West Bancorporation, Inc. (NASDAQ:WTBA) Q2 2024 Earnings Conference Call July 25, 2024 3:00 PM ET Company Participants Jane Funk - CFO Dave Nelson - CEO Harlee Olafson - CRO Brad Winterbottom - President Brad Peters - Minnesota Group President Conference Call Participants Andrew Liesch - Piper Sandler Operator Hello, and welcome to West Bancorporation, Inc. Q2 2024 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to the company's ...

West Bancorp (WTBA) came out with quarterly earnings of $0.31 per share, missing the Zacks Consensus Estimate of $0.32 per share. This compares to earnings of $0.35 per share a year ago. These figures are adjusted for non-recurring items. West Bancorp, which belongs to the Zacks Financial - Savings and Loan industry, posted revenues of $19.58 million for the quarter ended June 2024, surpassing the Zacks Consensus Estimate by 1.48%. This compares to year-ago revenues of $19.73 million. The company has topped ...

```markdown Part I [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) The Company's total assets increased to $3,965,115 thousand as of June 30, 2024, from $3,825,758 thousand at December 31, 2023, driven by increases in interest-bearing deposits and loans, partially offset by a decrease in available-for-sale securities. Total liabilities also increased, primarily due to a rise in total deposits | Metric | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----- | :--------------------------- | :------------------------------- | | Total Assets | $3,965,115 | $3,825,758 | | Total Liabilities | $3,741,232 | $3,600,715 | | Total Stockholders' Equity | $223,883 | $225,043 | | Loans, net | $2,970,352 | $2,899,193 | | Total Deposits | $3,180,922 | $2,973,779 | [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) Net income for the three months ended June 30, 2024, decreased to $5,192 thousand from $5,862 thousand in the prior year, and for the six months, it decreased to $11,001 thousand from $13,706 thousand. This was primarily due to increased interest expense on deposits and borrowings, partially offset by higher interest income from loans | Metric | 3 Months Ended June 30, 2024 (in thousands) | 3 Months Ended June 30, 2023 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2023 (in thousands) | | :----- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Net Income | $5,192 | $5,862 | $11,001 | $13,706 | | Basic EPS | $0.31 | $0.35 | $0.66 | $0.82 | | Diluted EPS | $0.31 | $0.35 | $0.65 | $0.82 | | Total Interest Income | $47,568 | $39,351 | $92,138 | $76,530 | | Total Interest Expense | $30,338 | $22,010 | $58,158 | $40,494 | [Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) The Company reported a comprehensive income of $3,698 thousand for the three months ended June 30, 2024, a slight increase from $3,470 thousand in the prior year. For the six months, comprehensive income decreased significantly to $7,104 thousand from $17,360 thousand, primarily due to higher unrealized losses on securities available for sale, partially offset by unrealized gains on derivatives | Metric | 3 Months Ended June 30, 2024 (in thousands) | 3 Months Ended June 30, 2023 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2023 (in thousands) | | :----- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Comprehensive Income | $3,698 | $3,470 | $7,104 | $17,360 | | Unrealized losses on securities | $(1,092) | $(6,645) | $(6,940) | $2,111 | | Unrealized gains on derivatives | $(402) | $4,253 | $3,043 | $1,543 | [Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) Stockholders' equity saw a slight decrease from December 31, 2023, to June 30, 2024, primarily due to accumulated other comprehensive loss, which offset net income and stock-based compensation. Cash dividends of $0.25 per common share were declared for the quarter | Metric | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----- | :--------------------------- | :------------------------------- | | Total Stockholders' Equity | $223,883 | $225,043 | | Accumulated Other Comprehensive Loss | $(87,420) | $(83,523) | - Cash dividends declared for the three months ended June 30, 2024, were **$4,208 thousand ($0.25 per common share)**[65](index=65&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities increased significantly to $16,123 thousand for the six months ended June 30, 2024, from $10,264 thousand in the prior year. Investing activities used more cash, while financing activities provided substantially more cash, mainly due to a net increase in deposits | Cash Flow Activity (6 Months Ended June 30) | 2024 (in thousands) | 2023 (in thousands) | | :---------------------------------------- | :------------------ | :------------------ | | Net cash provided by operating activities | $16,123 | $10,264 | | Net cash used in investing activities | $(62,058) | $(59,600) | | Net cash provided by financing activities | $130,397 | $54,541 | | Net increase in deposits | $207,143 | $(44,083) | | Ending cash and cash equivalents | $149,819 | $31,744 | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) [1. Basis of Presentation](index=10&type=section&id=Note%201.%20Basis%20of%20Presentation) The unaudited consolidated financial statements are prepared in conformity with U.S. GAAP, requiring management estimates. Recent accounting standard updates (ASU 2023-02, ASU 2021-01, ASU 2022-06) did not have a material impact, while ASU 2023-09 and ASU 2023-07 are currently being evaluated for their potential impact - ASU No. 2023-02 (Investments - Equity Method and Joint Ventures): Implementation did not have a **material impact** on the Company's financial statements[47](index=47&type=chunk) - ASU No. 2023-09 (Income Taxes - Improvements to Income Tax Disclosures): The Company is currently evaluating the impact (effective for fiscal years beginning after December 15, 2024)[48](index=48&type=chunk) - ASU No. 2023-07 (Segment Reporting - Improvements to Reportable Segment Disclosures): The Company is currently evaluating the impact (effective for fiscal years beginning after December 15, 2023)[74](index=74&type=chunk) [2. Earnings per Common Share](index=11&type=section&id=Note%202.%20Earnings%20per%20Common%20Share) Basic and diluted earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding, with diluted EPS reflecting potential dilution from restricted stock units using the treasury stock method | Metric (3 Months Ended June 30) | 2024 | 2023 | | :------------------------------ | :--- | :--- | | Net income (in thousands) | $5,192 | $5,862 | | Weighted average common shares outstanding (in thousands) | 16,828 | 16,722 | | Basic earnings per common share | $0.31 | $0.35 | | Diluted earnings per common share | $0.31 | $0.35 | [3. Securities Available for Sale](index=12&type=section&id=Note%203.%20Securities%20Available%20for%20Sale) The fair value of securities available for sale decreased to $588,452 thousand at June 30, 2024, from $623,919 thousand at December 31, 2023. This decrease was primarily due to unrealized losses, mainly from increases in market interest rates. No sales of available-for-sale securities occurred during the three and six months ended June 30, 2024 and 2023 | Metric | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----- | :--------------------------- | :------------------------------- | | Fair Value of Securities Available for Sale | $588,452 | $623,919 | | Total Amortized Cost | $719,434 | $745,706 | | Total Gross Unrealized Gains | $39 | $19 | | Total Gross Unrealized Losses | $(131,021) | $(121,806) | - Securities with a total amortized cost of approximately **$537,800 thousand** (June 30, 2024) and **$447,074 thousand** (December 31, 2023) were pledged to secure FHLB advances, Federal Reserve credit programs, public fund deposits, and other purposes[78](index=78&type=chunk) - **No sales** of securities available for sale occurred during the three and six months ended June 30, 2024 and 2023[109](index=109&type=chunk) [4. Loans and Allowance for Credit Losses](index=14&type=section&id=Note%204.%20Loans%20and%20Allowance%20for%20Credit%20Losses) Total loans increased to $2,998,774 thousand at June 30, 2024, from $2,927,535 thousand at December 31, 2023. The allowance for credit losses (ACL) remained stable at $28,422 thousand. The Company uses a cash flow-based model for collective evaluation of credit losses and has a 9-point risk rating scale. Nonaccrual loans increased to $521 thousand | Metric | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----- | :--------------------------- | :------------------------------- | | Total Loans | $2,998,774 | $2,927,535 | | Allowance for Credit Losses (ACL) | $28,422 | $28,342 | | Nonaccrual Loans | $521 | $296 | | ACL for Off-Balance-Sheet Credit Exposures | $2,544 | $2,544 | | ACL Activity (6 Months Ended June 30) | 2024 (in thousands) | 2023 (in thousands) | | :------------------------------------ | :------------------ | :------------------ | | Beginning balance | $28,342 | $25,473 | | Charge-offs | $(4) | $(18) | | Recoveries | $84 | $25 | | Provision for credit loss expense | $0 | $0 | | Ending balance | $28,422 | $27,938 | - The Company utilizes a **9-point risk rating scale** for credit quality indicators, with ratings 1-5 as Pass, 6 as Watch, 7-8 as Substandard, and 9 as Doubtful[96](index=96&type=chunk) [5. Derivatives](index=24&type=section&id=Note%205.%20Derivatives) The Company uses interest rate swaps for cash flow hedging (FHLB advances, long-term debt, deposits) and non-hedging purposes (back-to-back swaps for customers). Total notional amounts for cash flow hedges increased to $515,000 thousand at June 30, 2024, from $445,000 thousand at December 31, 2023. The Company is exposed to credit risk from counterparties, minimized by collateral-pledging provisions | Derivative Type | Metric | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :-------------- | :----- | :--------------------------- | :------------------------------- | | Cash Flow Hedges | Gross notional amount | $515,000 | $445,000 | | | Fair value in other assets | $14,364 | $11,313 | | Non-Hedging Derivatives | Gross notional amount | $290,543 | $293,400 | | | Fair value in other assets | $15,515 | $14,114 | | | Fair value in other liabilities | $(15,515) | $(14,114) | - The Company estimates approximately **$11,529 thousand** will be reclassified from accumulated other comprehensive income (loss) to decrease interest expense through the 12 months ending June 30, 2025, related to cash flow hedges[144](index=144&type=chunk) - The Company's counterparties pledged **$29,470 thousand** (June 30, 2024) and **$22,340 thousand** (December 31, 2023) of collateral to the Company in the form of cash on deposit[203](index=203&type=chunk) [6. Income Taxes](index=26&type=section&id=Note%206.