What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-02-24 compared with 2021-03-01 · 217 added, 251 removed, 1280 unchanged (27% of the section changed)

19 unchanged sentences

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matter or on the account or disclosures to which it relates.

Allowance for Loan Losses

5 unchanged sentences

The Company’s general component was developed based on historical loss ratios adjusted for qualitative factors not reflected in the historical loss experience.

Historical loss ratios are an annualized rate based on the loss history with more consideration given to the most recent loss experience.

Historical loss ratios are an annualized rate based on the loss history.

The qualitative factors include the Company’s lending policies and procedures, nature and volume of the portfolio, experience, depth and ability of lending management, volume and severity of past due, nonaccrual and classified loans, quality of the Company’s loan review system, value of underlying collateral, trends in commercial real estate loans, existence and effect of any concentrations and effects of other external factors.

9 unchanged sentences

/s/ RSM US LLP

We have served as the Company’s auditor since 1998.

Des Moines, Iowa

February 23, 2022

We have served as the Company’s auditor since 1998.

West Bancorporation, Inc.

36 unchanged sentences

Cash and cash equivalents 192,825 396,435

Investment securities available for sale, at fair value 420,571 398,578

Securities available for sale, at fair value 758,822 420,571

Federal Home Loan Bank stock, at cost 9,965 11,723

17 unchanged sentences

Subordinated notes, net 20,465 20,452

Federal Home Loan Bank advances, net 175,000 179,365

Federal Home Loan Bank advances 125,000 175,000

Long-term debt 51,521 21,558

24 unchanged sentences

Loans, including fees $ 95,585 $ 90,668 $ 85,512

Investment securities:

Taxable 8,542 7,818 10,031

18 unchanged sentences

Loan swap fees 66 1,572 —

Realized investment securities gains (losses), net 77 ( 87 ) ( 263 )

Realized securities gains (losses), net 51 77 ( 87 )

Other income 1,718 1,290 1,599

7 unchanged sentences

Director fees 765 868 993

Write-down of premises — — 333

Other expenses 8,998 7,248 6,944

15 unchanged sentences

Other comprehensive income (loss):

Unrealized gains (losses) on investment securities:

Unrealized gains (losses) on securities:

Unrealized holding gains (losses) arising during the period ( 14,684 ) 6,681 12,153

Unrealized gains on investment securities transferred from held to maturity to available for sale

reclassification adjustment for net (gains) losses realized in net income

( 51 ) ( 77 ) 87

other reclassification adjustment

Income tax benefit (expense) ( 1,667 ) ( 3,060 ) 1,806

Other comprehensive income (loss) on investment securities 4,937 9,180 ( 5,411 )

Income tax (expense) benefit 3,720 ( 1,667 ) ( 3,060 )

Other comprehensive income (loss) on securities ( 11,015 ) 4,937 9,180

Unrealized gains (losses) on derivatives:

2 unchanged sentences

8,284 4,156 ( 235 )

reclassification adjustment for amortization of derivative termination costs realized in interest expense

Income tax benefit (expense) 4,569 1,870 ( 290 )

reclassification adjustment for amortization of derivative termination costs — 31 93

Income tax (expense) benefit ( 4,107 ) 4,569 1,870

Other comprehensive income (loss) on derivatives 12,224 ( 13,522 ) ( 5,627 )

12 unchanged sentences

Balance, December 31, 2018 $ — 16,295,494 $ 3,000 $ 25,128 $ 169,709 $ ( 6,814 ) $ 191,023

Reclassification of stranded tax effects of rate change — — — — 370 ( 370 ) —

Net income — — — — 28,690 — 28,690

Other comprehensive loss, net of tax — — — — — ( 4,552 ) ( 4,552 )

Other comprehensive income, net of tax — — — — — 3,553 3,553

Cash dividends declared, $ 0.83 per common share

5 unchanged sentences

Net income — — — — 32,712 — 32,712

Other comprehensive income, net of tax — — — — — 3,553 3,553

Other comprehensive loss, net of tax — — — — — ( 8,585 ) ( 8,585 )

Cash dividends declared, $ 0.84 per common share

5 unchanged sentences

Net income — — — — 49,607 — 49,607

Other comprehensive loss, net of tax — — — — — ( 8,585 ) ( 8,585 )

Other comprehensive income, net of tax — — — — — 1,209 1,209

Cash dividends declared, $ 0.94 per common share

18 unchanged sentences

Net amortization and accretion 2,111 1,892 3,640

Investment securities (gains) losses, net ( 77 ) 87 263

Securities (gains) losses, net ( 51 ) ( 77 ) 87

Stock-based compensation 2,573 2,312 2,993

2 unchanged sentences

Depreciation 1,504 1,499 1,429

Write-down of premises — — 333

Deferred income taxes ( 3,025 ) ( 33 ) ( 359 )

(Benefit) provision for deferred income taxes 82 ( 3,025 ) ( 33 )

Change in assets and liabilities:

(Increase) decrease in accrued interest receivable 2,341 ( 4,097 ) 497

Increase in other assets ( 490 ) ( 1,029 ) ( 2,490 )

(Increase) decrease in other assets 2,118 ( 490 ) ( 1,029 )

Increase in accrued expenses and other liabilities 16 152 1,044

1 unchanged sentence

Cash Flows from Investing Activities:

Proceeds from sales of investment securities available for sale 139,819 198,699 75,401

Proceeds from maturities and calls of investment securities 76,065 46,755 45,937

Purchases of investment securities available for sale ( 232,409 ) ( 180,168 ) ( 96,170 )

Proceeds from sales of securities available for sale 30,374 139,819 198,699

Proceeds from maturities and calls of securities available for sale 95,733 76,065 46,755

Purchases of securities available for sale ( 481,140 ) ( 232,409 ) ( 180,168 )

Purchases of Federal Home Loan Bank stock ( 2,329 ) ( 9,338 ) ( 26,559 )

8 unchanged sentences

Net increase (decrease) in federal funds purchased ( 2,495 ) 2,715 ( 17,325 )

Proceeds from long-term debt — — 11,486

Net increase (decrease) in Federal Home Loan Bank advances ( 50,000 ) ( 5,000 ) 40,000

Proceeds from long-term debt 34,500 — —

Principal payments on long-term debt ( 4,537 ) ( 1,366 ) ( 4,115 )

12 unchanged sentences

Establishment of lease liabilities and right-of-use assets $ — $ — $ 10,435

Transfer of investment securities held to maturity to available for sale — — 45,527

See Notes to Consolidated Financial Statements.

7 unchanged sentences

operates in the commercial banking industry through its wholly-owned subsidiary, West Bank.

West Bank is a state chartered bank and has its main office in West Des Moines, Iowa, with seven additional offices located in the Des Moines, Iowa, metropolitan area, one office located in Coralville, Iowa, and four offices located in Minnesota, in the cities of Rochester, Owatonna, Mankato and St.

West Bank is a state chartered bank and has its main office in West Des Moines, Iowa, with six additional offices located in the Des Moines, Iowa, metropolitan area, one office located in Coralville, Iowa, and four offices located in Minnesota, in the cities of Rochester, Owatonna, Mankato and St.

As used herein, the term “Company” refers to West Bancorporation, Inc., or if the context dictates, West Bancorporation, Inc.

and its subsidiary.

Recent events :

On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic, which continues to cause disruption throughout the United States and around the world.

