What changed in this filing

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Item 1. Financial Statements

2023-04-27 compared with 2022-10-27 · 393 added, 381 removed, 593 unchanged (57% of the section changed)

3 unchanged sentences

Consolidated Balance Sheet

(in thousands, except share and per share data) September 30, 2022 December 31, 2021

(in thousands, except share and per share data) March 31, 2023 December 31, 2022

Cash and due from banks $ 21,579 $ 24,896

Federal funds sold 1,049 175,270

Interest-bearing deposits 901 1,643

Cash and cash equivalents 22,480 26,539

2 unchanged sentences

Loans 2,756,185 2,742,836

Allowance for loan losses ( 25,418 ) ( 28,364 )

Allowance for credit losses ( 27,941 ) ( 25,473 )

Loans, net 2,728,244 2,717,363

11 unchanged sentences

Total deposits 2,798,393 2,880,408

Federal funds purchased 204,500 2,880

Federal funds purchased and other short-term borrowings 229,290 200,000

Subordinated notes, net 79,435 79,369

7 unchanged sentences

authorized 50,000,000 shares;

no shares issued and outstanding at September 30, 2022 and December 31, 2021

no shares issued and outstanding at March 31, 2023 and December 31, 2022

Common stock, no par value;

authorized 50,000,000 shares;

and 16,554,846 shares issued and outstanding at September 30, 2022

and 16,640,413 shares issued and outstanding at March 31, 2023

and December 31, 2022, respectively

8 unchanged sentences

Consolidated Statements of Income

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands, except per share data) 2023 2022

3 unchanged sentences

Tax-exempt 885 858

Federal funds sold 30 82 179 226

Interest-bearing deposits 30 82

Total interest income 37,179 27,115

1 unchanged sentence

Deposits 13,339 2,151

Federal funds purchased 655 2 812 4

Federal funds purchased and other short-term borrowings 2,079 —

Subordinated notes 1,106 248

3 unchanged sentences

Net interest income 18,695 23,828

Provision for loan losses — — ( 2,500 ) ( 1,500 )

Net interest income after provision for loan losses

23,004 24,486 73,571 71,957

Credit loss expense (benefit) — ( 750 )

Net interest income after credit loss expense (benefit) 18,695 24,578

Noninterest income:

3 unchanged sentences

Increase in cash value of bank-owned life insurance 257 227

Loan swap fees 835 — 835 42

Realized securities gains, net — 11 — 51

Gain from bank-owned life insurance 691 —

Other income 355 481

2 unchanged sentences

Salaries and employee benefits 6,867 6,298

Occupancy 1,315 1,203 3,643 3,630

Occupancy and equipment 1,327 1,086

Data processing 635 624

Technology and software 513 476

FDIC insurance 416 337

12 unchanged sentences

Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2023 2022

2 unchanged sentences

Unrealized gains (losses) on securities:

Unrealized holding losses arising during the period ( 42,621 ) ( 6,172 ) ( 141,629 ) ( 10,462 )

reclassification adjustment for net gains realized in net income — ( 11 ) — ( 51 )

Other ( 11 ) — ( 11 ) —

Income tax benefit 10,569 1,558 35,618 2,649

Other comprehensive loss on securities ( 32,063 ) ( 4,625 ) ( 106,022 ) ( 7,864 )

Unrealized holding gains (losses) arising during the period 11,667 ( 54,595 )

Income tax (expense) benefit ( 2,911 ) 13,813

Other comprehensive income (loss) on securities 8,756 ( 40,782 )

Unrealized gains (losses) on derivatives:

Unrealized holding gains arising during the period 8,637 359 23,239 5,801

Unrealized holding gains (losses) arising during the period ( 1,634 ) 10,536

reclassification adjustment for net (gains) losses realized in net income ( 1,958 ) 1,045

Income tax expense ( 2,051 ) ( 369 ) ( 6,172 ) ( 3,269 )