%20Income%20Taxes) Net deferred tax assets decreased slightly to $33,477 thousand at June 30, 2024, from $34,303 thousand at December 31, 2023. A valuation allowance is maintained against state net operating loss carryforwards, as management believes it is more likely than not that these carryforwards will expire without being utilized | Metric | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----- | :--------------------------- | :------------------------------- | | Net deferred tax assets | $33,477 | $34,303 | | Valuation allowance | $(1,896) | $(1,763) | - The valuation allowance is recorded against state net operating loss carryforwards, which expire in **2024 and thereafter**[145](index=145&type=chunk) [7. Accumulated Other Comprehensive Income (Loss)](index=27&type=section&id=Note%207.%20Accumulated%20Other%20Comprehensive%20Income%20%28Loss%29) Accumulated other comprehensive loss increased to $(87,420) thousand at June 30, 2024, from $(83,523) thousand at December 31, 2023, primarily due to unrealized losses on securities, partially offset by unrealized gains on derivatives | Metric | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----- | :--------------------------- | :------------------------------- | | Accumulated Other Comprehensive Loss | $(87,420) | $(83,523) | | Unrealized Gains (Losses) on Securities | $(98,173) | $(91,233) | | Unrealized Gains (Losses) on Derivatives | $10,753 | $7,710 | - Net current period other comprehensive loss for the six months ended June 30, 2024, was **$(3,897) thousand**[52](index=52&type=chunk) [8. Commitments and Contingencies](index=27&type=section&id=Note%208.%20Commitments%20and%20Contingencies) The Company has significant off-balance-sheet commitments, totaling $832,803 thousand in commitments to extend credit and standby letters of credit at June 30, 2024. The outstanding balance of mortgage loans sold under the MPF Program was $18,597 thousand. There are no material pending legal proceedings against the Company or West Bank | Commitment Type | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :------------------------------ | :--------------------------- | :------------------------------- | | Commitments to fund real estate construction loans | $283,382 | $385,846 | | Other commitments to extend credit | $531,915 | $641,554 | | Standby letters of credit | $17,506 | $15,972 | | Total Commitments | $832,803 | $1,043,372 | - The outstanding balance of mortgage loans sold under the MPF Program was **$18,597 thousand** at June 30, 2024, and **$20,159 thousand** at December 31, 2023[176](index=176&type=chunk) - Neither the Company nor West Bank is a party to any **material pending legal proceedings**[148](index=148&type=chunk)[337](index=337&type=chunk) [9. Fair Value Measurements](index=28&type=section&id=Note%209.%20Fair%20Value%20Measurements) Financial instruments recorded at fair value on a recurring basis, such as available-for-sale securities and derivative instruments, are primarily classified within Level 2 of the fair value hierarchy, utilizing observable market data. No individually evaluated loans had fair value adjustments as of June 30, 2024, or December 31, 2023 | Financial Instrument (June 30, 2024) | Total (in thousands) | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | | :----------------------------------- | :------------------- | :--------------------- | :--------------------- | :--------------------- | | Securities available for sale | $588,452 | $0 | $588,452 | $0 | | Derivative instruments, interest rate swaps (assets) | $29,879 | $0 | $29,879 | $0 | | Derivative instruments, interest rate swaps (liabilities) | $15,515 | $0 | $15,515 | $0 | | Financial Instrument (December 31, 2023) | Total (in thousands) | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | | :----------------------------------- | :------------------- | :--------------------- | :--------------------- | :--------------------- | | Securities available for sale | $623,919 | $0 | $623,919 | $0 | | Derivative instruments, interest rate swaps (assets) | $25,427 | $0 | $25,427 | $0 | | Derivative instruments, interest rate swaps (liabilities) | $15,102 | $0 | $15,102 | $0 | - **No individually evaluated loans** with a fair value adjustment were recorded as of June 30, 2024, and December 31, 2023[183](index=183&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) ["Safe Harbor" Concerning Forward-Looking Statements](index=32&type=section&id=Safe%20Harbor%20Concerning%20Forward-Looking%20Statements) This section provides a cautionary statement regarding forward-looking statements, highlighting various risks that could cause actual results to differ materially, including interest rate risk, competitive pressures, credit risk, regulatory changes, and cybersecurity incidents. The Company undertakes no obligation to revise or update these statements - Forward-looking statements are based on underlying assumptions, risks, and uncertainties, and **actual results could differ materially**[220](index=220&type=chunk) - Key risks include **interest rate risk**, **fluctuations in securities values**, **competitive pressures**, **liquidity risk**, **changes in credit risk**, **concentration of large deposits**, **economic conditions**, **regulatory changes**, **fraudulent activity/cybersecurity incidents**, **litigation**, and **geopolitical events**[220](index=220&type=chunk) [Critical Accounting Policies](index=32&type=section&id=Critical%20Accounting%20Policies) The Company's financial statements require management to make estimates and judgments, particularly for the fair value of financial instruments and the allowance for credit losses. There have been no significant changes in critical accounting policies or the assumptions and judgments utilized since December 31, 2023 - Material estimates particularly susceptible to significant change include the **fair value of financial instruments** and the **allowance for credit losses**[46](index=46&type=chunk) - **No significant changes** in critical accounting policies or the assumptions and judgments utilized in applying these policies since December 31, 2023[221](index=221&type=chunk) [Non-GAAP Financial Measures](index=33&type=section&id=Non-GAAP%20Financial%20Measures) The report includes non-GAAP financial measures such as net interest income and net interest margin on a fully taxable equivalent (FTE) basis, and an adjusted efficiency ratio. Management believes these provide useful supplemental information for evaluating financial performance and comparability within the banking industry - Non-GAAP financial measures include **net interest income** and **net interest margin** on a fully taxable equivalent (FTE) basis, and the **efficiency ratio** on an adjusted and FTE basis[222](index=222&type=chunk) | Metric (3 Months Ended June 30) | 2024 | 2023 | | :------------------------------ | :--- | :--- | | Net interest income on a FTE basis (non-GAAP) | $17,285 | $17,463 | | Net interest margin on a FTE basis (non-GAAP) | 1.86% | 2.02% | | Efficiency ratio on an adjusted and FTE basis (non-GAAP) | 67.14% | 62.83% | [Overview](index=34&type=section&id=Overview) Net income decreased for both the three and six months ended June 30, 2024, compared to the prior year, primarily due to increased interest expense. Total loans increased by 2.4% in the first six months of 2024, while credit quality remained strong with a low nonperforming loans to total assets ratio. The Company aims to perform at or near the top of its peer group in key metrics | Metric | 3 Months Ended June 30, 2024 | 3 Months Ended June 30, 2023 | 6 Months Ended June 30, 2024 | 6 Months Ended June 30, 2023 | | :----- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income (in thousands) | $5,192 | $5,862 | $11,001 | $13,706 | | Diluted EPS | $0.31 | $0.35 | $0.65 | $0.82 | | Return on average assets | 0.53% | 0.64% | 0.57% | 0.76% | | Return on average equity | 9.50% | 11.03% | 10.07% | 12.90% | - Total loans outstanding increased **$71,239 thousand, or 2.4%**, during the first six months of 2024[198](index=198&type=chunk) - The ratio of nonperforming loans to total assets was **0.01%** as of both June 30, 2024, and December 31, 2023, indicating **strong credit quality**[198](index=198&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) [Net Interest Income](index=37&type=section&id=Net%20Interest%20Income) Net interest income on a FTE basis decreased by $178 thousand for the three months and $2,202 thousand for the six months ended June 30, 2024, compared to the prior year. This decline was driven by a faster increase in rates paid on deposits and borrowed funds than on interest-earning assets, despite increases in average loan balances and yields | Metric (FTE) | 3 Months Ended June 30, 2024 (in thousands) | 3 Months Ended June 30, 2023 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2023 (in thousands) | | :------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Net interest income | $17,285 | $17,463 | $34,117 | $36,319 | | Net interest margin | 1.86% | 2.02% | 1.87% | 2.12% | | Loan yields | 5.60% | 5.05% | 5.55% | 4.97% | | Rate paid on deposits | 3.70% | 2.85% | 3.64% | 2.66% | | Average balance of FHLB advances | $315,000 | $240,110 | $315,000 | $222,017 | - Tax-equivalent interest income on loans increased **$6,662 thousand** (3 months) and **$13,883 thousand** (6 months) due to increased average loan balances and higher loan yields[240](index=240&type=chunk) - The increase in the cost of deposits was primarily due to increases in deposit interest rates in response to increases in the target federal funds