West Bancorporation(US:WTBA)2023-04-30 02:51Financial Data and Key Metrics Changes - The first quarter of 2023 saw a relatively flat performance in loan and deposit balances despite increased deposit costs and an inverted yield curve impacting net interest margins [5][6] - The net interest margin was reported at 2.23% for the quarter, down 26 basis points from the previous quarter, with March's margin at approximately 2.21% [19][31] - The company declared a regular quarterly dividend of $0.25 per common share, payable on May 24, 2023 [7] Business Line Data and Key Metrics Changes - Gross loans, including PPP loans, totaled $2.76 billion, reflecting an increase of just under 1% from the end of 2022, impacted by a reduced pipeline due to higher interest rates [13] - The loan portfolio is diversified, with significant concentrations in C&I loans ($527 million) and multifamily housing ($436 million), among others [10] Market Data and Key Metrics Changes - The company experienced a decline in deposits primarily due to broker and public fund deposits, with a $40 million increase in deposits noted in April following tax receipts [17] - There is significant competition in deposit rates, with customers migrating from low-interest accounts to higher-yielding options [18] Company Strategy and Development Direction - The company aims to maintain customer relationships and is willing to pay higher deposit rates to retain its customer base, focusing on long-term success [6][7] - Expansion efforts in Minnesota are ongoing, with new facilities planned to enhance business growth in that region [15] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding economic growth for the year, anticipating challenges due to higher interest rates and potential recession fears impacting loan demand [5][7] - Credit quality remains strong, with no loans past due for seven consecutive quarters, indicating a robust portfolio [9] Other Important Information - The company has a strong liquidity position, with $452 million available from Federal Home Loan Bank and Federal Reserve, alongside $350 million in unencumbered securities [18] - The efficiency ratio for the quarter was reported at 55%, higher than the typical range, primarily due to net interest margin pressures [34] Q&A Session Summary Question: Funding and deposit pricing evolution - Management noted that funding costs increased significantly in the first quarter, particularly in money market rates due to competitive pressure [21][22] Question: Impact of bank failures on deposit balances - Management indicated that recent bank failures did not significantly impact their deposit balances due to strong customer relationships [24] Question: New loan production rates - New loan production rates are currently in the mid- to high 6% range, with a loan-to-deposit ratio of approximately 98.5% [27][28] Question: Outlook for loan growth - Management does not expect double-digit growth in loans this year, indicating a more conservative outlook [30] Question: Credit quality in the office portfolio - The office portfolio is performing well, with strong cash flow and low loan-to-value ratios, indicating resilience in that segment [35][36] Question: Capital priorities and outlook - The company is in a strong capital position and expects to strengthen its capital through retained earnings and potential improvements in AOCI [38]