West Bancorporation(WTBA) - 2025 Q2 - Quarterly Results

Executive Summary and Key Financial Highlights West Bancorporation, Inc. reported strong Q2 2025 and year-to-date performance with increased net income, diluted EPS, and improved efficiency, while maintaining excellent credit quality Q2 2025 and Year-to-Date Performance West Bancorporation, Inc. reported a solid second quarter 2025 with increased net income and diluted EPS compared to both the previous quarter and the same quarter last year. The company also declared a regular quarterly dividend of $0.25 per common share | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :-------------------------------- | :------ | :------ | :------ | | Net income (in thousands) | $7,979 | $7,842 | $5,192 | | Diluted common share | $0.47 | $0.46 | $0.31 | | Metric | First Six Months 2025 | First Six Months 2024 | | :-------------------------------- | :-------------------- | :-------------------- | | Net income (in thousands) | $15,800 | $11,000 | | Diluted common share | $0.93 | $0.65 | - The Board of Directors declared a regular quarterly dividend of $0.25 per common share, payable on August 20, 2025, to stockholders of record on August 6, 2025[1] CEO Commentary on Performance and Credit Quality CEO David Nelson highlighted significant improvements in year-to-date net interest income, net interest margin, and efficiency ratio compared to the first six months of 2024. He emphasized the company's strong credit quality with no nonaccrual or past due loans and ongoing efforts to grow its core customer base - Significant improvements in year-to-date net interest income, net interest margin, and efficiency ratio compared to the first six months of 2024[2] - The company is well positioned for continued earnings improvement through asset repricing, controlled funding costs, and maintaining pristine credit quality[2] - Credit quality metrics remain strong with no loans on nonaccrual status and no loans past due greater than 90 days at June 30, 2025[2] Selected Quarterly Financial Highlights Key financial metrics for Q2 2025 show strong performance with a return on average equity of 13.65% and a significantly improved efficiency ratio of 56.45% compared to Q2 2024 | Metric | Quarter Ended June 30, 2025 | Quarter Ended March 31, 2025 | Quarter Ended June 30, 2024 | | :------------------------------ | :-------------------------- | :--------------------------- | :-------------------------- | | Net income (in thousands) | $7,979 | $7,842 | $5,192 | | Return on average equity | 13.65 % | 13.84 % | 9.50 % | | Return on average assets | 0.80 % | 0.81 % | 0.53 % | | Efficiency ratio (non-GAAP) | 56.45 % | 56.37 % | 67.14 % | | Nonperforming assets to total assets | 0.00 % | 0.00 % | 0.01 % | Comparative Financial Analysis The company's Q2 2025 performance showed a decrease in loans but a significant increase in deposits, leading to improved net interest income and efficiency compared to prior periods Second Quarter 2025 vs. First Quarter 2025 Comparing Q2 2025 to Q1 2025, the company experienced a decrease in loans primarily due to commercial and commercial real estate payoffs, while deposits saw a significant increase, particularly non-brokered deposits. Net interest income improved, though net interest margin slightly declined, and the efficiency ratio remained stable - Loans decreased by $50.1 million in Q2 2025, mainly due to decreases in commercial and commercial real estate loans, partially offset by an increase in construction loans. This was driven by customer payoffs and reduced line of credit utilization[4] - No credit loss expense on loans was recorded in either Q2 2025 or Q1 2025[4] | Metric | Q2 2025 | Q1 2025 | Change (QoQ) | | :-------------------------------- | :------ | :------ | :----------- | | Allowance for credit losses to total loans | 1.03 % | 1.01 % | +0.02 pp | | Nonaccrual loans | $0 | $181K | -$181K | | Deposits (in thousands) | $3,391,993 | $3,324,518 | +$67,475 (+2.0%) | | Brokered deposits (in thousands) | $208,300 | $335,500 | -$127,200 | | Non-brokered deposits (in thousands) | $3,183,693 | $2,989,018 | +$194,675 (+6.5%) | | Net interest margin (FTE) | 2.27 % | 2.28 % | -0.01 pp | | Net interest income (in thousands) | $21,400 | $20,900 | +$500 | | Efficiency ratio (non-GAAP) | 56.45 % | 56.37 % | +0.08 pp | | Tangible common equity ratio | 5.94 % | 5.97 % | -0.03 pp | Second Quarter 2025 vs. Second Quarter 2024 Comparing Q2 2025 to Q2 2024, the company demonstrated significant improvements in net interest margin and efficiency ratio, driven by decreased interest expense on deposits and borrowed funds. Deposits increased substantially, allowing for a reduction in higher-cost borrowed funds, while loans experienced a slight decrease - Loans decreased by $32.4 million (1.1%) at June 30, 2025, compared to June 30, 2024, primarily due to decreases in commercial and construction loans, partially offset by an increase in commercial real estate loans[6] - Deposits increased by $211.1 million (6.6%) at June 30, 2025, compared to June 30, 2024. Excluding brokered deposits, deposits increased by $373.1 million (13.3%)[6] | Metric | Q2 2025 | Q2 2024 | Change (YoY) | | :-------------------------------- | :------ | :------ | :----------- | | Borrowed funds (in thousands) | $390,300 | $525,500 | -$135,200 | | Net interest margin (FTE) | 2.27 % | 1.86 % | +0.41 pp | | Net interest income (in thousands) | $21,400 | $17,200 | +$4,200 | | Efficiency ratio (non-GAAP) | 56.45 % | 67.14 % | -10.69 pp | | Tangible common equity ratio | 5.94 % | 5.65 % | +0.29 pp | Detailed Financial Statements This section presents condensed balance sheets, detailed breakdowns of loans, deposits, borrowings, and stockholders' equity, along with consolidated statements of income for quarterly and year-to-date periods Condensed Balance Sheets The condensed balance sheets provide a snapshot of the company's financial position, showing total assets increased to $4.057 billion at June 30, 2025, from $3.965 billion at June 30, 2024, primarily driven by an increase in deposits | Metric (in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :-------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Total assets | $4,056,669 | $3,986,669 | $4,014,991 | $3,988,566 | $3,965,115 | | Loans, net | $2,935,818 | $2,985,945 | $2,974,428 | $2,991,802 | $2,970,352 | | Deposits | $3,391,993 | $3,324,518 | $3,357,596 | $3,278,553 | $3,180,922 | | Stockholders' equity | $240,930 | $237,873 | $227,875 | $235,353 | $223,883 | Loans and Credit Quality Loan balances decreased slightly quarter-over-quarter and year-over-year, with commercial loans seeing the most significant reduction. The company maintained excellent credit quality, with no substandard or doubtful loans at June 30, 2025, and a healthy allowance for credit losses | Loan Category (in thousands) | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--------------------------- | :------------ | :------------- | :------------ | | Commercial | $500,854 | $531,267 | $526,589 | | Construction, land and land development | $459,037 | $451,230 | $496,864 | | Commercial Real Estate | $1,875,857 | $1,909,330 | $1,856,301 | | Total loans | $2,966,357 | $3,016,471 | $2,998,774 | | Allowance for credit losses | $(30,539) | $(30,526) | $(28,422) | - Credit quality remained strong with no substandard or doubtful loans at June 30, 2025. 'Pass' category loans constituted the vast majority at $2,958,318 thousand[12] Deposits Total deposits increased significantly year-over-year and quarter-over-quarter, reaching $3.392 billion at June 30, 2025. This growth was primarily driven by non-brokered deposits, including a large municipal deposit, while brokered deposits decreased | Deposit Category (in thousands) | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :------------------------------ | :------------ | :------------- | :------------ | | Noninterest-bearing demand | $521,990 | $519,771 | $530,441 | | Interest-bearing demand | $461,207 | $517,409 | $443,658 | | Savings and money market - non-brokered | $1,749,049 | $1,490,189 | $1,483,264 | | Money market - brokered | $98,877 | $143,423 | $97,259 | | Time - non-brokered | $451,463 | $461,655 | $353,269 | | Time - brokered | $109,407 | $192,071 | $273,031 | | Total deposits | $3,391,993 | $3,324,518 | $3,180,922 | - A local municipal customer deposited approximately $243.0 million of bond proceeds in Q2 2025, expected to be withdrawn over 24 months[6] - Estimated uninsured deposits accounted for approximately 27.2% of total deposits at June 30, 2025[6] Borrowings Total borrowings significantly decreased year-over-year, primarily due to reductions in federal funds purchased and Federal Home Loan Bank advances, reflecting the increased deposit base | Borrowing Category (in thousands) | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :-------------------------------- | :------------ | :------------- | :------------ | | Federal funds purchased and other short-term borrowings | $0 | $0 | $85,500 | | Subordinated notes, net | $80,024 | $79,959 | $79,762 | | Federal Home Loan Bank advances | $270,000 | $270,000 | $315,000 | | Long-term debt | $40,236 | $41,486 | $45,236 | | Total borrowings | $390,260 | $391,445 | $525,498 | - The decrease in borrowed funds balances resulted primarily from the increase in deposits since June 30, 2024[6] Stockholders' Equity Stockholders' equity increased to $240.9 million at June 30, 2025, from $223.9 million at June 30, 2024, driven by retained net income and a decrease in accumulated other comprehensive loss | Equity Component (in thousands) | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :------------------------------ | :------------ | :------------- | :------------ | | Common stock | $3,000 | $3,000 | $3,000 | | Additional paid-in capital | $35,773 | $35,072 | $34,322 | | Retained earnings | $285,990 | $282,247 | $273,981 | | Accumulated other comprehensive loss | $(83,833) | $(82,446) | $(87,420) | | Total stockholders' equity | $240,930 | $237,873 | $223,883 | - The increase in stockholders' equity was due to retained net income and the decrease in accumulated other comprehensive loss[6] Consolidated Statements of Income (Quarterly) The consolidated statements of income for Q2 2025 show an increase in net interest income to $21.4 million, contributing to a net income of $8.0 million. Interest income from deposits with banks significantly increased quarter-over-quarter | Metric (in thousands) | Q2 2025 | Q1 2025 | Q2 2024 | | :-------------------- | :------ | :------ | :------ | | Total interest income | $47,962 | $46,136 | $47,568 | | Total interest expense | $26,543 | $25,281 | $30,338 | | Net interest income | $21,419 | $20,855 | $17,230 | | Credit loss expense | $0 | $0 | $0 | | Total noninterest income | $2,410 | $2,243 | $2,346 | | Total noninterest expense | $13,485 | $13,063 | $13,194 | | Income before income taxes | $10,344 | $10,035 | $6,382 | | Net income | $7,979 | $7,842 | $5,192 | | Diluted EPS | $0.47 | $0.46 | $0.31 | - Interest income from deposits with banks increased significantly from $1,617 thousand in Q1 2025 to $2,847 thousand in Q2 2025[13] Consolidated Statements of Income (Six Months Ended) For the first six months of 2025, net income increased to $15.8 million from $11.0 million in the prior year period, driven by a substantial increase in net interest income and a decrease in total interest expense | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Total interest income | $94,098 | $92,138 | | Total interest expense | $51,824 | $58,158 | | Net interest income | $42,274 | $33,980 | | Credit loss expense | $0 | $0 | | Total noninterest income | $4,653 | $4,645 | | Total noninterest expense | $26,548 | $25,062 | | Income before income taxes | $20,379 | $13,563 | | Net income | $15,821 | $11,001 | | Diluted EPS | $0.93 | $0.65 | - Net interest income for the first six months of 2025 increased by $8.294 million compared to the same period in 2024, primarily due to a decrease in interest expense[14] Key Financial Ratios and Shareholder Data This section highlights the company's strong