rate, the inverted yield curve, and increased competition[266](index=266&type=chunk) [Credit Loss Expense and the Related Allowance for Credit Losses](index=40&type=section&id=Credit%20Loss%20Expense%20and%20the%20Related%20Allowance%20for%20Credit%20Losses) The Company recorded no credit loss expense for the three and six months ended June 30, 2024 and 2023. The allowance for credit losses (ACL) was deemed adequate by management, despite the inherent risks in the commercial loan portfolio, which is a significant portion of total loans. Management continuously evaluates the ACL based on various factors including borrower financial condition, collateral value, and economic conditions - The Company recorded **no credit loss expense** for the three and six months ended June 30, 2024, and June 30, 2023[294](index=294&type=chunk) | ACL Activity (6 Months Ended June 30) | 2024 (in thousands) | 2023 (in thousands) | | :------------------------------------ | :------------------ | :------------------ | | Net (charge-offs) recoveries | $80 | $7 | | Balance at end of period | $28,422 | $27,938 | | Ratio of ACL for loans to total loans at end of period | 0.95% | 1.00% | - West Bank has a significant portion of its loan portfolio in **commercial real estate loans**, **commercial lines of credit**, **commercial term loans**, and **construction and land development loans**, which carry **higher repayment risks**[243](index=243&type=chunk) [Noninterest Income](index=42&type=section&id=Noninterest%20Income) Total noninterest income decreased by $43 thousand for the three months and $701 thousand for the six months ended June 30, 2024, compared to the prior year. The six-month decrease was primarily due to a nonrecurring gain from bank-owned life insurance in 2023. Trust services revenue increased due to one-time estate fees | Noninterest Income (3 Months Ended June 30) | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) | Change % | | :------------------------------------------ | :------------------ | :------------------ | :-------------------- | :------- | | Total noninterest income | $2,346 | $2,389 | $(43) | (1.80)% | | Trust services | $794 | $749 | $45 | 6.01% | | Debit card usage fees | $490 | $511 | $(21) | (4.11)% | | Noninterest Income (6 Months Ended June 30) | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) | Change % | | :------------------------------------------ | :------------------ | :------------------ | :-------------------- | :------- | | Total noninterest income | $4,645 | $5,346 | $(701) | (13.11)% | | Gain from bank-owned life insurance | $0 | $691 | $(691) | (100.00)% | | Trust services | $1,570 | $1,455 | $115 | 7.90% | - The gain from bank-owned life insurance in the six months ended June 30, 2023, was a **nonrecurring death benefit claim**[272](index=272&type=chunk) [Noninterest Expense](index=43&type=section&id=Noninterest%20Expense) Total noninterest expense increased by $720 thousand for the three months and $517 thousand for the six months ended June 30, 2024, compared to the prior year. Key drivers included increases in occupancy and equipment, technology and software, and FDIC insurance expenses, partially offset by a decrease in business development expenses | Noninterest Expense (6 Months Ended June 30) | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) | Change % | | :------------------------------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Total noninterest expense | $25,062 | $24,545 | $517 | 2.11% | | Occupancy and equipment | $3,299 | $2,649 | $650 | 24.54% | | Technology and software | $1,431 | $1,092 | $339 | 31.04% | | FDIC insurance | $1,150 | $836 | $314 | 37.56% | | Business development | $397 | $748 | $(351) | (46.93)% | - Occupancy and equipment expense increased due to **new bank buildings**, while technology and software expenses rose from **new technology, product updates, and information security solutions**[277](index=277&type=chunk) - FDIC insurance expense increased primarily due to an **increase in the assessment rate**[277](index=277&type=chunk) [Income Tax Expense](index=45&type=section&id=Income%20Tax%20Expense) Income tax expense for the three months ended June 30, 2024, was $1,190 thousand (18.6% of pre-tax income), and for the six months, it was $2,562 thousand (18.9% of pre-tax income). The Company's consolidated income tax rate differs from the federal statutory income tax rate primarily due to tax-exempt interest income, tax-exempt increase in cash value of bank-owned life insurance, disallowed interest expense, state income taxes, and federal low income housing and new markets tax credits | Metric | 3 Months Ended June 30, 2024 (in thousands) | 3 Months Ended June 30, 2023 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2023 (in thousands) | | :----- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Income taxes | $1,190 | $1,394 | $2,562 | $3,131 | | Effective tax rate | 18.6% | 19.2% | 18.9% | 18.6% | - The tax rates were impacted by year-to-date federal low income housing tax credits and a new markets tax credit of approximately **$754 thousand** (2024) and **$749 thousand** (2023) for the first six months[278](index=278&type=chunk) [Financial Condition](index=46&type=section&id=Financial%20Condition) [Securities](index=46&type=section&id=Securities) Securities available for sale decreased by $35,467 thousand during the first six months of 2024, primarily due to principal paydowns and a decline in fair value from rising market interest rates. Management believes unrealized losses are not indicative of credit quality issues. The portfolio is expected to decrease as a percentage of total assets over time - Securities available for sale decreased by **$35,467 thousand** during the six months ended June 30, 2024[307](index=307&type=chunk) - The decrease was due to **calls and principal paydowns on securities** and the **decline in fair value** resulting from the increase in market interest rates[307](index=307&type=chunk) - Approximately **61%** of the available-for-sale securities portfolio consisted of government agency guaranteed collateralized mortgage obligations and mortgage-backed securities, which management believes have **little to no credit risk**[280](index=280&type=chunk) [Loans and Nonperforming Assets](index=46&type=section&id=Loans%20and%20Nonperforming%20Assets) Loans outstanding increased by $71,239 thousand to $2,998,774 thousand as of June 30, 2024, with an increase in construction, land and land development loans. Nonperforming assets remained low at 0.01% of total assets, indicating strong credit quality. The commercial real estate portfolio exceeded regulatory guidelines but was within internal policy limits - Loans outstanding increased **$71,239 thousand** from $2,927,535 thousand (December 31, 2023) to **$2,998,774 thousand** (June 30, 2024)[281](index=281&type=chunk) | Metric | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----- | :--------------------------- | :------------------------------- | | Nonaccrual loans | $521 | $296 | | Total nonperforming assets | $521 | $296 | | Nonperforming assets to total assets | 0.01% | 0.01% | - The commercial real estate portfolio exceeded regulatory guidelines but was within the Company's established policy limits, with **appropriate risk management policies and procedures** in place[308](index=308&type=chunk) [Deposits](index=47&type=section&id=Deposits) Total deposits increased by $207,143 thousand (7.0%) during the first six months of 2024, including an increase in brokered deposits to $370,290 thousand. A significant municipal deposit contributed to this growth. The Company faces strong competition for deposits, leading to increased costs, and estimated uninsured deposits were approximately 26.3% of total deposits - Deposits increased **$207,143 thousand, or 7.0%**, during the first six months of 2024[311](index=311&type=chunk) - Brokered deposits increased to **$370,290 thousand** at June 30, 2024, from **$305,411 thousand** at December 31, 2023[311](index=311&type=chunk) - Estimated uninsured deposits, excluding those in the IntraFi reciprocal network, brokered deposits, and public funds protected by state programs, were approximately **26.3% of total deposits** as of June 30, 2024[284](index=284&type=chunk) [Borrowed Funds](index=47&type=section&id=Borrowed%20Funds) Federal funds purchased and other short-term borrowings decreased to $85,500 thousand at June 30, 2024. FHLB advances remained at $315,000 thousand, with $295,000 thousand hedged by long-term interest rate swaps. This hedging strategy effectively provides fixed-cost wholesale funding - Federal funds purchased and other short-term borrowings decreased from **$150,270 thousand** at December 31, 2023, to **$85,500 thousand** as of June 30, 2024[284](index=284&type=chunk) - The Company had **$315,000 thousand** of FHLB advances outstanding at June 30, 2024, with **$295,000 thousand** being one-month rolling advances hedged with long-term interest rate swaps[312](index=312&type=chunk) [Liquidity](index=47&type=section&id=Liquidity) The Company maintains strong liquidity with $149,819 thousand in cash and cash equivalents at June 30, 2024, and significant additional borrowing capacity from the FHLB ($525,000 thousand), Federal Reserve discount window ($72,000 thousand), and unsecured federal funds lines of credit ($75,000 thousand). Management believes current liquidity is sufficient to meet needs - Cash and cash equivalents were **$149,819 thousand** as of June 30, 2024, compared with **$65,357 thousand** as of December 31, 2023[313](index=313&type=chunk) - West Bank had additional borrowing capacity of approximately **$525,000 thousand** from the FHLB, **$72,000 thousand** through the Federal Reserve discount window, and **$75,000 thousand** through unsecured federal funds lines of credit[329](index=329&type=chunk) - Net cash from operating activities contributed **$16,123 thousand** to liquidity for the six months ended June 30, 2024[329](index=329&type=chunk) [Capital](index=48&type=section&id=Capital) Total stockholders' equity decreased slightly to $223,883 thousand at June 30, 2024, primarily due to an increase in accumulated other