The COVID-19 pandemic has adversely affected, and continues to adversely affect, economic activity globally, nationally and locally.

Actions taken to help mitigate the spread of COVID-19 include restrictions on travel, lockdowns and stay-at-home orders, and forced closures for certain types of public places, businesses and schools.

While the economic fallout has stabilized somewhat, COVID-19 and actions taken to mitigate the spread of it have had and are expected to continue to have an adverse impact on the economy, including in the geographical area in which the Company operates.

The COVID-19 pandemic is a highly unusual, unprecedented and evolving public health and economic crisis and may have a material negative impact on our financial condition and results of operations.

The extent of the pandemic's effect on our business will depend on many factors, including the speed and extent of any recovery from the related economic recession.

Among other things, this will depend on the duration of the COVID-19 pandemic, particularly in our Iowa and Minnesota markets, the development and distribution of vaccines, therapies and other public health initiatives to control the spread of the disease, the nature and size of federal economic stimulus and other governmental efforts, and the possibility of additional state lockdown or stay-at-home orders in our markets.

It is reasonably possible that estimates made in the financial statements could be materially and adversely impacted in the near-term as a result of these conditions, including expected credit losses on loans.

The COVID-19 pandemic may produce declining asset quality, reflected by a higher level of loan delinquencies and loan charge-offs, as well as downgrades of commercial lending relationships, which may necessitate additional provisions for our allowance for loan losses and reduce net income.

Significant accounting policies :

5 unchanged sentences

Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change in the near term are the fair value of investment securities and derivatives, and the allowance for loan losses.

Material estimates that are particularly susceptible to significant change in the near term are the fair value of financial instruments and the allowance for loan losses.

Consolidation policy :

3 unchanged sentences

In accordance with GAAP, the results of the Trust are recorded on the books of the Company using the equity method of accounting and are not consolidated .

Reclassification :

Certain amounts in prior year financial statements have been reclassified, with no effect on net income, comprehensive income or stockholders’ equity, to conform with current period presentation.

Segment information:

2 unchanged sentences

Management makes operating decisions and assesses performance based on an ongoing review of the community banking activities, which constitutes the Company’s only operating segment for financial reporting purposes.

West Bancorporation, Inc.

and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

Comprehensive income :

Comprehensive income consists of net income and other comprehensive income (OCI).

OCI consists of the net change in unrealized gains and losses on the Company’s investment securities available for sale, including the noncredit-related portion of unrealized gains (losses) of other than temporarily impaired (OTTI) securities, if any, and the change in fair value of derivative instruments designated as hedges.

OCI also includes the amortization of derivative termination costs and the amortization of unrealized gains on investment securities transferred from available for sale to held to maturity.

OCI consists of the net change in unrealized gains and losses on the Company’s securities available for sale, including the noncredit-related portion of unrealized gains (losses) of other than temporarily impaired (OTTI) securities, if any, and the change in fair value of derivative instruments designated as hedges.

OCI also includes the amortization of derivative termination costs.

Cash and cash equivalents and cash flows :

1 unchanged sentence

Cash inflows and outflows from loans, deposits, federal funds purchased and FHLB advances are reported on a net basis.

Investment securities :

Investment securities that may be sold for general liquidity needs, in response to market interest rate fluctuations, implementation of asset-liability management strategies, funding loan demand, changes in securities prepayment risk or other similar factors are classified as available for sale and reported at fair value, with unrealized gains and losses reported as a separate component of accumulated other comprehensive income (AOCI), net of deferred income taxes.

Realized gains and losses on sales of investment securities are computed on a specific identification basis based on amortized cost.

The amortized cost of debt securities is adjusted for accretion of discounts to maturity and amortization of premiums over the estimated average life of each security or, in the case of callable securities, through the first call date, using the effective yield method.

Securities Available for Sale :

Securities that may be sold for general liquidity needs, in response to market interest rate fluctuations, implementation of asset-liability management strategies, funding loan demand, changes in securities prepayment risk or other similar factors are classified as available for sale and reported at fair value, with unrealized gains and losses reported as a separate component of accumulated other comprehensive income (AOCI), net of deferred income taxes.

Realized gains and losses on sales of securities are computed on a specific identification basis based on amortized cost.

The amortized cost of securities available for sale is adjusted for accretion of discounts to maturity and amortization of premiums over the estimated life of each security or, in the case of callable securities, through the first call date, using the effective yield method.

Such amortization and accretion is included in interest income.

Interest income on securities is recognized using the interest method according to the terms of the investment security.

The Company evaluates each of its investment securities whose value has declined below amortized cost to determine whether the decline in fair value is OTTI.

When determining whether an investment security is OTTI, management assesses the severity and duration of the decline in fair value, the length of time expected for recovery, the financial condition of the issuer and other qualitative factors, as well as whether:

Interest income on securities is recognized using the interest method according to the terms of the security.

West Bancorporation, Inc.

and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

The Company evaluates each of its securities whose value has declined below amortized cost to determine whether the decline in fair value is OTTI.

When determining whether a security is OTTI, management assesses the severity and duration of the decline in fair value, the length of time expected for recovery, the financial condition of the issuer and other qualitative factors, as well as whether:

(a) it has the intent to sell the security, and (b) it is more likely than not that it will be required to sell the security prior to its anticipated recovery.

4 unchanged sentences

The amount of the total OTTI related to all other factors is recognized in OCI.

If the Company intends to sell or it is more likely than not that it will be required to sell a security with OTTI before recovery of its amortized cost basis, the OTTI is recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date.

If the Company intends to sell or it is more likely than not that it will be required to sell a security with OTTI before recovery of its amortized cost basis, the OTTI is recognized in earnings equal to the entire difference between the security’s amortized cost basis and its fair value at the balance sheet date.

Federal Home Loan Bank stock :

7 unchanged sentences

All loan policies identified below apply to all segments of the loan portfolio.

West Bancorporation, Inc.

and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

Delinquencies are determined based on the payment terms of the individual loan agreements.

The accrual of interest on past due and other impaired loans is generally discontinued at 90 days past due or when, in the opinion of management, the borrower may be unable to make all payments pursuant to contractual terms.

Unless considered collectible, all interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income, if accrued in the current year, or charged to the allowance for loan losses, if accrued in the prior year.

Generally, all payments received while a loan is on nonaccrual status are applied to the principal balance of the loan.

7 unchanged sentences

The CARES Act provided financial institutions the option to temporarily suspend certain requirements under GAAP related to TDRs for a limited period of time in certain circumstances.

This temporary suspension may only be applied to modifications of loans that were not more than 30 days past due as of December 31, 2019 and may not be applied to modifications that are not related to the COVID-19 pandemic.

If elected, the temporary suspension may be applied to eligible modifications executed during the period beginning on March 1, 2020 and, as extended by the Coronavirus Response and Relief Supplemental Appropriations Act of 2021, ending on the earlier of January 1, 2022 or 60 days after the termination of COVID-19 national emergency.

In 2020, federal banking regulators, in consultation with FASB, issued interagency statements that included similar guidance on their approach for the accounting of loan modifications in light of the economic impact of the COVID-19 pandemic that provide that short-term modifications and additional accommodations made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs.

This temporary suspension was only applicable to modifications of loans that were not more than 30 days past due as of December 31, 2019 and was not applicable to modifications that were not related to the COVID-19 pandemic.

The temporary suspension was applied to eligible modifications executed during the period beginning on March 1, 2020 and, as extended by the Coronavirus Response and Relief Supplemental Appropriations Act of 2021, ending on January 1, 2022.