capital position, improved profitability, and efficiency through key performance and regulatory capital ratios, alongside common share data Common Share Data Common share data reflects consistent quarterly dividends and an increase in book value per common share. The market price to book value ratio remained strong, indicating positive investor sentiment | Metric | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :-------------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Earnings per common share (diluted) | $0.47 | $0.46 | $0.42 | $0.35 | $0.31 | | Dividends per common share | $0.25 | $0.25 | $0.25 | $0.25 | $0.25 | | Book value per common share | $14.22 | $14.06 | $13.54 | $13.98 | $13.30 | | Closing stock price | $19.63 | $19.94 | $21.65 | $19.01 | $17.90 | | Market price/book value | 138.05 % | 141.82 % | 159.90 % | 135.98 % | 134.59 % | | Annualized dividend yield | 5.09 % | 5.02 % | 4.62 % | 5.26 % | 5.59 % | Regulatory Capital Ratios Both the Company and West Bank maintained strong regulatory capital ratios, with all ratios exceeding minimum requirements and showing an upward trend, indicating a robust capital position | Ratio | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :-------------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Consolidated: | | | | | | | Total risk-based capital ratio | 12.53 % | 12.18 % | 12.11 % | 11.95 % | 11.85 % | | Tier 1 risk-based capital ratio | 9.89 % | 9.59 % | 9.51 % | 9.39 % | 9.30 % | | Tier 1 leverage capital ratio | 8.33 % | 8.36 % | 7.93 % | 8.15 % | 8.08 % | | Common equity tier 1 ratio | 9.32 % | 9.02 % | 8.95 % | 8.83 % | 8.74 % | | West Bank: | | | | | | | Total risk-based capital ratio | 13.21 % | 12.90 % | 12.86 % | 12.73 % | 12.66 % | | Tier 1 risk-based capital ratio | 12.29 % | 11.99 % | 11.96 % | 11.86 % | 11.79 % | | Tier 1 leverage capital ratio | 10.36 % | 10.46 % | 9.97 % | 10.29 % | 10.25 % | | Common equity tier 1 ratio | 12.29 % | 11.99 % | 11.96 % | 11.86 % | 11.79 % | Key Performance Ratios Key performance ratios demonstrate improved profitability and efficiency. Return on average assets and equity increased year-over-year, and the net interest margin expanded significantly. The efficiency ratio showed substantial improvement, indicating better cost management | Metric | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------------- | :------ | :------ | :------ | :------ | :------ | :------- | :------- | | Return on average assets | 0.80 % | 0.81 % | 0.68 % | 0.60 % | 0.53 % | 0.80 % | 0.57 % | | Return on average equity | 13.65 % | 13.84 % | 12.24 % | 10.41 % | 9.50 % | 13.74 % | 10.07 % | | Net interest margin (FTE) | 2.27 % | 2.28 % | 1.98 % | 1.91 % | 1.86 % | 2.27 % | 1.87 % | | Yield on interest-earning assets | 5.07 % | 5.04 % | 5.02 % | 5.16 % | 5.13 % | 5.06 % | 5.06 % | | Cost of interest-bearing liabilities | 3.28 % | 3.25 % | 3.57 % | 3.84 % | 3.83 % | 3.27 % | 3.77 % | | Efficiency ratio (non-GAAP) | 56.45 % | 56.37 % | 60.79 % | 63.28 % | 67.14 % | 56.41 % | 64.62 % | | Nonperforming assets to total assets | 0.00 % | 0.00 % | 0.00 % | 0.01 % | 0.01 % | | | | ACL ratio | 1.03 % | 1.01 % | 1.01 % | 0.97 % | 0.95 % | | | | Tangible common equity ratio | 5.94 % | 5.97 % | 5.68 % | 5.90 % | 5.65 % | | | Non-GAAP Financial Measures This section provides reconciliations for non-GAAP financial measures, including net interest income and efficiency ratio on a fully tax-equivalent basis, to aid in financial performance analysis Reconciliation of Net Interest Income and Net Interest Margin (FTE) The company provides non-GAAP reconciliations for net interest income and net interest margin on a fully tax-equivalent (FTE) basis, which management believes offers useful information for evaluating financial performance and comparability within the banking industry - Non-GAAP financial measures, such as FTE net interest income and net interest margin, are used to provide useful information for analyzing and evaluating financial performance and enhancing comparability of income from taxable and nontaxable