comprehensive loss from rising interest rates impacting available-for-sale securities. Despite this, the Company and West Bank met all regulatory capital adequacy requirements, including the 2.5% capital conservation buffer - Total stockholders' equity decreased to **$223,883 thousand** at June 30, 2024, from **$225,043 thousand** at December 31, 2023, primarily due to an **increase in accumulated other comprehensive loss**[330](index=330&type=chunk) - The Company's tangible common equity as a percent of tangible assets was **5.65%** at June 30, 2024, compared to **5.88%** at December 31, 2023[330](index=330&type=chunk) | Capital Ratio (Consolidated, June 30, 2024) | Actual Ratio | Minimum for Adequacy | Minimum with Capital Conservation Buffer | To Be Well-Capitalized | | :------------------------------------------ | :----------- | :------------------- | :--------------------------------------- | :--------------------- | | Total Capital (to Risk-Weighted Assets) | 11.85% | 8.00% | 10.50% | 10.00% | | Tier 1 Capital (to Risk-Weighted Assets) | 9.30% | 6.00% | 8.50% | 8.00% | | Common Equity Tier 1 Capital (to Risk-Weighted Assets) | 8.74% | 4.50% | 7.00% | 6.50% | | Tier 1 Capital (to Average Assets) | 8.08% | 4.00% | 4.00% | 5.00% | [Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The Company's primary market risk is interest rate risk, managed through an Asset Liability Committee and earnings simulation. A hypothetical 300 basis point rise in interest rates is estimated to decrease net interest income by 11.76% over one year, while a 100 basis point fall would increase it by 0.52%. These simulations are based on numerous assumptions and may not predict actual results - The Company's market risk is primarily **interest rate risk**, arising from lending and deposit taking activities[332](index=332&type=chunk) - Interest rate risk is managed by an Asset Liability Committee, which uses an **earnings simulation approach** to measure exposure to potential interest rate changes[333](index=333&type=chunk) | Change in Interest Rates | Estimated Change in Net Interest Income Over One Year Horizon (in thousands) | % Change | | :----------------------- | :----------------------------------------------------------------------- | :------- | | 300 basis points rising | $(9,484) | (11.76)% | | 200 basis points rising | $(5,943) | (7.37)% | | 100 basis points rising | $(3,330) | (4.13)% | | 100 basis points falling | $418 | 0.52% | | 200 basis points falling | $(285) | (0.35)% | [Controls and Procedures](index=49&type=section&id=Item%204.%20Controls%20and%20Procedures) The Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2024. Furthermore, there were no changes in the Company's internal control over financial reporting that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting during the period - The Company's disclosure controls and procedures were **effective** as of June 30, 2024[335](index=335&type=chunk) - There were **no changes** in the Company's internal control over financial reporting that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting during the period[323](index=323&type=chunk) Part II [Legal Proceedings](index=49&type=section&id=Item%201.%20Legal%20Proceedings) Neither the Company nor West Bank is a party to any material pending legal proceedings, other than ordinary routine litigation incidental to West Bank's business. No proceedings contemplated by a governmental authority against the Company or West Bank are known - Neither the Company nor West Bank is a party to any **material pending legal proceedings**[337](index=337&type=chunk) [Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) Management does not believe there have been any material changes in the risk factors that were disclosed in the Company's Annual Report on Form 10-K/A, filed with the SEC on February 23, 2024 - Management does not believe there have been any **material changes** in the risk factors disclosed in the Company's Form 10-K/A[338](index=338&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds from such sales during the period covered by this report - **None**[339](index=339&type=chunk) [Defaults Upon Senior Securities](index=49&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the period covered by this report - **None**[340](index=340&type=chunk) [Mine Safety Disclosures](index=49&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - **Not applicable**[341](index=341&type=chunk) [Other Information](index=49&type=section&id=Item%205.%20Other%20Information) During the fiscal quarter ended June 30, 2024, none of the Company's directors or executive officers adopted or terminated any contract, instruction, or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any 'non-Rule 10b5-1 trading arrangement.' - **No directors or executive officers adopted or terminated any Rule 10b5-1 trading arrangements** during the fiscal quarter ended June 30, 2024[342](index=342&type=chunk) [Exhibits](index=49&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the report, including the Restated Articles of Incorporation, Amended and Restated Bylaws, Certifications of the Chief Executive Officer and Chief Financial Officer, and various Inline XBRL documents - Exhibits include **Restatement of the Restated Articles of Incorporation (3.1)** and **Amended and Restated Bylaws (3.2)**[325](index=325&type=chunk) - Certifications of Chief Executive Officer and Chief Financial Officer under **Sections 302 and 906 of the Sarbanes-Oxley Act of 2002** are filed as Exhibits 31.1, 31.2, 32.1, and 32.2[325](index=325&type=chunk) - Various **Inline XBRL documents** (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104) are included[325](index=325&type=chunk) SIGNATURES The report is duly signed on July 25, 2024, by David D. Nelson, Chief Executive Officer and President, and Jane M. Funk, Executive Vice President, Treasurer and Chief Financial Officer, as authorized representatives of West Bancorporation, Inc - The report was signed on **July 25, 2024**[327](index=327&type=chunk) - Signed by **David D. Nelson, Chief Executive Officer and President** (Principal Executive Officer)[327](index=327&type=chunk) - Signed by **Jane M. Funk, Executive Vice President, Treasurer and Chief Financial Officer** (Principal Financial and Accounting Officer)[327](index=327&type=chunk)[345](index=345&type=chunk) ```

[Financial Results and Dividend Announcement](index=1&type=section&id=WEST%20BANCORPORATION%2C%20INC.%20ANNOUNCES%20SECOND%20QUARTER%202024%20FINANCIAL%20RESULTS%20AND%20DECLARES%20QUARTERLY%20DIVIDEND) West Bancorporation announced its Q2 2024 financial results, reporting decreased net income and diluted EPS, alongside a declared quarterly dividend [Q2 2024 Financial Results and Dividend](index=1&type=section&id=Financial%20Results%20and%20Dividend%20Announcement) West Bancorporation reported second quarter 2024 net income of $5.2 million, or $0.31 per diluted common share, and declared a $0.25 quarterly dividend Quarterly Financial Performance Summary | Metric | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | Net Income | $5.2 million | $5.8 million | $5.9 million | | Diluted EPS | $0.31 | $0.35 | $0.35 | - The Board of Directors declared a regular quarterly dividend of **$0.25 per common share**, payable on August 21, 2024, to stockholders of record on August 7, 2024[1](index=1&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management emphasized pristine credit quality, positive deposit growth, stabilized net interest income, and strategic investments in new buildings - Credit quality remains pristine due to disciplined loan growth and credit risk management, with the ratio of nonperforming assets to total assets at **0.01%**[2](index=2&type=chunk) - In the first half of 2024, the company experienced **deposit growth**, **improved net interest income**, and a **stabilized net interest margin**[2](index=2&type=chunk) - The **efficiency ratio increased** as anticipated due to costs associated with new buildings, which are viewed as strategic investments for relationship building and business development[2](index=2&type=chunk) [Financial Highlights](index=1&type=section&id=Second%20Quarter%202024%20Financial%20Highlights) The second quarter saw loan and deposit growth but also a decline in net income and increased efficiency ratio compared to prior periods [Q2 2024 vs. Q1 2024 Comparison](index=1&type=section&id=Second%20Quarter%202024%20Compared%20to%20First%20Quarter%202024%20Overview) Net income decreased by $0.6 million, while loans and deposits grew, but the efficiency ratio worsened and net interest margin slightly compressed - Loans increased by **$18.6 million** (**2.5% annualized**), primarily from funding previously committed construction loans[5](index=5&type=chunk) - Deposits increased by **$115.9 million**; excluding a **$26.1 million** decrease in brokered deposits, core deposits grew by **$142.0 million**, including a temporary **$120.0 million** municipal deposit[9](index=9&type=chunk) - The efficiency ratio increased to **67.14%** from **62.04%** in Q1 2024, mainly due to higher salaries and occupancy costs related to the new headquarters[9](index=9&type=chunk) - Net interest margin (tax-equivalent) slightly decreased to **1.86%** from **1.88%** in the prior quarter[9](index=9&type=chunk) [Q2 2024 vs. Q2 2023 Comparison](index=2&type=section&id=Second%20Quarter%202024%20Compared%20to%20Second%20Quarter%202023%20Overview) Year-over-year, net income decreased by $0.7 million despite significant loan and deposit growth, with net interest margin contraction and higher efficiency ratio - Loans increased by **$191.7 million**, or **6.8%**, compared to June 30, 2023, mainly due to funding of construction loans[9](index=9&type=chunk) - Deposits increased by **$344.6 million** year-over-year, including an increase in brokered deposits from **$230.7 million** to **$370.3 million**[9](index=9&type=chunk) - Net interest margin (tax-equivalent) decreased to **1.86%** from **2.02%** in Q2 2023[9](index=9&type=chunk) - The efficiency ratio increased to **67.14%** from **62.83%** in Q2 2023, driven by lower net interest income and higher noninterest