In 2020, federal banking regulators, in consultation with FASB, issued interagency statements that included similar guidance on their approach for the accounting of loan modifications in light of the economic impact of the COVID-19 pandemic that provided that short-term modifications and additional accommodations made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief were not TDRs.

West Bancorporation, Inc.

and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

Based upon its ongoing assessment of credit quality within the loan portfolio, the Company maintains a Watch List, which includes loans classified as Doubtful, Substandard and Watch according to the Company’s classification criteria.

2 unchanged sentences

Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, as a practical expedient, at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent.

The amount of impairment, if any, and any subsequent changes are included in the allowance for loan losses.

The amount of impairment, if any, and any subsequent changes are included in the specific component of the allowance for loan losses.

Allowance for loan losses :

9 unchanged sentences

In addition, regulatory agencies, as integral parts of their examination processes, periodically review the Company’s allowance for loan losses, and may require the Company to make additions to the allowance based on their judgment about information available to them at the time of their examinations.

West Bancorporation, Inc.

and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

Premises and equipment :

5 unchanged sentences

An impairment loss is measured as the amount by which the carrying amount of the asset group exceeds its fair value.

No indicators of impairment were identified as of December 31, 2020 and 2019.

Other real estate owned :

8 unchanged sentences

Assets held by West Bank in fiduciary or agency capacities, other than trust cash on deposit at West Bank, are not included in the consolidated balance sheets of the Company, as such assets are not assets of West Bank.

The Company managed or administered accounts with assets totaling $ 395,887 as of December 31, 2020, compared to assets totaling $ 359,585 as of December 31, 2019.

The Company managed or administered accounts with assets totaling $ 462,105 and $ 395,887 as of December 31, 2021 and 2020, respectively.

Bank-owned life insurance :

2 unchanged sentences

Increases in cash value and the portion of death benefits recognized as income are exempt from income taxes.

West Bancorporation, Inc.

and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

The Company uses derivative financial instruments, which consist of interest rate swaps, to assist in its interest rate risk management.

10 unchanged sentences

The Company does not use derivative instruments for trading or speculative purposes.

West Bancorporation, Inc.

and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

The Company formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative instruments that are used are highly effective in offsetting changes in cash flows of the hedged items.

6 unchanged sentences

Stock-based compensation:

The Company’s equity incentive plans were approved by the stockholders as a means to attract, retain and reward selected participants.

The plans are administered by the Compensation Committee of the Board of Directors.

Compensation expense for stock-based awards is recognized on a straight-line basis over the vesting period, or until the participant reaches full retirement age if less than the vesting period, using the fair value of the award at the time of the grant.

The restricted stock unit (RSU) participants do not have dividend rights prior to vesting, so the fair value of nonvested RSUs is equal to the fair market value of the underlying common stock at the grant date, reduced by the present value of the dividends expected to be paid on the underlying shares during the vesting period.

The Company accounts for forfeitures as they occur.

Compensation expense for stock-based awards is recorded over the vesting period, or until the participant reaches full retirement age if less than the vesting period, at the fair value of the award at the time of grant.

Certain grants of restricted stock units (RSUs) are subject to performance-based vesting and cliff vest based on those conditions.

Compensation expense is recognized over the service period to the extent restricted stock awards are expected to vest.

The fair value of RSUs granted under the Company’s incentive plans is equal to the fair market value of the underlying stock at the grant date, adjusted for dividends and required post vesting holding periods where applicable.

The Company has elected to record forfeitures as they occur .

See Note 13 Stock Compensation Plans for further information.

Deferred compensation:

3 unchanged sentences

The Deferred Compensation Plan is an unfunded, nonqualified deferred compensation plan intended to conform to the requirements of Section 409A of the Internal Revenue Code.

Liabilities accrued under the Deferred Compensation Plan totaled $ 203 and none as of December 31, 2020 and 2019, respectively.

Liabilities accrued under the Deferred Compensation Plan totaled $ 432 and $ 203 as of December 31, 2021 and 2020, respectively.

West Bancorporation, Inc.

and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

Income taxes :

12 unchanged sentences

Interest and penalties, if any, related to income taxes are recorded as other noninterest expense in the consolidated income statements in the year assessed.

West Bancorporation, Inc.

and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

Revenue recognition :

18 unchanged sentences

Credit losses relating to available for sale debt securities should be recorded through an allowance for credit losses.

West Bancorporation, Inc.

and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

In December 2019, the FASB issued ASU No.

8 unchanged sentences

While we currently cannot reasonably estimate the impact of adopting this standard, we expect the impact will be influenced by the composition, characteristics and quality of our loan and securities portfolios, as well as the general economic conditions and forecasts as of the adoption date.

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement .

The amendments in this update modify the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures.

The update is effective for interim and annual periods in fiscal years beginning after December 15, 2019, with early adoption permitted for the removed disclosures and delayed adoption until the fiscal year 2020 permitted for the new disclosures.

The removed and modified disclosures will be adopted on a retrospective basis, and the new disclosures will be adopted on a prospective basis.

The adoption did not have a material effect on the Company’s consolidated financial statements.

In April 2019, the FASB issued ASU No.

3 unchanged sentences

The Company is currently evaluating the impact of the ASU on the Company’s consolidated financial statements.

West Bancorporation, Inc.

and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

In March 2020, the FASB issued ASU No.

5 unchanged sentences

The Company is currently evaluating the impact of the reference rate reform on the Company’s consolidated financial statements.

In October 2020, the FASB issued ASU No.

2020-08, Codification Improvements to Subtopic 310-20, Receivables-Nonrefundable Fees and Other Costs .

The amendments in this update clarify that an entity should reevaluate whether a callable debt security is within the scope of ASC paragraph 310-20-35-33 for each reporting period.

The amendments in this update are effective for public business entities beginning after December 15, 2020.

The Company does not expect the guidance to have a material impact on the Company's consolidated financial statements.

In January 2021, the FASB issued ASU No.

2021-01, Reference Rate Reform (Topic 848):

The amendments in this update refine the scope for certain optional expedients and exceptions for contract modifications and hedge accounting to apply to derivative contracts and certain hedging relationships affected by the discounting transition.

The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022.

The Company is currently evaluating the impact of the reference rate reform on the Company’s consolidated financial statements.

Earnings per Common Share

12 unchanged sentences

(dollars in thousands, except per share data)

Investment Securities

The following tables show the amortized cost, gross unrealized gains and losses and fair value of investment securities, by investment security type as of December 31, 2020 and 2019.

Securities Available for Sale

The following tables show the amortized cost, gross unrealized gains and losses and fair value of securities available for sale, by security type as of December 31, 2021 and 2020.

Cost Gross Unrealized

7 unchanged sentences

Collateralized loan obligations 37,880 59 ( 157 ) 37,782

Corporate notes 12,750 62 ( 52 ) 12,760

$ 765,546 $ 5,076 $ ( 11,800 ) $ 758,822

7 unchanged sentences

82,994 651 ( 122 ) 83,523

Asset-backed securities (2)

17,551 66 ( 17 ) 17,600

Collateralized loan obligations 52,822 50 ( 1,118 ) 51,754

Corporate notes and other investments 15,300 — ( 1,283 ) 14,017

$ 412,559 $ 9,792 $ ( 1,780 ) $ 420,571

(1) All collateralized mortgage obligations and mortgage-backed securities consist of residential mortgage pass-through securities and real estate mortgage investment conduits guaranteed by FNMA, FHLMC or GNMA, and commercial mortgage pass-through securities guaranteed by the SBA.

