West Bancorporation(WTBA) - 2020 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements This section presents West Bancorporation's unaudited consolidated financial statements for Q3 and YTD 2020, detailing financial position, performance, and cash flows Consolidated Balance Sheets Total assets increased to $2.78 billion by September 30, 2020, driven by loan growth and a rise in deposits Consolidated Balance Sheet Highlights (in millions) | Account | Sep 30, 2020 | Dec 31, 2019 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $2,775.9 | $2,473.7 | $302.2 | | Loans, net | $2,222.0 | $1,924.4 | $297.6 | | Investment securities available for sale | $374.4 | $398.6 | ($24.2) | | Total Liabilities | $2,560.6 | $2,261.9 | $298.7 | | Total deposits | $2,296.8 | $2,014.8 | $282.0 | | Total Stockholders' Equity | $215.3 | $211.8 | $3.5 | Consolidated Statements of Income Net income increased in Q3 and YTD 2020, driven by higher net interest income despite increased loan loss provisions Income Statement Highlights (in millions, except per share data) | Metric | Q3 2020 | Q3 2019 | YTD 2020 | YTD 2019 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $21.1 | $17.1 | $60.3 | $49.0 | | Provision for Loan Losses | $4.0 | $0.3 | $8.0 | $0.3 | | Net Income | $8.1 | $7.5 | $24.2 | $21.1 | | Diluted EPS | $0.49 | $0.46 | $1.46 | $1.28 | Consolidated Statements of Comprehensive Income Comprehensive income rose in Q3 2020 but declined year-to-date, primarily due to unrealized derivative losses Comprehensive Income (in millions) | Metric | Q3 2020 | Q3 2019 | YTD 2020 | YTD 2019 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $8.1 | $7.5 | $24.2 | $21.1 | | Total other comprehensive income (loss) | $1.4 | ($2.7) | ($11.3) | $0.8 | | Comprehensive Income | $9.5 | $4.9 | $12.9 | $21.9 | Consolidated Statements of Stockholders' Equity Total stockholders' equity increased, driven by net income offset by comprehensive loss and cash dividends - Key changes in stockholders' equity for the nine months ended Sep 30, 2020, include net income of $24.2 million, offset by other comprehensive loss of $11.3 million and cash dividends of $10.4 million[19] - Cash dividends declared were $0.63 per common share for the nine months ended Sep 30, 2020, compared to $0.62 for the same period in 2019[19] Consolidated Statements of Cash Flows Net cash from operating activities provided $31.1 million, with investing activities using $283.4 million, leading to a net increase in cash Cash Flow Summary (Nine Months Ended Sep 30, in millions) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $31.1 | $27.3 | | Net Cash from Investing Activities | ($283.4) | ($59.2) | | Net Cash from Financing Activities | $264.9 | $113.7 | | Net Increase in Cash | $12.6 | $81.8 | Notes to Consolidated Financial Statements This section details the Company's accounting policies, financial data disclosures, and COVID-19 pandemic impacts - The Company has elected to delay the adoption of ASU No. 2016-13 (CECL model) until fiscal years beginning after December 15, 2022[27] - The Company is evaluating the impact of reference rate reform (Topic 848), with optional guidance effective through December 31, 2022[30] - The COVID-19 pandemic is a significant uncertainty that could materially and adversely impact financial estimates, especially expected credit losses on loans[112] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance and condition, focusing on COVID-19 impacts, net interest income, loan loss provisions, and loan growth Significant Developments - Impact of COVID-19 The company details COVID-19's significant impact, its response including PPP loans and payment deferrals, and stressed industry exposures - Originated $224.5 million in Paycheck Protection Program (PPP) loans as a participating lender[124][129] - As of September 30, 2020, approximately $434.4 million (19.3%) of loans were in payment deferral status under COVID-19 related modifications[129] - Loan exposure to stressed industries (hotel, retail, restaurant, movie theater) was approximately $331.7 million, or 14.8% of the total loan portfolio, at September 30, 2020[130] Summary of Financial Performance Net income increased in Q3 and YTD 2020, driven by net interest income despite higher loan loss provisions and strong loan growth Quarterly Performance Highlights (in millions, except per share data) | Metric | Q3 2020 | Q3 2019 | | :--- | :--- | :--- | | Net Income | $8.1 | $7.5 | | Diluted EPS | $0.49 | $0.46 | | ROA (annualized) | 1.16% | 1.22% | | ROE (annualized) | 15.20% | 14.76% | - The Board of Directors declared a quarterly cash dividend of $0.21 per common share, maintaining the previous level due to economic uncertainty[129][144] - The allowance for loan losses to total loans ratio increased to 1.13% at Sep 30, 2020, from 0.89% at Dec 31, 2019, with the ratio at 1.26% excluding PPP loans[141] Results of Operations Operating results show significant net interest income growth, higher loan loss provisions, increased noninterest income, and modest expense growth Key Performance Ratios | Ratio | Nine Months 2020 | Nine Months 2019 | | :--- | :--- | :--- | | Return on average assets | 1.21% | 1.20% | | Return on average equity | 15.47% | 14.25% | | Net interest margin (FTE) | 3.19% | 2.95% | | Efficiency ratio (FTE) | 42.68% | 51.74% | Financial Condition Total assets grew to $2.78 billion, driven by loan and deposit increases, while nonperforming assets rose due to COVID-19 impacts - Total assets increased by $302.2 million to $2.78 billion in the first nine months of 2020[179] - Nonaccrual loans increased by $17.2 million to $17.8 million as of September 30, 2020, from $0.5 million at year-end 2019, due to downgrades of two COVID-19 affected borrowers[183][186] - The Texas ratio increased to 7.38% as of September 30, 2020, from 0.23% at December 31, 2019[183] Quantitative and Qualitative Disclosures About Market Risk Disclosure for market risk is not required for smaller reporting companies - Disclosure is not required for smaller reporting companies[200] Controls and Procedures Management concluded disclosure controls were effective, with no material changes to internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the reporting period[201] - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2020[202] PART II. OTHER INFORMATION Legal Proceedings The company is not involved in any material legal proceedings beyond ordinary routine litigation - The Company is not involved in any material legal proceedings outside of ordinary routine litigation[204] Risk Factors Updated risk factors highlight significant uncertainties and adverse impacts from the COVID-19 pandemic, including credit quality and PPP risks - The COVID-19 pandemic has had an adverse impact on the economy, with its duration and extent remaining highly uncertain[205] - As a PPP lender, the company faces litigation risks regarding loan processing and the risk that the SBA may not fully fund loan guarantees if deficiencies are found[211][213] - The pandemic has increased business risks, including potential declines in demand, increased loan delinquencies, reduced net interest margin, and potential loss of key employees[208][216][210] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the reporting period - None[214] Defaults Upon Senior Securities No defaults upon senior securities occurred during the reporting period - None[215] Mine Safety Disclosures This item is not applicable to the company - Not applicable[216] Other Information No other information is reported for this period - None[217] Exhibits This section lists exhibits filed, including CEO and CFO certifications and XBRL interactive data files - Exhibits filed include certifications from the CEO and CFO (31.1, 31.2, 32.1, 32.2) and XBRL data files (101 series)[218]