Other comprehensive income on derivatives 6,327 1,095 18,495 9,705

Income tax (expense) benefit 882 ( 2,930 )

Other comprehensive income (loss) on derivatives ( 2,710 ) 8,651

Total other comprehensive income (loss) 6,046 ( 32,131 )

5 unchanged sentences

(in thousands, except share and per share data)

Three Months Ended September 30, 2022

Additional Other

Preferred Common Stock Paid-In Retained Comprehensive

Stock Shares Amount Capital Earnings Income (Loss) Total

Balance, June 30, 2022 $ — 16,640,413 $ 3,000 $ 30,283 $ 255,334 $ ( 72,428 ) $ 216,189

— — — — 11,602 — 11,602

Other comprehensive loss, net of tax — — — — — ( 25,736 ) ( 25,736 )

Cash dividends declared, $ 0.25 per common share

— — — — ( 4,160 ) — ( 4,160 )

Stock-based compensation costs

— — — 869 — — 869

Balance, September 30, 2022 $ — 16,640,413 $ 3,000 $ 31,152 $ 262,776 $ ( 98,164 ) $ 198,764

Three Months Ended September 30, 2021

Additional Other

Preferred Common Stock Paid-In Retained Comprehensive

Stock Shares Amount Capital Earnings Income (Loss) Total

Balance, June 30, 2021 $ — 16,554,846 $ 3,000 $ 28,888 $ 221,113 $ ( 6,475 ) $ 246,526

Net income — — — — 12,706 — 12,706

Other comprehensive loss, net of tax — — — — — ( 3,530 ) ( 3,530 )

Cash dividends declared, $ 0.24 per common share

— — — — ( 3,974 ) — ( 3,974 )

Stock-based compensation costs

— — — 648 — — 648

Balance, September 30, 2021 $ — 16,554,846 $ 3,000 $ 29,536 $ 229,845 $ ( 10,005 ) $ 252,376

See Notes to Consolidated Financial Statements.

West Bancorporation, Inc.

and Subsidiary

Consolidated Statements of Stockholders' Equity

(in thousands, except share and per share data)

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Additional Other

2 unchanged sentences

Balance, December 31, 2022 $ — 16,640,413 $ 3,000 $ 32,021 $ 267,562 $ ( 91,471 ) $ 211,112

Cumulative effect of change in accounting principle (1)

— — — — ( 3,626 ) — ( 3,626 )

Other comprehensive loss, net of tax

— — — — 7,844 — 7,844

Other comprehensive income, net of tax

— — — — — 6,046 6,046

Cash dividends declared, $ 0.25 per common share

3 unchanged sentences

Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes — 71,844 — ( 935 ) — — ( 935 )

Balance, September 30, 2022 $ — 16,640,413 $ 3,000 $ 31,152 $ 262,776 $ ( 98,164 ) $ 198,764

Nine Months Ended September 30, 2021

Balance, March 31, 2023 $ — 16,712,257 $ 3,000 $ 31,797 $ 267,620 $ ( 85,425 ) $ 216,992

Three Months Ended March 31, 2022

Additional Other

3 unchanged sentences

— — — — 13,184 — 13,184

Other comprehensive income, net of tax — — — — — 1,841 1,841

Other comprehensive loss, net of tax — — — — — ( 32,131 ) ( 32,131 )

Cash dividends declared, $ 0.25 per common share

4 unchanged sentences

— 76,567 — ( 1,519 ) — — ( 1,519 )

Balance, September 30, 2021 $ — 16,554,846 $ 3,000 $ 29,536 $ 229,845 $ ( 10,005 ) $ 252,376

Balance, March 31, 2022 $ — 16,631,413 $ 3,000 $ 29,421 $ 246,827 $ ( 42,768 ) $ 236,480

(1) Cumulative effect adjustment pursuant to adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

See Note 1 for additional information.

See Notes to Consolidated Financial Statements.