expense, particularly occupancy costs[9](index=9&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Information) The financial statements detail the balance sheet, loan and deposit composition, credit quality, and income statements, reflecting asset growth funded by deposits [Condensed Balance Sheets](index=4&type=section&id=CONDENSED%20BALANCE%20SHEETS) Total assets reached $3.965 billion, with loans at $2.970 billion and deposits at $3.181 billion, enabling a reduction in borrowings Balance Sheet Highlights (in thousands) | Account | June 30, 2024 | March 31, 2024 | June 30, 2023 | | :--- | :--- | :--- | :--- | | Total Assets | $3,965,115 | $3,962,692 | $3,678,555 | | Loans, net | $2,970,352 | $2,951,760 | $2,779,137 | | Total Deposits | $3,180,922 | $3,065,030 | $2,836,325 | | Total Borrowings* | $525,498 | $639,683 | $593,886 | | Stockholders' Equity | $223,883 | $223,756 | $217,126 | [Loan, Deposit, and Credit Quality](index=5&type=section&id=LOANS%2C%20DEPOSITS%2C%20AND%20CREDIT%20QUALITY) Total loans reached $3.0 billion with strong credit quality, while deposits grew to $3.18 billion, primarily in nonmaturity accounts Loan Composition (in thousands) | Loan Type | June 30, 2024 | March 31, 2024 | | :--- | :--- | :--- | | Commercial | $526,589 | $544,293 | | Construction, land & dev. | $496,864 | $465,247 | | Commercial Real Estate | $1,856,301 | $1,839,580 | | **Total Loans** | **$2,998,774** | **$2,980,133** | Credit Quality (in thousands) | Rating | June 30, 2024 | March 31, 2024 | | :--- | :--- | :--- | | Pass | $2,994,310 | $2,983,618 | | Watch | $7,651 | $142 | | Substandard | $521 | $289 | Deposit Composition (in thousands) | Deposit Type | June 30, 2024 | March 31, 2024 | | :--- | :--- | :--- | | Noninterest-bearing demand | $530,441 | $521,377 | | Total nonmaturity deposits | $2,554,622 | $2,406,861 | | Total time deposits | $626,300 | $658,169 | | **Total Deposits** | **$3,180,922** | **$3,065,030** | [Consolidated Statements of Income](index=6&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20INCOME) Q2 2024 net income was $5.2 million, impacted by higher noninterest expenses, contributing to a six-month net income of $11.0 million Quarterly Income Statement (in thousands) | Account | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | Net Interest Income | $17,230 | $16,750 | $17,341 | | Credit Loss Expense | $0 | $0 | $0 | | Total Noninterest Income | $2,346 | $2,299 | $2,389 | | Total Noninterest Expense | $13,194 | $11,868 | $12,474 | | **Net Income** | **$5,192** | **$5,809** | **$5,862** | Six-Month Income Statement (in thousands) | Account | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net Interest Income | $33,980 | $36,036 | | Total Noninterest Expense | $25,062 | $24,545 | | **Net Income** | **$11,001** | **$13,706** | [Key Ratios and Shareholder Data](index=8&type=section&id=KEY%20PERFORMANCE%20RATIOS%20AND%20OTHER%20METRICS) Key Q2 2024 performance ratios include ROA of 0.53%, ROE of 9.50%, and a net interest margin of 1.86%, with strong regulatory capital Common Share Data (Q2 2024) | Metric | Value | | :--- | :--- | | Diluted EPS | $0.31 | | Dividends per share | $0.25 | | Book value per share | $13.30 | Key Performance Ratios (Q2 2024) | Ratio | Value | | :--- | :--- | | Return on average assets | 0.53% | | Return on average equity | 9.50% | | Net interest margin (FTE) | 1.86% | | Efficiency ratio (non-GAAP) | 67.14% | | Nonperforming assets to total assets | 0.01% | | Tangible common equity ratio | 5.65% | Regulatory Capital Ratios (Consolidated, June 30, 2024) | Ratio | Value | | :--- | :--- | | Total risk-based capital | 11.85% | | Tier 1 risk-based capital | 9.30% | | Common equity tier 1 | 8.74% | [Non-GAAP Financial Measures](index=9&type=section&id=NON-GAAP%20FINANCIAL%20MEASURES) The company provides non-GAAP financial measures, such as FTE net interest margin and adjusted efficiency ratio, for enhanced performance analysis [Reconciliation of Non-GAAP Measures](index=9&type=section&id=Reconciliation%20of%20Non-GAAP%20Measures) The report reconciles non-GAAP measures like FTE net interest margin (1.86%) and adjusted efficiency ratio (67.14%) to their GAAP equivalents for clearer financial analysis - Management uses non-GAAP measures like **FTE net interest income** and an **adjusted efficiency ratio** to enhance comparability and provide useful information for analyzing financial performance[22](index=22&type=chunk) Non-GAAP Reconciliation Summary (Q2 2024) | Metric | GAAP Value | FTE / Adjusted Value (Non-GAAP) | | :--- | :--- | :--- | | Net Interest Income | $17,230 thousand | $17,285 thousand | | Net Interest Margin | N/A | 1.86% | | Efficiency Ratio | N/A | 67.14% | [Company Information and Forward-Looking Statements](index=3&type=section&id=About%20West%20Bancorporation%2C%20Inc.%20%28Nasdaq%3A%20WTBA%29) West Bancorporation, a community bank, provides an overview of its operations and discloses forward-looking statements subject to various market and economic risks [Company Overview and Disclosures](index=3&type=section&id=Company%20Overview%20and%20Disclosures) West Bancorporation, a community bank founded in 1893, operates across Iowa and Minnesota, with its forward-looking statements subject to various market and regulatory risks - West Bancorporation, Inc. is a **community bank holding company** with operations in Des Moines, Coralville, Rochester, Owatonna, Mankato, and St. Cloud, focusing on business and consumer lending, deposits, and trust services[10](index=10&type=chunk) - The report contains forward-looking statements that are subject to numerous risks, including **interest rate risk**, **competitive pressures** from fintech, **credit risks**, and changes in **economic and regulatory conditions**[11](index=11&type=chunk)

West Bancorp (WTBA) shares ended the last trading session 8.5% higher at $18.71. The jump came on an impressive volume with a higher-than-average number of shares changing hands in the session. This compares to the stock's 0.9% gain over the past four weeks. Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements. With cooling ...

West Bancorporation, Inc. (NASDAQ:WTBA) Q1 2024 Earnings Conference Call April 25, 2024 3:00 PM ET Company Participants Jane Funk - Chief Financial Officer Dave Nelson - Chief Executive Officer Harlee Olafson - Chief Risk Officer Brad Winterbottom - President Brad Peters - Minnesota Group President Conference Call Participants Andrew Liesch - Piper Sandler Operator Thanks for standing by. My name is Mandeep, and I will be your conference operator today. At this time, I would like to welcome everyone to the ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents West Bancorporation, Inc.'s unaudited consolidated financial statements for Q1 2024 and 2023, encompassing balance sheets, income statements, and detailed notes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to **$3.96 billion** by March 31, 2024, driven by loans and cash, while liabilities grew due to deposits, and equity slightly decreased Consolidated Balance Sheet Highlights (in thousands USD) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | **Total Assets** | **$3,962,692** | **$3,825,758** | | Cash and cash equivalents | $148,017 | $65,357 | | Loans, net | $2,951,760 | $2,899,193 | | Securities available for sale | $605,735 | $623,919 | | **Total Liabilities** | **$3,738,936** | **$3,600,715** | | Total deposits | $3,065,030 | $2,973,779 | | Federal Home Loan Bank advances | $315,000 | $315,000 | | **Total Stockholders' Equity** | **$223,756** | **$225,043** | [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) Net income for Q1 2024 decreased to **$5.8 million** from **$7.8 million** in Q1 2023, primarily due to a **$1.9 million** decline in net interest income Q1 2024 vs. Q1 2023 Income Statement (in thousands USD, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total Interest Income | $44,570 | $37,179 | | Total Interest Expense | $27,820 | $18,484 | | **Net Interest Income** | **$16,750** | **$18,695** | | Credit Loss Expense (benefit) | $0 | $0 | | Total Noninterest Income | $2,299 | $2,957 | | Total Noninterest Expense | $11,868 | $12,071 | | **Net Income** | **$5,809** | **$7,844** | | **Diluted EPS** | **$0.35** | **$0.47** | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes detail accounting policies, financial instruments, the securities portfolio's unrealized losses, strong loan credit quality, and off-balance-sheet commitments - As of March 31, 2024, the securities available for sale portfolio had **$129.6 million** in gross unrealized losses, primarily due to increased market interest rates[30](index=30&type=chunk)[35](index=35&type=chunk) - The loan portfolio grew to **$2.98 billion**, with an Allowance for Credit Losses of **$28.4 million** (0.95% of total loans), and minimal nonaccrual loans of **$289 thousand**, reflecting strong credit quality[37](index=37&type=chunk)[40](index=40&type=chunk)[53](index=53&type=chunk) - The company uses **$515 million** in interest rate swaps as cash flow hedges to manage interest rate risk on borrowings and deposits[82](index=82&type=chunk)[85](index=85&type=chunk) - Off-balance-sheet commitments totaled **$955 million**, primarily for real estate construction loans (**$343.8 million**) and other credit extensions (**$593.5 million**)[93](index=93&type=chunk)[94](index=94&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2024 financial results, noting a decrease in net income to **$5.8 million** due to net interest margin compression, while highlighting strong credit quality and capital position [Overview](index=33&type=section&id=Overview) Q1 2024 net income decreased to **$5.8 million** (**$0.35** diluted EPS) from **$7.8 million** in Q1 2023, primarily due to lower net interest income, despite loan growth and strong credit quality Q1 2024 Key Performance Metrics (in thousands USD, except percentages and EPS) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Income | $5,809 thousand | $7,844 thousand | | Diluted EPS | $0.35 | $0.47 | | Return on Average Assets | 0.61% | 0.88% | | Return on Average Equity | 10.63% | 14.77% | - The Board of Directors declared a quarterly cash dividend of **$0.25** per common share, payable on May 22, 2024[127](index=127&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) Q1 2024 operating results show net interest margin compression, with net interest income (FTE) falling **10.7%** to **$16.8 million**, while noninterest income decreased and noninterest expense slightly declined - Net interest margin (FTE) compressed to **1.88%** in Q1 2024 from **2.23%** in Q1 2023, as the cost of interest-bearing liabilities rose faster than asset yields[134](index=134&type=chunk)[138](index=138&type=chunk) - No credit loss expense was recorded in Q1 2024 or Q1 2023, with the allowance for credit losses deemed adequate at **$28.4 million**[142](index=142&type=chunk)[148](index=148&type=chunk) - Noninterest income fell by **$0.66 million**, primarily due to a non-recurring **$0.69 million** gain from a bank-owned life insurance death benefit claim in Q1 2023[150](index=150&type=chunk) - Noninterest expense decreased by **$0.20 million**, mainly from a **$0.38 million** reduction in salaries and employee benefits, partially offset by higher technology and FDIC insurance costs[152](index=152&type=chunk) [Financial Condition](index=41&type=section&id=Financial%20Condition) As of March 31, 2024, total assets grew to **$3.96 billion**, driven by a **$52.6 million** increase in loans, while deposits rose by **$91.3 million**, and capital ratios remained strong - Total loans grew by **$52.6 million** (**1.8%**) in Q1 2024, reaching **$2.98 billion**, with nonperforming assets remaining extremely low at **$289 thousand**[157](index=157&type=chunk)[160](index=160&type=chunk) - Total deposits increased by **$91.3 million** (**3.1%**), with brokered deposits rising to **$396.4 million**, and estimated uninsured deposits at approximately **27.2%** of total deposits[161](index=161&type=chunk)[162](index=162&type=chunk) - The company maintains significant available liquidity, including **$479 million** in FHLB borrowing capacity and **$73 million** from the Federal Reserve discount window[165](index=165&type=chunk) Capital Ratios as of March 31, 2024 (%) | Ratio | Consolidated Actual | To Be Well-Capitalized | | :--- | :--- | :--- | | Common Equity Tier 1 Capital | 8.67% | 6.50% | | Tier 1 Capital | 9.23% | 8.00% | | Total Capital | 11.78% | 10.00% | | Tier 1 Capital (Leverage) | 8.36% | 5.00% | [Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk, with an earnings simulation model projecting a **5.86%** decrease in net interest income for a **+100 bps** rate rise and a **1.57%** increase for a **-100 bps** rate fall Sensitivity of Net Interest Income (1-Year Horizon, % Change) | Change in Interest Rates | % Change in NII | | :--- | :--- | | +300 bps | (16.94)% | | +200 bps | (11.34)% | | +100 bps | (5.86)% | | -100 bps | 1.57% | | -200 bps | 1.63% | [Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) The CEO and CFO concluded that disclosure controls and procedures are effective, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the reporting period[177](index=177&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter[178](index=178&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) The company is not a party to any material pending legal proceedings beyond ordinary routine litigation incidental to its business - There are no material pending legal proceedings against the Company or its subsidiary, West Bank, outside of ordinary routine litigation[180](index=180&type=chunk) [Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's amended Form 10-K filed on February 23, 2024 - Management believes there have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K[181](index=181&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered sales of equity securities during the reporting period - None[182](index=182&type=chunk)

Financial Performance - First quarter 2024 net income was $5.8 million, or $0.35 per diluted common share, compared to $4.5 million, or $0.27 per diluted common share in Q4 2023, and $7.8 million, or $0.47 per diluted common share in Q1 2023[1] - The net income for the quarter was $5,809,000, representing a 28.3% increase from $4,525,000 in the previous quarter[15] - Basic and diluted earnings per common share increased to $0.35, up from $0.27 in the previous quarter, marking a 29.6% increase[16] - Adjusted income for the quarter was $19,131,000, up from $18,809,000 in the previous quarter, indicating a growth of 1.7%[22] Loans and Deposits - Loans increased by $52.6 million, or 7.2 percent annualized, in Q1 2024, primarily due to funding of previously committed construction loans[6] - Total loans reached $2,980,133 thousand, an increase of 1.8% from $2,927,535 thousand at the end of 2023[14] - Net loans amounted to $2,951,760 thousand, reflecting a rise of 1.8% compared to $2,899,193 thousand in the previous quarter[14] - Deposits increased by $91.3 million, or 3.1 percent, in Q1 2024, with brokered deposits totaling $396.4 million, up from $305.4 million at the end of Q4 2023[10] - Total deposits grew to $3,065,030 thousand, up 3.1% from $2,973,779 thousand at December 31, 2023[14] Asset Management - Total assets increased to $3,962,692 thousand as of March 31, 2024, up from $3,825,758 thousand at December 31, 2023, representing a growth of 3.6%[13] - The average balance of assets for the quarter was $3,812,199 thousand, compared to $3,706,497 thousand in the previous quarter, indicating an increase of 2.9%[13] - The tangible common equity ratio decreased to 5.65 percent at March 31, 2024, from 5.88 percent at December 31, 2023, due to accumulated other comprehensive losses[10] Income and Expenses - For the quarter ended March 31, 2024, total interest income increased to $44,570,000, up 4.4% from $42,683,000 in the previous quarter[15] - Net interest income after credit loss expense for the quarter was $16,750,000, compared to $15,861,000 in the previous quarter, reflecting a 5.6% increase[15] - Noninterest income totaled $2,299,000, a significant increase of 21.1% from $1,898,000 in the previous quarter[15] - Noninterest expense decreased to $11,868,000 from $12,161,000 in the previous quarter, showing a reduction of about 2.4%[22] Efficiency and Ratios - The efficiency ratio improved to 62.04 percent in Q1 2024 from 64.66 percent in Q4 2023, driven by an increase in net interest income[10] - The efficiency ratio on an adjusted and FTE basis improved to 62.04% from 64.66% in the previous quarter, indicating enhanced operational efficiency[23] - Return on average assets increased to 0.61% from 0.48% in the previous quarter, showing improved asset utilization[17] - The total risk-based capital ratio as of March 31, 2024, was 11.78%, slightly down from 11.88% in the previous quarter[16] Dividends and Stock Performance - The company declared a quarterly dividend of $0.25 per common share, payable on May 22, 2024[1] - The closing stock price as of March 31, 2024, was $17.83, down from $21.20 at the end of the previous quarter[16] - The annualized dividend yield increased to 5.61% from 4.72% in the previous quarter, reflecting a more attractive return for shareholders[16]

Part I [Business](index=6&type=section&id=ITEM%201.%20BUSINESS) West Bancorporation, Inc. operates West Bank, a business-focused community bank in Iowa and Minnesota, emphasizing strong customer relationships and credit quality under extensive regulation - The Company is a financial holding company primarily owning West Bank, a business-focused community bank established in 1893[17](index=17&type=chunk) - The Company operates across central and eastern Iowa and southern Minnesota, including major cities like Des Moines, Iowa City, and Rochester[19](index=19&type=chunk) Key Business Metrics (2022 vs 2023) | Metric | 2022 | 2023 | Change | | :--- | :--- | :--- | :--- | | Loans Outstanding | $2.7 billion | $2.9 billion | +6.7% | | Total Deposits | - | - | +3.2% | | Dividends per Share | - | $1.00 | - | - The company's strategy focuses on developing strong relationships with small- to medium-sized businesses, providing personalized attention and financial expertise[24](index=24&type=chunk) - As an FDIC-insured financial holding company, the business is extensively regulated by federal and state agencies, impacting capital levels, investments, and dividend payments[38](index=38&type=chunk)[39](index=39&type=chunk) [Risk Factors](index=17&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces inherent banking risks including credit concentration in commercial real estate, subjective allowance for credit losses, cybersecurity threats, interest rate sensitivity, intense competition, and extensive regulatory oversight impacting profitability and operations - The company's loan portfolio has a significant concentration in commercial real estate, posing risks from fluctuating property values and income dependency for repayment[94](index=94&type=chunk)[97](index=97&type=chunk) - The allowance for credit losses (ACL) is subjective, requiring significant management estimates, and an insufficient ACL could decrease net income and capital[99](index=99&type=chunk)[100](index=100&type=chunk) - The company is susceptible to cybersecurity threats, including fraud and data breaches, which could lead to financial losses, reputational damage, and litigation[107](index=107&type=chunk)[108](index=108&type=chunk) - Earnings are highly dependent on net interest income, sensitive to interest rate changes, where rising rates have compressed the net interest margin by increasing funding costs faster than asset yields[130](index=130&type=chunk)[131](index=131&type=chunk) - Operating in a highly regulated environment, changes in banking laws and regulations could adversely impact profitability, business practices, and compliance costs[136](index=136&type=chunk)[138](index=138&type=chunk) [Unresolved Staff Comments](index=30&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company reports no unresolved comments from the Securities and Exchange Commission (SEC) staff - There are no unresolved comments from the SEC staff[153](index=153&type=chunk) [Cybersecurity](index=30&type=section&id=ITEM%201C.