(2) Pass-through asset-backed securities guaranteed by the SBA, representing participating interests in pools of commercial working capital and equipment loans.

Investment securities with an amortized cost of approximately $ 232,206 and $ 148,257 as of December 31, 2020 and 2019, respectively, were pledged to secure access to the Federal Reserve discount window, for public fund deposits, and for other purposes as required or permitted by law or regulation.

The amortized cost and fair value of investment securities available for sale as of December 31, 2020, by contractual maturity, are shown below.

(1) Collateralized mortgage obligations and mortgage-backed securities consist of residential and commercial mortgage pass-through securities and collateralized mortgage obligations guaranteed by FNMA, FHLMC, GNMA and SBA.

Securities with an amortized cost of approximately $ 295,961 and $ 232,206 as of December 31, 2021 and 2020, respectively, were pledged to secure access to the Federal Reserve discount window, for public fund deposits, and for other purposes as required or permitted by law or regulation.

The amortized cost and fair value of securities available for sale as of December 31, 2021, by contractual maturity, are shown below.

Certain securities have call features that allow the issuer to call the securities prior to maturity.

11 unchanged sentences

(dollars in thousands, except per share data)

The details of the sales of investment securities for the years ended December 31, 2020, 2019 and 2018 are summarized in the following table.

The details of the sales of securities available for sale for the years ended December 31, 2021, 2020 and 2019 are summarized in the following table.

2021 2020 2019

12 unchanged sentences

Collateralized loan obligations 22,821 ( 157 ) — — 22,821 ( 157 )

Corporate notes 4,198 ( 52 ) — — 4,198 ( 52 )

$ 530,081 $ ( 10,295 ) $ 36,246 $ ( 1,505 ) $ 566,327 $ ( 11,800 )

4 unchanged sentences

Securities available for sale:

State and political subdivisions $ 48,752 $ ( 514 ) $ — $ — $ 48,752 $ ( 514 )

Collateralized mortgage obligations 9,275 ( 26 ) — — 9,275 ( 26 )

Mortgage-backed securities 14,183 ( 122 ) — — 14,183 ( 122 )

Asset-backed securities 3,641 ( 4 ) 7,075 ( 13 ) 10,716 ( 17 )

Collateralized loan obligations 14,667 ( 206 ) 32,026 ( 912 ) 46,693 ( 1,118 )

Corporate notes 4,499 ( 501 ) 9,518 ( 782 ) 14,017 ( 1,283 )

$ 86,877 $ ( 868 ) $ 32,026 $ ( 912 ) $ 118,903 $ ( 1,780 )

As of December 31, 2020, the available for sale investment securities with unrealized losses included 19 state and political subdivisions, three collateralized mortgage obligations, two mortgage-backed securities and eight collateralized loan obligations.

The Company believes the unrealized losses on investment securities available for sale as of December 31, 2020 were due to market conditions, including interest rate fluctuations, rather than reduced estimated cash flows.

The Company does not intend to sell these securities, does not anticipate that these securities will be required to be sold before anticipated recovery, and expects full principal and interest to be collected.

Therefore, the Company does not consider these investments to have OTTI as of December 31, 2020.

As of December 31, 2021, securities available for sale with unrealized losses included 43 state and political subdivisions, 31 collateralized mortgage obligations, 19 mortgage-backed securities, three collateralized loan obligations and four corporate notes.

Collateralized loan obligation securities are debt securities backed by pools of senior secured commercial loans to a diverse group of companies across a broad spectrum of industries.

At December 31, 2021, the Company only owned collateralized loan obligations that were rated AAA or AA.

The Company believes the unrealized losses on securities available for sale as of December 31, 2021 were due to market conditions rather than reduced estimated cash flows.

At December 31, 2021, the Company did not intend to sell these securities, did not anticipate that these securities will be required to be sold before anticipated recovery, and expected full principal and interest to be collected.

Therefore, the Company does not consider these securities to have other than temporary impairment as of December 31, 2021.

West Bancorporation, Inc.

13 unchanged sentences

$ 2,456,196 $ 2,280,575

Included in commercial loans at December 31, 2020, were $ 180,757 of loans originated in the PPP, which was established by the CARES Act, enacted on March 27, 2020, in response to the COVID-19 pandemic.

The PPP is administered by the SBA.

Included in commercial loans at December 31, 2021 and 2020, were $ 22,206 and $ 180,757 , respectively, of loans originated in the Paycheck Protection Program (PPP).

The PPP was established by the Coronavirus Aid, Relief and Economic Security Act (CARES Act), enacted on March 27, 2020, and expanded by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, enacted on December 27, 2020 and the American Rescue Plan Act, enacted on March 11, 2021, in response to the Coronavirus Disease 2019 (COVID-19) pandemic.

The PPP is administered by the Small Business Administration (SBA).

PPP loans may be forgiven by the SBA and are 100 percent guaranteed by the SBA.

No allowance for loan losses has been allocated to PPP loans.

Therefore, no allowance for loan losses is allocated to PPP loans.

The loan portfolio included $ 1,719,109 and $ 1,605,525 of fixed-rate loans and $ 741,617 and $ 681,224 of variable-rate loans as of December 31, 2021 and 2020, respectively.

43 unchanged sentences

Total impaired loans $ 8,948 $ 8,948 $ 2,500 $ 16,194 $ 16,194 $ 3,000

The balance of impaired loans was composed of loans to two and six different borrowers, as of December 31, 2020 and 2019, respectively.

As of December 31, 2020, $ 377 of total impaired loans to one of the borrowers was also considered impaired as of December 31, 2019.

The balance of impaired loans was composed of loans to the same two borrowers as of both December 31, 2021 and 2020.

The Company has no commitments to advance additional funds on any of the impaired loans.

62 unchanged sentences

Total $ 18 $ — $ — $ 18 $ 2,270,537 $ 16,194 $ 2,286,749

TDR loans totaled $ 0 and $ 4 as of December 31, 2020 and 2019, respectively, and were included in the nonaccrual category.

There were no loan modifications considered to be TDR that occurred during the years ended December 31, 2020 and 2019 and one loan modification considered to be TDR that occurred during the year ended December 31, 2018.

TDR loans totaled $ 8,599 and $ 0 as of December 31, 2021 and December 31, 2020, respectively, and were included in the nonaccrual category.

There were six loan modifications related to one borrower considered to be TDR that occurred during the year ended December 31, 2021.

The modifications included significant payment delays.

A specific reserve of $ 2,500 and $ 3,000 related to these loans was recorded at December 31, 2021 and December 31, 2020, respectively.

There were no loan modifications considered to be TDR that occurred during the years ended December 31, 2020 and 2019.

The pre- and post-modification recorded investment in TDR loans that have occurred during the years ended December 31, 2021, 2020 and 2019, totaled $ 14,044 , $ 0 and $ 0 , respectively.

The financial impact of charge-offs or specific reserves for these modified loans was immaterial.

TDR loans that have been modified within the twelve months ended December 31, 2020, 2019 and 2018, which have subsequently had a payment default, totaled $ 0 , $ 0 and $ 544 , respectively.

There were no TDR loans that have been modified within the twelve months ended December 31, 2021, 2020 and 2019 that have subsequently had a payment default.