2 unchanged sentences

Consolidated Statements of Cash Flows

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2023 2022

2 unchanged sentences

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for loan losses ( 2,500 ) ( 1,500 )

Credit loss expense (benefit) — ( 750 )

Net amortization and accretion 829 666

Securities gains, net — ( 51 )

Stock-based compensation 711 757

4 unchanged sentences

Increase in accrued interest receivable ( 296 ) ( 1,193 )

Decrease in other assets 930 2,299

Increase in accrued expenses and other liabilities 7,889 312

(Increase) decrease in other assets ( 1,322 ) 249

Increase (decrease) in accrued expenses and other liabilities ( 6,054 ) 1,702

Net cash provided by operating activities 2,494 15,519

Cash Flows from Investing Activities:

Proceeds from sales of securities available for sale — 30,374

Proceeds from maturities and calls of securities available for sale 63,353 65,784

Proceeds from principal paydowns, maturities and calls of securities available for sale 9,661 25,730

Purchases of securities available for sale — ( 120,077 )

6 unchanged sentences

Net increase (decrease) in deposits ( 82,015 ) 75,247

Net increase in federal funds purchased 201,620 34,005

Proceeds from issuance of subordinated debt, net of issuance costs 58,756 —

Net decrease in Federal Home Loan Bank advances — ( 50,000 )

Net increase (decrease) in federal funds purchased and other short-term borrowings 29,290 ( 2,880 )

Net increase in Federal Home Loan Bank advances 65,000 —

Principal payments on long-term debt — ( 35 )

10 unchanged sentences

Income taxes — —

Supplemental Disclosure of Noncash Investing and Financing Activities:

Purchase of securities available for sale, pending settlement $ — $ 30,151

See Notes to Consolidated Financial Statements.

8 unchanged sentences

Although management believes that the disclosures are adequate to make the information presented understandable, it is suggested that these interim consolidated financial statements be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 23, 2023.

In the opinion of management, the accompanying consolidated financial statements of the Company contain all adjustments necessary to fairly present its financial position as of September 30, 2022 and December 31, 2021, net income, comprehensive income (loss) and changes in stockholders' equity for the three and nine months ended September 30, 2022 and 2021, and cash flows for the nine months ended September 30, 2022 and 2021.

In the opinion of management, the accompanying consolidated financial statements of the Company contain all adjustments necessary to fairly present its financial position as of March 31, 2023 and December 31, 2022, and net income, comprehensive income (loss), changes in stockholders' equity and cash flows for the three months ended March 31, 2023 and 2022.

The results for these interim periods may not be indicative of results for the entire year or for any other period.

14 unchanged sentences

Under the update, the income statement will reflect the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period.

The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount of financial assets.

The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount of financial assets.

An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances.

3 unchanged sentences

Off-balance sheet arrangements such as commitments to extend credit, guarantees, and standby letters of credit that are not considered derivatives under ASC 815 and are not unconditionally cancellable are also within the scope of this update.

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

The FASB has also issued multiple updates to ASU No.

2016-13 as codified in Topic 326, including ASU No.

2019-04, ASU No.

2019-05, ASU No.

2019-11, ASU No.

2020-02, and ASU No.

These ASUs have provided for various minor technical corrections and improvements to the codification as well as other transition matters.

West Bancorporation, Inc.

and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

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

In December 2019, the FASB issued ASU No.

2019-10, Financial Instruments-Credit Losses (Topic 326).

This update amends the effective date of ASU No.

This update amended the effective date of ASU No.

2016-13 for certain entities, including smaller reporting companies until fiscal years beginning after December 15, 2022, including interim periods within those fiscal periods.

Early adoption is permitted.

Early adoption was permitted.

The one-time determination date for identifying as a smaller reporting company was November 15, 2019.

The Company met the definition of a smaller reporting company as of that date and plans to adopt the standard with the amended effective date.

The Company continues to develop it's methodology and work through model validation and implementation considerations.

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.