%20CYBERSECURITY) The company maintains a comprehensive Information Security Program, overseen by the Board and its committees, to manage cybersecurity risks through safeguards, assessments, and training, with no material impact from identified threats to date - The company maintains an Information Security Program with administrative, technical, and physical safeguards to protect customer information[156](index=156&type=chunk) - Oversight is managed by the Information Security Committee, with ultimate responsibility from the Board of Directors and its Risk and Information Technology Committee for cybersecurity risk management[158](index=158&type=chunk)[159](index=159&type=chunk) - While cybersecurity threats are identified periodically, none have materially affected the company's business, operations, or financial condition to date[157](index=157&type=chunk) [Properties](index=33&type=section&id=ITEM%202.%20PROPERTIES) The company's corporate office is in West Des Moines, Iowa, with West Bank operating 11 locations across Iowa and Minnesota (six leased, five owned), and a new corporate headquarters expected in Q2 2024 - West Bank operates **11 locations** in total, comprising a main office and ten branches, with **six facilities leased and five owned**[160](index=160&type=chunk) - A new corporate headquarters is under construction in West Des Moines, Iowa, with an expected opening date of **April 15, 2024**[161](index=161&type=chunk) [Legal Proceedings](index=33&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) Neither the company nor West Bank is party to any material pending legal proceedings beyond ordinary litigation incidental to business - Neither the Company nor West Bank is party to any material pending legal proceedings, apart from ordinary litigation incidental to business[162](index=162&type=chunk) [Mine Safety Disclosures](index=33&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This section is not applicable to the company - Not applicable[163](index=163&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](index=34&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%2C%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's common stock trades on Nasdaq under 'WTBA', with **149 holders** as of February 16, 2024, and paid **$1.00 per share** in dividends for 2023 and 2022, intending to continue quarterly payments subject to approvals - The company's common stock is traded on the Nasdaq Global Select Market under the symbol **"WTBA"**[166](index=166&type=chunk) - Total cash dividends paid to common stockholders were **$1.00 per share** in both 2023 and 2022[167](index=167&type=chunk) Five-Year Stock Performance Comparison (Indexed) | Index | 12/31/2018 | 12/31/2019 | 12/31/2020 | 12/31/2021 | 12/31/2022 | 12/31/2023 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | West Bancorporation, Inc. | 100.00 | 139.47 | 109.93 | 183.00 | 156.60 | 137.21 | | Nasdaq Composite Index | 100.00 | 136.69 | 198.10 | 242.03 | 163.28 | 236.17 | | S&P U.S. BMI Banks - Midwest Region Index | 100.00 | 130.10 | 111.85 | 147.78 | 127.53 | 130.20 | [Reserved](index=36&type=section&id=ITEM%206.%20RESERVED) This item is reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Net income for 2023 significantly decreased to **$24.1 million** from **$46.4 million** in 2022, primarily due to a **24.7% drop** in net interest income and the adoption of CECL, while total assets grew **5.9% to $3.8 billion** and credit quality remained strong Financial Highlights (2023 vs 2022) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net Income | $24,137 thousand | $46,399 thousand | | Diluted EPS | $1.44 | $2.76 | | Return on Average Assets | 0.66% | 1.32% | | Return on Average Equity | 11.42% | 20.71% | | Net Interest Margin | 2.01% | 2.76% | | Total Assets | $3,825,758 thousand | $3,613,218 thousand | | Total Loans | $2,927,535 thousand | $2,742,836 thousand | | Total Deposits | $2,973,779 thousand | $2,880,408 thousand | - The **$22.7 million (24.7%) decrease** in 2023 net income was primarily due to a decline in net interest income, as rising short-term interest rates caused interest expense to increase more than interest income[195](index=195&type=chunk) - The company adopted the CECL standard on January 1, 2023, resulting in a **$700 thousand credit loss expense** in 2023, contrasting with a **$2.5 million credit loss benefit** in 2022 under the prior model[196](index=196&type=chunk)[250](index=250&type=chunk) [Critical Accounting Policies and Estimates](index=38&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) Management identifies fair value of financial instruments and the allowance for credit losses (ACL) as critical accounting policies, with ACL measured under the CECL model requiring significant judgment and estimates based on historical data, current conditions, and future forecasts - The company's most critical accounting policies are the fair value of financial instruments and the allowance for credit losses (ACL)[183](index=183&type=chunk) - The ACL is measured using a cash flow-based model under the CECL standard, requiring significant management judgment for economic forecasts and qualitative factors[186](index=186&type=chunk)[187](index=187&type=chunk) - The allowance for credit losses was **$28.3 million (0.97% of loans)** at year-end 2023, up from **$25.5 million (0.93% of loans)** at year-end 2022[188](index=188&type=chunk) [Results of Operations - 2023 Compared to 2022](index=41&type=section&id=RESULTS%20OF%20OPERATIONS%20-%202023%20COMPARED%20TO%202022) Net income for 2023 was **$24.1 million**, down from **$46.4 million** in 2022, primarily due to a **$22.7 million decrease** in net interest income and a **$0.7 million credit loss expense**, while noninterest expense increased by **7.9%** and the effective tax rate decreased to **18.9%** - Net interest income decreased by **$22.7 million (24.7%)** as interest expense on deposits and borrowings increased more than interest income on assets[195](index=195&type=chunk) - Noninterest expense increased by **$3.6 million (7.9%)**, driven by higher salaries and benefits (**+4.7%**), occupancy and equipment costs (**+12.1%**), and a **75.7% increase** in FDIC insurance expense[197](index=197&type=chunk)[205](index=205&type=chunk) - The effective income tax rate was **18.9%** in 2023, down from **21.9%** in 2022, with the 2022 rate including a one-time increase in state income tax expense[208](index=208&type=chunk) [Securities Portfolio](index=48&type=section&id=SECURITIES%20PORTFOLIO) The securities available for sale portfolio decreased by **$40.2 million** to **$623.9 million** at year-end 2023, with **61%** in government agency-guaranteed securities, and **$121.8 million** in gross unrealized losses attributed to interest rate changes, with no credit loss allowance deemed necessary - The balance of securities available for sale decreased by **$40.2 million** during 2023, primarily due to principal paydowns and a **$11.3 million** securities sale[226](index=226&type=chunk) - Approximately **61%** of the portfolio consists of government agency-guaranteed collateralized mortgage obligations and mortgage-backed securities, considered to have little to no credit risk[227](index=227&type=chunk) - The portfolio had gross unrealized losses of **$121.8 million** at year-end 2023, attributed to market interest rate changes rather than credit quality decline, with no allowance for credit losses recorded[230](index=230&type=chunk) [Loan Portfolio](index=49&type=section&id=LOAN%20PORTFOLIO) Total loans grew **6.7% to $2.93 billion** in 2023, driven by commercial real estate, construction, and residential mortgages, with a **77.4% concentration** in commercial real estate exceeding regulatory guidelines, yet credit quality remains strong with nonperforming loans at **0.01%** - Total loans outstanding increased by **6.7%** in 2023 compared to 2022[233](index=233&type=chunk) - Nonperforming loans remained stable at **0.01% of total loans** at year-end 2023 and 2022[201](index=201&type=chunk) - Loans classified as 'watch' significantly decreased from **$54.2 million** at year-end 2022 to **$0.14 million** at year-end 2023, primarily due to a large borrowing relationship upgrade[237](index=237&type=chunk) - The company's loan portfolio is concentrated in commercial real estate, exceeding regulatory guidelines, necessitating heightened risk management practices like stress testing and trend analysis[241](index=241&type=chunk)[243](index=243&type=chunk) [Summary of the Allowance for Credit Losses](index=52&type=section&id=SUMMARY%20OF%20THE%20ALLOWANCE%20FOR%20CREDIT%20LOSSES) Effective January 1, 2023, the company adopted CECL, increasing the ACL by **$2.5 million** upon adoption, with the ACL ending the year at **$28.3 million (0.97% of loans)**, and management believes it is adequate for expected lifetime losses - The company adopted the CECL standard on January 1, 2023, requiring a one-time adjustment that increased the ACL by **$2.458 million**[250](index=250&type=chunk)[260](index=260&type=chunk) Allowance for Credit Losses Ratios | Ratio | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | ACL to Total Loans | 0.97% | 0.93% | | Nonaccrual Loans to Total Loans | 0.01% | 0.01% | | ACL to Nonaccrual Loans | 9,575.00% | 7,910.87% | [Deposits](index=54&type=section&id=DEPOSITS) Total deposits increased **3.2% to $2.97 billion** at year-end 2023, facing significant competition and increasing funding costs, with brokered deposits totaling **$305.4 million** and estimated uninsured deposits at approximately **$1.44 billion** - Total deposits increased **3.2% to $2.97 billion** as of December 31, 2023[261](index=261&type=chunk) - The company utilizes brokered deposits, which increased to **$305.4 million** at year-end 2023 from **$272.7 million** at year-end 2022[262](index=262&type=chunk) - Total estimated uninsured deposits were **$1.44 billion** as of December 31, 2023[267](index=267&type=chunk) [Liquidity and Capital Resources](index=57&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company maintains sufficient liquidity with **$528 million** additional FHLB borrowing capacity and Federal Reserve access, while total stockholders' equity increased