A TDR loan is considered to have a payment default when it is past due 30 days or more.

4 unchanged sentences

The CARES Act provided financial institutions the option to temporarily suspend certain requirements under GAAP related to TDRs for a limited period of time in certain circumstances.

In 2020, federal banking regulators in consultation with FASB issued interagency statements that included similar guidance on their approach for the accounting of loan modifications in light of the economic impact of the COVID-19 pandemic that provide that short-term modifications and additional accommodations made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs.

This temporary suspension only applied to modifications of loans that were not more than 30 days past due as of December 31, 2019 and could not be applied to modifications that were not related to the COVID-19 pandemic.

If elected, this temporary suspension applied to eligible modifications executed during the period beginning on March 1, 2020 and, as extended by the Coronavirus Response and Relief Supplemental Appropriations Act of 2021, ending on January 1, 2022.

In 2020, federal banking regulators in consultation with FASB issued interagency statements that included similar guidance on their approach for the accounting of loan modifications in light of the economic impact of the COVID-19 pandemic that provided that short-term modifications and additional accommodations made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief were not TDRs.

At December 31, 2021, there were no COVID-19-related loan modifications.

At December 31, 2020, COVID-19-related loan modifications totaled $ 139,940 .

The modifications primarily include a deferral of principal and/or interest payments.

Expiration of the deferrals range from January 2021 through June 2021.

Modifications have been made for hotel loans totaling $ 64,449 , movie theater loans totaling $ 17,863 , mixed-use commercial real estate loans totaling $ 38,177 and other commercial and commercial real estate loans totaling $ 19,451 as of December 31, 2020.

Modified loans continue to accrue interest and are evaluated for past due status based on the revised payment terms, except for one borrower relationship classified as impaired.

The modifications primarily included a deferral of principal and/or interest payments.

Modified loans continued to accrue interest and were evaluated for past due status based on the revised payment terms, except for one borrower relationship classified as impaired.

All COVID-19-related modifications expired during 2021 and these loans returned to regular payment status.

The following tables show the recorded investment in loans by credit quality indicator and loan segment as of December 31, 2021 and 2020.

17 unchanged sentences

Total $ 2,242,108 $ 26,715 $ 17,926 $ — $ 2,286,749

West Bancorporation, Inc.

and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

All loans are subject to the assessment of a credit quality indicator.

6 unchanged sentences

The loan is secured by properly margined marketable securities, bonds or cash surrender value of life insurance.

West Bancorporation, Inc.

and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

Risk rating 3:

34 unchanged sentences

The risk of declining collateral values is present for most types of loans.

West Bancorporation, Inc.

and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

Commercial loans consist primarily of loans to businesses for various purposes, including revolving lines to finance current operations, inventory and accounts receivable, and capital expenditure loans to finance equipment and other fixed assets.

6 unchanged sentences

The Company’s loan policy includes minimum appraisal and other credit guidelines.

West Bancorporation, Inc.

and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

Consumer loans include loans extended to individuals for household, family and other personal expenditures not secured by real estate.

69 unchanged sentences

Operating Leases

The Company leases real estate for its main office, nine branch offices and office space for operations departments under various operating lease agreements.

The Company leases real estate for its main office, eight branch offices and office space for operations departments under various operating lease agreements.

The lease agreements have maturity dates ranging from May 2023 to February 2033, some of which include options to renew at the Company's discretion.

4 unchanged sentences

Operating lease right-of-use assets are included in premises and equipment.

Operating lease liabilities of $ 7,686 and $ 9,102 are included in other liabilities as of December 31, 2020 and 2019, respectively.

Operating lease liabilities of $ 5,938 and $ 7,686 were included in other liabilities as of December 31, 2021 and 2020, respectively.

Rent expense related to these leases was $ 1,958 , $ 1,673 and $ 1,630 , for the years ended December 31, 2021, 2020 and 2019, respectively.

10 unchanged sentences

2022 $ 174,005

Short-term brokered time deposits totaled zero and $ 50,000 as of December 31, 2020 and 2019, respectively.

Time deposits as of December 31, 2020 and 2019, included $ 71,286 and $ 95,889 , respectively, of Certificate of Deposit Account Registry Service deposits, which is a program that coordinates, on a reciprocal basis, a network of banks to spread deposits exceeding the FDIC insurance coverage limits out to numerous institutions in order to provide insurance coverage for all participating deposits.

Also included in total deposits as of December 31, 2020 and 2019, were $ 85,348 and $ 95,618 , respectively, of Insured Cash Sweep (ICS) interest-bearing checking and $ 304,077 and $ 235,411 , respectively, of ICS money market deposits.

These are also reciprocal programs providing insurance coverage for all participating deposits.

Subordinated Notes

10 unchanged sentences

Holders of the trust preferred securities associated with the junior subordinated debentures have no voting rights, are unsecured, and rank junior in priority to all the Company’s indebtedness and senior to the Company’s common stock.

The junior subordinated debentures are reported net of unamortized debt issuance costs of $ 167 and $ 181 as of December 31, 2020 and 2019, respectively.

The Company has an interest rate swap contract that effectively converts $ 20,000 of the variable-rate junior subordinated debentures to a fixed rate.

The junior subordinated debentures were reported net of unamortized debt issuance costs of $ 154 and $ 167 as of December 31, 2021 and 2020, respectively.

The Company has an interest rate swap contract that effectively converts $ 20,000 of the variable-rate junior subordinated debentures to a fixed rate of 4.81 percent.

See Note 11 for additional information on the interest rate swap.

5 unchanged sentences

Federal Home Loan Bank and Other Borrowings

The following table presents the terms of all FHLB advances as of December 31, 2020 and 2019.

December 31, 2020 December 31, 2019

Weighted Weighted Weighted Weighted

Average Average Average Average

Contractual Effective Contractual Effective

Balance Rate Rate (1)

Fixed-rate advances maturing:

2020 $ — — % — % $ 125,000 1.87 % 2.21 %

2021 175,000 0.35 % 2.27 % — — % — %

Variable-rate advances maturing:

2020 — — % — % 55,000 2.27 % 4.46 %

175,000 0.35 % 2.27 % 180,000 1.99 % 2.90 %

Discount for modification — ( 635 )

FHLB advances, net of discount $ 175,000 $ 179,365

(1) The effective interest rate includes adjustments for discount amortization and interest rate swap terms, if applicable.

Fixed-rate advances are short-term advances with maturities of 1 to 3 months.

The Company had fixed-rate FHLB advances totaling $ 125,000 and $ 175,000 as of December 31, 2021 and December 31, 2020, respectively.

The weighted average contractual rates on these advances were 0.32 percent and 0.35 percent as of December 31, 2021 and December 31, 2020, respectively, while the weighted average effective rate for these advances were 2.09 percent and 2.27 percent as of December 31, 2021 and December 31, 2020, respectively.

The effective interest rate on these advances includes adjustments for discount amortization and interest rate swaps, if applicable.

Fixed-rate advances are short-term advances with maturities of one to three months.

The Company has interest rate swaps related to the interest cash flows of these rolling short-term FHLB advances.

See Note 11 for additional information on interest rate swaps hedging FHLB advances.

Variable-rate advances were long-term advances.

These advances were modified in prior years to extend their terms and to convert the borrowings to a variable rate.

In connection with these modifications, the Company paid a prepayment fee which was amortized and recognized as interest expense over the remaining terms of the advances.