The Company met the definition of a smaller reporting company as of that date and was not required to adopt the standard until January 1, 2023.

West Bancorporation, Inc.

and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

In March 2022, the FASB issued ASU No.

5 unchanged sentences

Lastly, the amendments require that a public business entity disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases.

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

The Company adopted ASU No.

2016-13 using the modified retrospective method for financial assets measured at amortized cost and off-balance-sheet credit exposures.

Results for the periods beginning after January 1, 2023 are presented under ASU No.

2016-13, while prior period amounts are reported in accordance with the previously applicable accounting standards.

The Company recorded a reduction to retained earnings of $3,626 upon adoption of ASU No.

The transition adjustment included an increase to the allowance for credit losses on loans of $2,458 and established an allowance for credit losses on off-balance sheet credit exposure of $2,344.

There was no allowance for credit losses recorded for available-for-sale debt securities.

The transition adjustment included corresponding increases in deferred tax assets of $1,176.

The following table illustrates the impact of ASC 326 adoption.

January 1, 2023

Pre-ASC 326 Adoption Impact of ASC 326 Adoption As Reported Under ASC 326

Commercial $ 4,804 $ 677 $ 5,481

Construction, land and land development 3,548 ( 234 ) 3,314

1-4 family residential first mortgages 357 121 478

Home equity 101 ( 8 ) 93

Commercial 16,575 1,911 18,486

Consumer and other 88 ( 9 ) 79

Allowance for credit losses on loans $ 25,473 $ 2,458 $ 27,931

Liability for off-balance sheet credit exposures $ — $ 2,344 $ 2,344

In March 2020, the FASB issued ASU No.

3 unchanged sentences

They provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

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.

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

In January 2021, the FASB issued ASU No.

1 unchanged sentence

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

T he 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.

T he amendments in this update were effective for all entities as of March 12, 2020 through December 31, 2022.

In December 2022, the FASB issued ASU No.

2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848.

The amendment in this update extends the period of time preparers can utilize reference rate reform relief guidance in Topic 848, discussed above.

2022-06 defers the sunset date from December 31, 2022 to December 31, 2024.

The Company does not expect the updates within Topic 848 to have a material impact on our financial statements.

West Bancorporation, Inc.

2 unchanged sentences

(dollars in thousands, except per share data)

In March 2023, the FASB issued ASU No.

2023-02, Investments - Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using Proportional Amortization Method .

The ASU is intended to improve the accounting and disclosures for investments in tax credit structures.

It allows reporting entities to elect to adopt for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits.

For public business entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

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

Earnings per Common Share

3 unchanged sentences

The incremental shares, to the extent they would have been dilutive, were included in the denominator of the diluted earnings per common share calculation.

The calculations of earnings per common share and diluted earnings per common share for the three and nine months ended September 30, 2022 and 2021 are presented in the following table.

Three Months Ended September 30, Nine Months Ended September 30,

The calculations of earnings per common share and diluted earnings per common share for the three months ended March 31, 2023 and 2022 are presented in the following table.

Three Months Ended March 31,

(in thousands, except per share data) 2023 2022

2 unchanged sentences

Weighted average effect of restricted stock units outstanding

154 248 200 245

Diluted weighted average common shares outstanding 16,805 16,840

7 unchanged sentences

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 September 30, 2022 and December 31, 2021.

September 30, 2022

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 March 31, 2023 and December 31, 2022.

March 31, 2023

(Losses) Fair

20 unchanged sentences

(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 $ 299,397 and $ 295,961 as of September 30, 2022 and December 31, 2021, 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 September 30, 2022, by contractual maturity, are shown below.

Securities with an amortized cost of approximately $ 381,622 and $ 293,017 as of March 31, 2023 and December 31, 2022, respectively, were pledged to secure access to FHLB advances and Federal Reserve credit programs, 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 March 31, 2023, by contractual maturity, are shown below.

