 2009 to $16.6M as of March 31, 2010.  We also note disclosure in Exhibit 99.2 of your Form 8-K filed on April 30, 2010 that you are currently earning interest on these restructured loans and that 90% are current less than 30 days past due.  Please address the following:

·

Clearly label these restructurings as troubled-debt restructurings (TDRs) pursuant to ASC 310-40;

Response:

We will label these restructurings as troubled-debt restructurings in all future reports.

·

Tell us whether at the time the loan is restructured you continue to accrue interest.  If so, tell us all of the factors you consider in making this determination so as to be reasonably assured of repayment and performance according to the modified terms;

Response:

To this point in time we have continued to accrue interest on loans that are restructured.  The terms of the restructuring are based on a cash flow analysis of the customer.  The terms of the restructuring are set so that the probability of the borrower meeting those terms is high.  Subsequent to restructuring, we monitor troubled-debt restructurings in the same manner as performing loans.  Should payments be late or missed, or other factors come to our attention that may indicate the borrower will not be able to perform on the restructured contractual terms; the loan would be placed on nonaccrual status in accordance with our policy.

·

For your restructurings that accrue interest at the time the loan is restructured, please tell us in detail and disclose how you determine that the loan has been restructured so as to be reasonably assured of repayment and of performance according to the modified terms and is supported by a current, well-documented credit assessment of the borrower's financial condition and prospects for repayment under the revised terms;

Response:

The payment history of the customer along with a current analysis of its cash flow is used to determine the restructured terms.  Underwriting procedures are similar to those of new loan originations and renewals of performing loans in that current financial statements and tax returns are obtained and analyzed.  A current assessment of collateral is performed.  The approval process for restructured loans is the same as that of performing loans.  We will add this explanation to future Form 10-K filings.

·

For your restructurings that accrue interest at the time the loan is restructured, tell us and disclose whether you have charged-off any portion of the loan.  If you have, please tell us how you concluded that repayment of interest and principal contractually due on the entire debt is reasonably assured;

Response:

The current restructured loans have had no portion of the loan charged off.  A table later in this letter shows the break down of TDRs between those due to extension of term and those due to rate reduction.  The vast majority of TDRs are due to term extension.  There is one TDR as a result of rate reduction for $4,152,000.  This loan is collateral dependent with a loan-to-value based on a recent appraisal of approximately 79%.  We will add this explanation to future Form 10-K filings.

4

·

Disclose how you determine whether the borrower has demonstrated repayment performance with modified terms.  Specifically disclose how many payments the borrower needs to make before returning a loan to accrual status;

Response:

We place restructured loans on accrual status at the time of restructuring.  The terms of the restructuring are predicated on data that indicate the borrower is capable of making payments based on the new terms.  If a loan has been placed on nonaccrual status at some point during its life, the loan may generally be returned to an accrual status after six months of payment performance.  We will add this explanation to future Form 10-K filings.

·

Quantify the types of concessions made (i.e. reduction in interest rate, extensions of the loan's maturity, or other actions) distinguishing between each loan product along with a discussion of your success with these different types of concessions.

Response:

The following table summarizes all loans designated as TDRs as of March 31, 2010, along with the concession made.

Number

Amount

(dollars in thousands)

of Loans

Outstanding

Concessions made:

Lengthened amortization:

Commercial

11

$
6,246

Real estate:

Construction, land and land development

1

81

1-4 family residential

3

667

Commercial

2

5,223

Consumer and other loans

2

160

19

12,377

Reduced interest rate:

Commercial

2

25

Real estate:

Construction, land and land development

-

-

1-4 family residential

-

-

Commercial

1

4,152

Consumer and other loans

-

-

3

4,177

Total

22

$
16,554

Lengthening the amortization period to lessen the strain on cash flow to service debt has been our preferred method of restructuring debt.  This has improved our likelihood of repayment while maintaining loan yields.  We have been successful in affecting repayment under modified terms for loans that we have designated as TDRs.  All TDRs as of March 31, 2010, are performing and remain on accrual status.  The vast majority of the debt is less than 30 days past due, consistent with Exhibit 99.2 of our Form 8-K filed on April 30, 2010.  We have not charged off losses on any of the above loans.  For the commercial real estate loan where the interest rate was reduced, the loan is collateral dependent and based on a recent appraisal has a loan-to-value of approximately 79%.

5

Note 3. Securities, page 48

5. We note your disclosure on page 50 that during 2009 you recognized $2.267M in other-than-temporary impairment relating to five single-issuer trust preferred securities, four of which were subsequently sold.  We also note disclosure on page 8 that you liquidated these securities during the second half of 2009 in order to reduce credit risk in your portfolio.  As a result, please compare and contrast how you determined which securities to sell as compared to the pooled trust preferred security with a fair value and unrealized loss of $1.136M and $3.475M as of December 31, 2009, respectively, and the other two single-issuer trust preferred securities that you decided to retain.

Response:

The four trust preferred securities that were sold were issued by IBC Capital, Irwin Financial, Capitol Bancorp and Old Second Bancorp, Inc.  Old Second was sold only to reduce our exposure to that issue.  We sold 50 percent of our holdings in that issue.  The IBC issue was sold because the company was reporting losses and is located in Michigan, a state that is more distressed than most of the other states.  The other two companies were extremely distressed.  Irwin Financial had entered into agreements with their regulators.  Capitol Bancorp had been selling off subsidiary banks.

Except for Old Second, we sold the other trust preferred issues because, in our opinion, there was rapid deterioration in their condition and we saw no reasonable probability of improvement.  We sold them so we could get something, rather than waiting and potentially getting nothing.

Our analysis of the pooled trust preferred security shows we should receive a significant portion of our investment if we hold it to maturity.  We certainly believe it is other than temporarily impaired and have accounted for it accordingly, but we do not believe it is a prudent business decision to realize a $3.5 million loss when the current analysis indicates we should get a significant portion of our money back.

We decided to keep the other two single issue trust preferred securities (Old Second Bancorp., Inc. and Heartland Financial USA, Inc.) because our analysis indicates those two companies are viable entities that should survive the current environment and return to normalized profitability levels.

6. We note your disclosure that as a result of the adoption of a new accounting pronouncement (ASC 320-10-35) you recorded a cumulative effect adjustment to increase beginning retained earnings by $2.622M, which represents 100% of the other-than-temporary impairment recorded during quarter ended December 31, 2008 related to a pooled trust preferred security.  Please tell us in detail how you determined that the entire amount of other-than-temporary impairment was not credit-related.  Additionally, please tell us if there were any differences in the assumptions/inputs used in the cash