For the years ended December 31, 2020, 2019 and 2018, the Company amortized $ 635 , $ 1,486 and $ 1,496 , respectively, of interest expense related to the discount.

Previous long-term FHLB advances had modification-related discounts being amortized and recognized as interest expense over the terms of those advances.

For the years ended December 31, 2021, 2020 and 2019, the Company recognized $ 0 , $ 635 and $ 1,486 , respectively, of interest expense related to the discount.

The FHLB advances are collateralized by FHLB stock and real estate loans, as required by the FHLB’s collateral policy.

7 unchanged sentences

Long-Term Debt

In May 2017, the Company entered into a credit agreement with an unaffiliated commercial bank and borrowed $ 25,000 .

The borrowing was used to make a capital injection into West Bank in May 2017.

In June 2019, the Company modified the principal payment requirements of the credit agreement.

Under the terms of the modification, required quarterly principal payments of $ 625 resumed in August 2020, with the balance due in May 2022.

O n December 15, 2021, the Company entered into a credit agreement with a commercial bank and borrowed $ 40,000 .

This credit agreement replaced a prior credit agreement with the same commercial bank that had a remaining outstanding balance of $ 5,500 .

The additional borrowings were used to make a capital injection into the Company’s subsidiary, West Bank.

Interest under the term note is payable quarterly over five years with the first payment due February 2022.

Required quarterly princip al payments of $ 1,250 begin May 2023, with the remaining balance due February 2027.

The Company may make additional principal payments without penalty.

Interest under the term note is payable quarterly.

The interest rate is variable at 1.95 percent plus 30-day LIBOR , which totaled 2.10 percent as of December 31, 2020.

In the event of default, the commercial bank may accelerate payment of the loan.

The outstanding balance was $ 10,000 and $ 11,250 as of December 31, 2020 and 2019, respectively.

The interest rate is variable at the Wall Street Journal Prime Rate minus 1.00 percent, which totaled 2.25 percent as of December 31, 2021.

In the event of default, the unaffiliated commercial bank may accelerate payment of the loan.

The outstanding balance was $ 40,000 as of December 31, 2021.

The note is secured by 100 percent of West Bank’s stock.

The prior note that was replaced by this credit agreement had an outstanding balance of $ 10,000 as of December 31, 2020 .

West Bank’s special purpose subsidiary has a credit agreement for $ 11,486 .

2 unchanged sentences

The outstanding balance was $ 11,486 as of December 31, 2021 and 2020.

Future required principal payments for long-term debt as of December 31, 2021 are shown in the table below.

Thereafter 32,290

West Bancorporation, Inc.

2 unchanged sentences

(dollars in thousands, except per share data)

Future required principal payments for long-term debt as of December 31, 2020 are shown in the table below.

Thereafter 11,486

The Company has entered into various interest rate swap agreements as part of its interest rate risk management strategy.

The Company uses interest rate swap agreements to manage its exposure to the variability of interest payments on variable-rate and short-term borrowings and deposits due to interest rate movements.

The Company uses interest rate swaps to manage its interest rate risk exposure on certain loans, variable-rate and short-term borrowings, and deposits due to interest rate movements.

The notional amounts of the interest rate swaps do not represent amounts exchanged by the counterparties, but rather, the notional amount is used to determine, along with other terms of the derivative, the amounts to be exchanged between the counterparties.

2 unchanged sentences

total notional amounts of $ 255,000 and $ 305,000 at December 31, 2021 and 2020, respectively.

As of December 31, 2020, the Company had swaps with a total notional amount of $ 175,000 that hedge the interest payments of rolling fixed-rate one- or three-month funding consisting of FHLB advances or brokered deposits.

As of December 31, 2021, the Company had swaps with a total notional amount of $ 125,000 that hedge the interest payments of rolling fixed-rate one-month funding consisting of FHLB advances or brokered deposits.

Also, as of December 31, 2021, the Company had a swap with a total notional amount of $ 20,000 that effectively converts variable-rate junior subordinated notes to fixed-rate debt and swaps with a total notional amount of $ 110,000 that hedge the interest payments of certain deposit accounts.

In March 2021, the Company terminated interest rate swaps with a total notional amount of $ 50,000 .

In the second quarter of 2021, the Company repaid $ 50,000 of FHLB advances related to these terminated swaps as a result of excess liquidity and in response to market conditions.

Pre-tax losses of $ 3,600 were reclassified from AOCI and recorded in noninterest income at termination.

At the inception of each hedge transaction, the Company represented that the underlying principal balance would remain outstanding throughout the hedge transaction, making it probable that sufficient interest payments would exist through the maturity date of the swaps.

12 unchanged sentences

The customer accommodations and any offsetting swaps are treated as non-hedging derivative instruments, which do not qualify for hedge accounting.

The Company entered into forward-starting interest rate swaps with a total notional amount of $ 100,000 in January 2021 that were not accounting hedges.

These swaps were terminated in March 2021, and the resulting gains of $ 3,781 were recorded in noninterest income.

West Bancorporation, Inc.

3 unchanged sentences

The table below identifies the balance sheet category and fair values of the Company’s derivative instruments as of December 31, 2021 and 2020.

Amount Fair Value Balance Sheet

Category Weighted Average Floating Rate Weighted Average Fixed Rate Weighted Average Maturity - Years

December 31, 2021 December 31, 2020

Cash Flow Hedges:

December 31, 2020

Interest rate swaps $ 305,000 $ ( 23,848 ) Other Liabilities 0.38 % 2.17 % 5.0

December 31, 2019

Interest rate swaps $ 215,000 $ ( 5,786 ) Other Liabilities 1.84 % 2.26 % 5.5

Interest rate swaps 70,000 403 Other Assets 2.62 % 2.37 % 5.2

Forward starting interest rate swaps (1)

50,000 ( 343 ) Other Liabilities — % 1.74 % 6.1

Gross notional amount $ 255,000 $ 305,000

Fair value in other liabilities ( 7,517 ) ( 23,848 )

Weighted-average floating rate received 0.39 % 0.38 %

Weighted-average fixed rate paid 2.09 % 2.17 %

Weighted-average maturity in years 4.2 5.0

Non-Hedging Derivatives:

December 31, 2020

Interest rate swaps - counterparty $ 83,876 $ 492 Other Assets 2.90 % 3.47 % 9.8

Interest rate swaps - loan customer 83,876 ( 492 ) Other Liabilities 2.90 % 3.47 % 9.8

(1) The fixed rate for forward starting swaps represents the fixed rate to be paid beginning on the scheduled start dates of the swaps.

No interest payments were required related to these swaps prior to their effective dates.

Gross notional amount $ 172,008 $ 167,752

Fair value in other assets 3,887 492

Fair value in other liabilities ( 3,887 ) ( 492 )

The following table identifies the pretax gains or losses recognized on the Company’s derivative instruments designated as cash flow hedges for the years ended December 31, 2021, 2020 and 2019.

Amount of Pretax Gain (Loss) Recognized in OCI Reclassified from AOCI into Income

Category Amount of Gain (Loss)

December 31, 2020 $ ( 22,278 ) Interest Expense $ ( 4,187 )

December 31, 2019 $ ( 7,355 ) Interest Expense $ 142

December 31, 2018 $ 1,044 Interest Expense $ ( 105 )

The Company estimates there will be approximately $ 5,456 reclassified from AOCI to interest expense through December 31, 2021.