to **$225.0 million**, and both the company and West Bank met all well-capitalized regulatory requirements - As of December 31, 2023, West Bank had additional borrowing capacity of approximately **$528 million** from the FHLB and **$2.282 billion** from the Federal Reserve discount window[280](index=280&type=chunk) - Total stockholders' equity increased to **$225.0 million** at year-end 2023 from **$211.1 million** at year-end 2022, primarily due to net income less dividends and a decrease in accumulated other comprehensive loss[282](index=282&type=chunk) - The Company and West Bank met all capital adequacy requirements and were considered well-capitalized as of December 31, 2023[283](index=283&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=58&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's primary market risk is interest rate risk, managed by an Asset Liability Committee using an earnings simulation model, which estimates a **100 basis point rate increase** would decrease net interest income by **4.58%** over one year, while a **100 basis point decrease** would increase it by **3.16%** - The company's main market risk is interest rate risk, managed by an Asset Liability Committee using an earnings simulation approach to measure exposure[285](index=285&type=chunk)[286](index=286&type=chunk)[287](index=287&type=chunk) Estimated Change in Net Interest Income (One Year) | Change in Interest Rates | $ Change (thousands) | % Change | | :--- | :--- | :--- | | 300 bps rising | $(11,456) | (14.73)% | | 200 bps rising | $(7,187) | (9.24)% | | 100 bps rising | $(3,559) | (4.58)% | | 100 bps falling | $2,461 | 3.16% | | 200 bps falling | $4,786 | 6.16% | [Financial Statements and Supplementary Data](index=59&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section presents the company's consolidated financial statements and RSM US LLP's unqualified audit opinion on financial statements and internal controls, highlighting the Allowance for Credit Losses for Loans as a critical audit matter due to significant judgment and CECL adoption - The independent auditor, RSM US LLP, issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2023[292](index=292&type=chunk)[305](index=305&type=chunk) - The auditor identified the Allowance for Credit Losses for Loans as a critical audit matter due to significant judgments and complex estimations required by management, particularly under the new CECL model[297](index=297&type=chunk)[300](index=300&type=chunk) [Consolidated Balance Sheets](index=63&type=section&id=Consolidated%20Balance%20Sheets) As of December 31, 2023, total assets were **$3.83 billion**, up from **$3.61 billion** in 2022, driven by increased net loans, while total liabilities rose to **$3.60 billion**, and total stockholders' equity increased to **$225.0 million** Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $65,357 | $26,539 | | Securities available for sale | $623,919 | $664,115 | | Loans, net | $2,899,193 | $2,717,363 | | **Total Assets** | **$3,825,758** | **$3,613,218** | | **Liabilities & Equity** | | | | Total deposits | $2,973,779 | $2,880,408 | | Borrowings (FHLB, etc.) | $465,270 | $355,000 | | Subordinated notes, net | $79,631 | $79,369 | | **Total Liabilities** | **$3,600,715** | **$3,402,106** | | **Total Stockholders' Equity** | **$225,043** | **$211,112** | [Consolidated Statements of Income](index=64&type=section&id=Consolidated%20Statements%20of%20Income) For 2023, net income sharply declined to **$24.1 million** from **$46.4 million** in 2022, primarily due to net interest income falling to **$69.0 million** as interest expense more than doubled, alongside a **$0.7 million credit loss expense** and increased noninterest expenses Consolidated Income Statement Highlights (in thousands) | Account | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Total Interest Income | $160,305 | $123,349 | $107,280 | | Total Interest Expense | $91,274 | $31,609 | $12,221 | | **Net Interest Income** | **$69,031** | **$91,740** | **$95,059** | | Credit Loss Expense (Benefit) | $700 | $(2,500) | $(1,500) | | Total Noninterest Income | $10,066 | $10,208 | $9,729 | | Total Noninterest Expense | $48,611 | $45,051 | $43,380 | | **Net Income** | **$24,137** | **$46,399** | **$49,607** | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=109&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) The company reports no changes in or disagreements with its accountants regarding accounting principles, financial disclosure, or auditing scope within the last two years - There have been no changes in or disagreements with the Company's accountants in the two years prior to the most recent financial statements[501](index=501&type=chunk) [Controls and Procedures](index=109&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) As of December 31, 2023, the CEO and CFO concluded disclosure controls and procedures were effective, management asserted effective internal control over financial reporting, and no material changes occurred during Q4 2023 - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of the end of the period[502](index=502&type=chunk) - Management asserts that the Company maintained effective internal control over financial reporting as of December 31, 2023[506](index=506&type=chunk) - No material changes in internal control over financial reporting occurred during the fourth quarter of 2023[508](index=508&type=chunk) [Other Information](index=109&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) During Q4 2023, no directors or executive officers adopted or terminated any Rule 10b5-1 trading plans or other non-Rule 10b5-1 trading arrangements - During the fourth quarter of 2023, no directors or executive officers adopted or terminated any Rule 10b5-1 trading arrangement[509](index=509&type=chunk) [Disclosure Regarding Foreign Jurisdictions That Prevent Inspection](index=110&type=section&id=ITEM%209C.%20DISCLOSURE%20REGARDING%20FOREIGN%20JURISDICTIONS%20THAT%20PREVENT%20INSPECTION) This section is not applicable to the company - Not applicable[510](index=510&type=chunk) Part III [Directors, Executive Officers, and Corporate Governance](index=111&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%2C%20AND%20CORPORATE%20GOVERNANCE) Information on directors, executive officers, code of ethics, and the audit committee is incorporated by reference from the definitive Proxy Statement, with the company maintaining a Code of Conduct applicable to all personnel - Information required for this item is incorporated by reference from the Company's definitive Proxy Statement on Form DEF 14A[512](index=512&type=chunk) - The Company has a Code of Conduct applicable to all directors, officers, and employees, available on its website[513](index=513&type=chunk) [Executive Compensation](index=111&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) Information regarding executive and director compensation is incorporated by reference from the company's definitive Proxy Statement on Form DEF 14A - Information regarding executive compensation is incorporated by reference from the Company's definitive Proxy Statement[516](index=516&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=111&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) This section details the company's equity compensation plans, with **479,480 shares** to be issued upon exercise of outstanding rights and **266,963 shares** available for future issuance as of December 31, 2023, with further information incorporated by reference from the Proxy Statement Equity Compensation Plan Information (as of Dec 31, 2023) | Plan Category | Number of shares to be issued upon exercise (a) | Weighted-average exercise price (b) | Number of shares remaining available for future issuance (c) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by stockholders | 479,480 | — | 266,963 | | Total | 479,480 | — | 266,963 | - Additional information regarding security ownership of beneficial owners and management is incorporated by reference from the Company's definitive Proxy Statement[520](index=520&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=112&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) Information concerning related party transactions and director independence is incorporated by reference from the company's definitive Proxy Statement on Form DEF 14A - Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the Company's definitive Proxy Statement[521](index=521&type=chunk) [Principal Accountant Fees and Services](index=113&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) Information concerning principal accountant fees and services is incorporated by reference from the company's definitive Proxy Statement on Form DEF 14A - Information regarding principal accountant fees and services is incorporated by reference from the Company's definitive Proxy Statement[523](index=523&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=113&type=section&id=ITEM%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists financial statements, schedules, and exhibits filed as part of the Form 10-K, with consolidated financial statements in Item 8 and all schedules omitted as not applicable or included elsewhere, alongside a comprehensive exhibit list - The consolidated financial statements from Item 8 are incorporated by reference[525](index=525&type=chunk) - All financial statement schedules are omitted as not applicable or included in the financial statements or notes[526](index=526&type=chunk) [Form 10-K Summary](index=118&type=section&id=ITEM%2016.%20FORM%2010-K%20SUMMARY) The company has not provided a summary for its Form 10-K - None[533](index=533&type=chunk)

West Bancorporation, Inc. (NASDAQ:WTBA) Q4 2023 Earnings Conference Call January 25, 2024 3:00 PM ET Company Participants Jane Funk - EVP, Treasurer & CFO David Nelson - CEO Harlee Olafson - Chief Risk Officer Brad Winterbottom - President Bradley Peters - Minnesota Group President Conference Call Participants Andrew Liesch - Piper Sandler Operator Good afternoon, and welcome to West Bancorporation Inc.'s Fourth Quarter 2023 Earnings Call. Please note that this call is being recorded. All participants are n ...