sources[21] | Metric (in thousands) | Q2 2025 | Q1 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------------- | :------ | :------ | :------ | :------- | :------- | | Net interest income (GAAP) | $21,419 | $20,855 | $17,230 | $42,274 | $33,980 | | Tax-equivalent adjustment | $59 | $66 | $55 | $125 | $137 | | Net interest income on a FTE basis (non-GAAP) | $21,478 | $20,921 | $17,285 | $42,399 | $34,117 | | Net interest margin on a FTE basis (non-GAAP) | 2.27 % | 2.28 % | 1.86 % | 2.27 % | 1.87 % | Reconciliation of Efficiency Ratio (Adjusted and FTE) The efficiency ratio, presented on an adjusted and FTE basis, is a non-GAAP measure that management uses to assess the company's financial performance and cost management, with a lower ratio being more desirable - The efficiency ratio expresses noninterest expense as a percentage of fully taxable equivalent net interest income and noninterest income, excluding specific noninterest income and expenses. A lower ratio is more desirable[23] | Metric (in thousands) | Q2 2025 | Q1 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------------- | :------ | :------ | :------ | :------- | :------- | | Net interest income on a FTE basis (non-GAAP) | $21,478 | $20,921 | $17,285 | $42,399 | $34,117 | | Noninterest income | $2,410 | $2,243 | $2,346 | $4,653 | $4,645 | | Adjusted income | $23,888 | $23,172 | $19,652 | $47,060 | $38,783 | | Noninterest expense | $13,485 | $13,063 | $13,194 | $26,548 | $25,062 | | Efficiency ratio on an adjusted and FTE basis (non-GAAP) | 56.45 % | 56.37 % | 67.14 % | 56.41 % | 64.62 % | Company Information and Disclosures This section provides an overview of West Bancorporation, Inc., details on forward-looking statements and associated risks, and information regarding additional financial disclosures and conference call access About West Bancorporation, Inc. West Bancorporation, Inc., headquartered in West Des Moines, Iowa, operates West Bank, a community bank providing lending, deposit, and trust services to businesses and consumers across multiple locations in Iowa and Minnesota - West Bancorporation, Inc. (Nasdaq: WTBA) is headquartered in West Des Moines, Iowa, and has served customers since 1893[9] - West Bank, a wholly-owned subsidiary, is a community bank focusing on lending, deposit services, and trust services for small- to medium-sized businesses and consumers[9] - The bank operates six offices in the Des Moines metropolitan area, one in Coralville, Iowa, and four in Minnesota (Rochester, Owatonna, Mankato, and St. Cloud)[9] Forward-Looking Statements and Risk Factors The report contains forward-looking statements regarding future business plans and operating results, which are subject to various risks and uncertainties. These risks include interest rate fluctuations, competitive pressures, technological changes, credit risks, and regulatory changes, among others - The report includes 'forward-looking statements' concerning business plans, objectives, and expected operating results, identified by words like 'believes,' 'expects,' 'intends,' and 'anticipates'[10] - Actual results could differ materially from forward-looking statements due to underlying assumptions being incorrect or not materializing as expected[10] - Key risks and uncertainties include interest rate risk, competitive pressures, technological changes (including AI), liquidity risk, credit risks, concentration of large deposits, economic conditions, bank failures, regulatory changes, cybersecurity incidents, and geopolitical events[10] Additional Information and Conference Call Details Further detailed financial results are available in the company's Form 10-Q filing. A conference call was scheduled for July 24, 2025, to discuss the results, with replay options available - The Company filed its report on Form 10-Q with the SEC, available on West Bank's Investor Relations website[7] - A conference call to discuss results was scheduled for 2:00 p.m. Central Time on Thursday, July 24, 2025, with replay available until August 7, 2025[8]