The Company will continue to assess the effectiveness of the hedges on a quarterly basis.

2021 2020 2019

Pre-tax gain (loss) recognized in other comprehensive income $ 8,047 $ ( 22,278 ) $ ( 7,355 )

Reclassification from AOCI into income:

(Increase) decrease in interest expense $ ( 4,684 ) $ ( 4,187 ) $ 142

Decrease in noninterest income, swap termination fees ( 3,600 ) — —

The Company estimates there will be approximately $ 4,337 reclassified from accumulated other comprehensive income to interest expense through December 31, 2022 related to cash flow hedges.

The Company will continue to assess the effectiveness of hedges on a quarterly basis.

The Company is exposed to credit risk in the event of nonperformance by interest rate swap counterparties, which is minimized by collateral-pledging provisions in the agreements.

33 unchanged sentences

Stock compensation ( 195 ) ( 0.3 ) 97 0.2 ( 13 ) —

Amended tax returns — — % — — % 222 0.6 %

Federal income tax credits ( 1,368 ) ( 2.2 ) ( 1,239 ) ( 3.0 ) ( 1,265 ) ( 3.5 )

8 unchanged sentences

Allowance for loan losses $ 7,176 $ 7,418

Net unrealized losses on securities available for sale 1,701 —

Net unrealized losses on interest rate swaps 1,903 6,010

3 unchanged sentences

State net operating loss carryforward 1,276 1,197

Capital loss carryforward — 3

14,913 17,696

16 unchanged sentences

2017 Equity Incentive Plan (the 2017 Plan).

Upon approval of the 2017 Plan, the 2012 Plan was frozen, and no new grants were made under that plan.

Upon approval of the 2021 Plan, the 2017 Plan was frozen and no new grants will be made under that plan.

Outstanding awards under the 2017 Plan will continue pursuant to their terms and provisions.

The 2017 Plan and the 2012 Plan are administered by the Compensation Committee of the Board of Directors, which determines the specific individuals who will be granted awards under the 2017 Plan and the type and amount of any such awards.

All employees and directors of, and service providers to, the Company and its subsidiary are eligible to become participants in the 2017 Plan, except that nonemployees may not be granted incentive stock options.

The 2021 and 2017 Plans are administered by the Compensation Committee of the Board of Directors, which determines the specific individuals who will be granted awards under the 2021 Plan and the type and amount of any such awards.

All employees and directors of the Company and its subsidiary are eligible to become participants in the 2021 Plan.

Under the terms of the 2021 Plan, the Company may grant a total of 625,000 shares of the Company’s common stock as nonqualified and incentive stock options, stock appreciation rights and stock awards.

As of December 31, 2021, 612,000 shares of the Company’s common stock remained available for future awards under the 2021 Plan.

West Bancorporation, Inc.

and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

Under the 2021 Plan, the Company may grant RSU awards, as determined by the Compensation Committee, that vest upon the completion of future service requirements or specified performance criteria.

1 unchanged sentence

Each RSU entitles the participant to receive one share of common stock on the vesting date or upon the participant’s termination due to death or disability, or upon a change in control of the Company if the RSUs are not fully assumed or if the RSUs are assumed and the participant’s employment is thereafter terminated by the Company without cause or by the participant for good reason.

RSUs granted to employees vest 20 percent per year over a five year period, and RSUs granted to directors vest after one year.

If a participant terminates employment prior to the end of the continuous service period other than due to death, disability or retirement, the award is forfeited.

If a participant terminates service due to retirement, the RSUs will continue to vest, subject to provisions of the 2021 and 2017 Plans.

West Bancorporation, Inc.

and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

RSUs granted to employees prior to 2021 vest 20 percent per year over a five year period, and RSUs granted to directors vest after one year.

In 2021, the Company granted time-based and performance-based RSU awards.

The time-based RSU awards granted to employees vest 20 percent per year over a five year period and have a one year post-vesting holding period.

The time-based RSU awards granted to directors vest after one year and have a one year post-vesting holding period.

The performance based RSU awards granted to employees cliff vest at the end of a three year performance period based upon the Company meeting certain performance metrics and have a one year post-vesting holding period.

The following table includes a summary of nonvested RSU activity for the years ended December 31, 2021, 2020 and 2019.

12 unchanged sentences

Total compensation costs, including director compensation, recorded for the RSUs were $ 2,573 , $ 2,312 and $ 2,993 for the years ended December 31, 2021, 2020 and 2019, respectively.

The tax expense related to vesting of RSUs totaled $ 116 for the year ended December 31, 2020.

The tax benefit related to the vesting of RSUs totaled $ 15 and $ 261 , respectively, for the years ended December 31, 2019 and 2018.

The tax benefit related to vesting of RSUs totaled $ 233 and $ 15 for the years ended December 31, 2021 and 2019, respectively.

The tax expense related to the vesting of RSUs totaled $ 116 for the year ended December 31, 2020.

As of December 31, 2021, there was $ 3,680 of unrecognized compensation cost related to nonvested RSUs, and the weighted average period over which these remaining costs are expected to be recognized was approximately 1.6 years.

12 unchanged sentences

Accumulated Other Comprehensive Income (Loss)

The following table summarizes the changes in the balances of each component of AOCI, net of tax, for the years ended December 31, 2020, 2019 and 2018.

The following table summarizes the changes in the balances of each component of accumulated other comprehensive income (loss), net of tax, for the years ended December 31, 2021, 2020 and 2019.

Unrealized Accumulated

3 unchanged sentences

Balance, December 31, 2018 $ ( 8,123 ) $ 1,309 $ ( 6,814 )

Transfer of securities held to maturity to securities

available for sale 273 — 273

Other comprehensive income (loss) before reclassifications 9,115 ( 5,517 ) 3,598

2 unchanged sentences

Net current period other comprehensive income (loss) 9,180 ( 5,627 ) 3,553

Reclassification of stranded tax effects ( 475 ) 105 ( 370 )

Balance, December 31, 2019 1,057 ( 4,318 ) ( 3,261 )

65 unchanged sentences

Prior to March 26, 2020, West Bank was required to maintain an average reserve balance with the Federal Reserve Bank.

The required reserve balance, which was included in cash and due from banks, was approximately $ 4,836 as of December 31, 2019.

On March 26, 2020, in response to the COVID-19 pandemic, the reserve requirement was reduced to zero .

On March 26, 2020, in response to the COVID-19 pandemic, the reserve requirement was reduced to zero , and remained at zero as of December 31, 2021.

Financial instruments with off-balance sheet risk :

6 unchanged sentences

The Company’s commitments consisted of the following approximate amounts as of December 31, 2021 and 2020.

Commitments to extend credit $ 832,590 $ 672,117

Commitments to fund real estate construction loans $ 294,580 $ 271,280

Other commitments to extend credit 585,678 561,310

Standby letters of credit 17,391 23,295

19 unchanged sentences

The Company had commitments to invest in qualified affordable housing projects totaling $ 3,986 and $ 3,505 as of December 31, 2021 and 2020, respectively.

During 2020, the Company began construction on a new office in Sartell, Minnesota, which had a commitment of $ 8,324 as of December 31, 2020.

During 2020, the Company began construction on a new office in Sartell, Minnesota, which had a remaining commitment of $ 1,578 and $ 8,324 as of December 31, 2021 and December 31, 2020, respectively.

West Bancorporation, Inc.

12 unchanged sentences

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts business.

The Company’s balance sheet contains investment securities available for sale and derivative instruments that are recorded at fair value on a recurring basis.

The Company’s balance sheet contains securities available for sale and derivative instruments that are recorded at fair value on a recurring basis.

The three-level valuation hierarchy for disclosure of fair value is as follows:

5 unchanged sentences

The following is a description of valuation methodologies used for financial assets and liabilities recorded at fair value on a recurring basis.

Investment securities available for sale:

When available, quoted market prices are used to determine the fair value of investment securities (Level 1).

Securities available for sale:

When available, quoted market prices are used to determine the fair value of securities (Level 1).

If quoted market prices are not available, the Company determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable (Level 2).

The fair values of these securities are determined by pricing models that consider observable market data such as interest rate volatilities, yield curves, credit spreads, prices from market makers and live trading systems.

For the corporate bond portfolio, the Company has elected to use a matrix pricing model as a practical expedient to individual quoted market prices.

Management obtains the fair value of investment securities at the end of each reporting period via a third-party pricing service.

Management obtains the fair value of securities at the end of each reporting period via a third-party pricing service.

Management reviewed the valuation process used by the third party and believed that process was valid.

On a quarterly basis, management corroborates the fair values of a randomly selected sample of investment securities by obtaining pricing from an independent source and compares the two sets of fair values.

On a quarterly basis, management corroborates the fair values of a randomly selected sample of securities by obtaining pricing from an independent financial market data provider and compares the two sets of fair values.

Any significant variances are reviewed and investigated.

For a sample of securities, the fair values are further validated by management, by obtaining details of the inputs used by the pricing service.

Those inputs were independently tested, and management concluded the fair values were consistent with GAAP requirements and the investment securities were properly classified in the fair value hierarchy.

Those inputs were independently tested, and management concluded the fair values were consistent with GAAP requirements and the securities were properly classified in the fair value hierarchy.

Derivative instruments:

10 unchanged sentences

Financial assets:

Investment securities available for sale:

Securities available for sale:

State and political subdivisions $ 232,447 $ — $ 232,447 $ —

2 unchanged sentences

Collateralized loan obligations 37,782 — 37,782 —

Derivative instrument, interest rate swap 492 — 492 —

Corporate notes 12,760 — 12,760 —

Derivative instrument, interest rate swaps 3,887 — 3,887 —

Financial liabilities:

Derivative instrument, interest rate swap $ 24,340 $ — $ 24,340 $ —

Derivative instrument, interest rate swaps $ 11,404 $ — $ 11,404 $ —

Description Total Level 1 Level 2 Level 3

Financial assets:

Investment securities available for sale:

Securities available for sale:

State and political subdivisions $ 144,332 $ — $ 144,332 $ —

1 unchanged sentence

Mortgage-backed securities 83,523 — 83,523 —

Asset-backed securities 17,600 — 17,600 —

Collateralized loan obligations 51,754 — 51,754 —

Corporate notes 14,017 — 14,017 —

Derivative instrument, interest rate swap 403 — 403 —

Derivative instrument, interest rate swaps 492 — 492 —

Financial liabilities:

Derivative instrument, interest rate swap $ 6,129 $ — $ 6,129 $ —

Derivative instrument, interest rate swaps $ 24,340 $ — $ 24,340 $ —

Certain assets are measured at fair value on a nonrecurring basis.

That is, they are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

As of December 31, 2020, there was $ 12,817 in impaired loans that had a fair value adjustment.

As of December 31, 2019, there were no impaired loans with a fair value adjustment.

Impaired loans are classified within Level 3 of the fair value hierarchy.

Impaired loans with a net book value of $ 6,099 and $ 12,817 for which a fair value adjustment was recorded were classified as Level 3 as of December 31, 2021 and December 31, 2020, respectively.

As of December 31, 2021, impaired loans with a carrying value of $ 8,599 were reduced by a specific reserve of $ 2,500 , resulting in a reported fair value of $ 6,099 .

As of December 31, 2020, impaired loans with a carrying value of $ 15,817 were reduced by a specific reserve of $ 3,000 , resulting in a reporting fair value of $ 12,817 .

In determining the estimated net realizable value of the underlying collateral of impaired loans, the Company primarily uses third-party appraisals or broker opinions which may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach.

2 unchanged sentences

Because of the high degree of judgment required in estimating the fair value of collateral underlying impaired loans and because of the relationship between fair value and general economic conditions, the Company considers the fair value of impaired loans to be highly sensitive to changes in market conditions.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2020.

Valuation Technique Unobservable Inputs Range (Weighted Average)

Impaired loans Appraisal of collateral Appraisal adjustment 7% selling costs

West Bancorporation, Inc.

2 unchanged sentences

(dollars in thousands, except per share data)

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis.

Valuation Technique Unobservable Inputs Range (Weighted Average)

December 31, 2021

Impaired loans Appraisal of collateral Appraisal adjustment 50%, including selling costs

December 31, 2020

Impaired loans Appraisal of collateral Appraisal adjustment 7% selling costs

GAAP requires disclosure of the fair value of financial assets and liabilities, including those that are not measured and reported at fair value on a recurring or nonrecurring basis.

6 unchanged sentences

Federal funds sold 175,270 175,270 175,270 — —

Investment securities available for sale 420,571 420,571 — 420,571 —

Securities available for sale 758,822 758,822 — 758,822 —

Federal Home Loan Bank stock 9,965 9,965 9,965 — —

6 unchanged sentences

Subordinated notes, net 20,465 17,122 — 17,122 —

Federal Home Loan Bank advances, net 175,000 175,000 — 175,000 —

Long-term debt, net 21,558 21,556 — 21,556 —

Federal Home Loan Bank advances 125,000 125,000 — 125,000 —

Long-term debt 51,521 51,521 — 51,521 —

Accrued interest payable 519 519 519 — —

Interest rate swap 24,340 24,340 — 24,340 —

Interest rate swaps 11,404 11,404 — 11,404 —

Off-balance-sheet financial instruments:

1 unchanged sentence

Standby letters of credit — — — — —

West Bancorporation, Inc.

and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

December 31, 2020

4 unchanged sentences

Federal funds sold 318,742 318,742 318,742 — —

Investment securities available for sale 398,578 398,578 — 398,578 —

Securities available for sale 420,571 420,571 — 420,571 —

Federal Home Loan Bank stock 11,723 11,723 11,723 — —

6 unchanged sentences

Subordinated notes, net 20,452 17,349 — 17,349 —

Federal Home Loan Bank advances, net 179,365 179,365 — 179,365 —

Federal Home Loan Bank advances 175,000 175,000 — 175,000 —

Long-term debt, net 21,558 21,556 — 21,556 —

67 unchanged sentences

Net cash provided by operating activities 20,226 15,406 17,749

Cash Flows from Investing Activities:

Capital contribution to West Bank ( 34,500 ) — —

Net cash used in investing activities ( 34,500 ) — —

Cash Flows from Financing Activities:

Proceeds from long-term debt 34,500 — —

Principal payments on long-term debt ( 4,500 ) ( 1,250 ) ( 4,000 )

Common stock cash dividends ( 15,543 ) ( 13,815 ) ( 13,578 )

Net cash used in financing activities ( 15,065 ) ( 17,578 ) ( 19,946 )

Net cash provided by (used in) financing activities 14,457 ( 15,065 ) ( 17,578 )

Net increase in cash 183 341 171

37 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data