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

1 unchanged sentence

Therefore, collateralized mortgage obligations and mortgage-backed securities are not included in the maturity categories within the following maturity summary.

September 30, 2022

March 31, 2023

Amortized Cost Fair Value

8 unchanged sentences

(dollars in thousands, except per share data)

The details of the sales of securities available for sale for the three and nine months ended September 30, 2022 and 2021 are summarized in the following table.

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Proceeds from sales $ — $ 1,413 $ — $ 30,374

Gross gains on sales — 11 — 283

Gross losses on sales — — — 232

The following tables show the fair value and gross unrealized losses, aggregated by investment type and length of time that individual securities have been in a continuous loss position, as of September 30, 2022 and December 31, 2021.

September 30, 2022

There were no sales of securities available for sale during the three months ended March 31, 2023 and 2022.

March 31, 2023

Less than 12 months 12 months or longer Total

(Losses) Fair

of Securities Fair

Securities available for sale:

7 unchanged sentences

Less than 12 months 12 months or longer Total

(Losses) Fair

of Securities Fair

Securities available for sale:

5 unchanged sentences

$ 237,128 $ ( 32,391 ) 138 $ 426,795 $ ( 106,345 ) 99 $ 663,923 $ ( 138,736 )

As of September 30, 2022, securities available for sale with unrealized losses included 118 state and political subdivision securities, 79 collateralized mortgage obligation securities, 27 mortgage-backed securities, six collateralized loan obligation securities and eight 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 September 30, 2022, the Company only owned collateralized loan obligations that were AAA- or AA-rated.

The Company believes the unrealized losses on securities available for sale as of September 30, 2022 were due to market interest rate conditions rather than reduced estimated cash flows.

At September 30, 2022, 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 did not consider these securities to have other than temporary impairment as of September 30, 2022.

The Company adopted ASU No.

2016-13 effective January 1, 2023 which requires credit losses on available-for-sale securities to be recorded in an allowance for credit losses.

If the Company intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis, then the security is written down to fair value through income.

As of March 31, 2023, the Company did not have the intent to sell, nor was it more likely than not that we would be required to sell any of the securities in an unrealized loss position prior to recovery.

As of March 31, 2023, the Company also determined that no individual securities in an unrealized loss position represented credit losses that would require an allowance for credit losses.

The Company concluded that the unrealized losses were primarily attributed to increases in market interest rates since these securities were purchased and other market conditions.

Accrued interest receivable is not included in available-for-sale security balances and is presented in the "Accrued interest receivable" line of the Consolidated Balance Sheets.

Interest receivable on securities was $ 3,553 as of March 31, 2023, and is excluded from the estimate of credit losses.

As of December 31, 2022, the Company believed the unrealized losses on securities available for sale were due to market conditions rather than reduced estimated cash flows.

At December 31, 2022, 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, under the accounting principles effective at December 31, 2022, the Company did not consider these securities to have other than temporary impairment as of December 31, 2022.

West Bancorporation, Inc.

2 unchanged sentences

(dollars in thousands, except per share data)

Loans and Allowance for Loan Losses

Loans consisted of the following segments as of September 30, 2022 and December 31, 2021.

September 30, 2022 December 31, 2021

Loans and Allowance for Credit Losses

Loans consisted of the following segments as of March 31, 2023 and December 31, 2022.

March 31, 2023 December 31, 2022

Commercial $ 520,894 $ 519,196

7 unchanged sentences

$ 2,756,185 $ 2,742,836

Included in commercial loans at September 30, 2022 and December 31, 2021, were $ 1,119 and $ 22,206 , 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.

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

Real estate loans of approximately $ 1,240,000 and $ 1,190,000 were pledged as security for Federal Home Loan Bank (FHLB) advances as of September 30, 2022 and December 31, 2021, respectively.

Real estate loans of approximately $ 1,300,000 and $ 1,190,000 were pledged as security for Federal Home Loan Bank (FHLB) advances as of March 31, 2023 and December 31, 2022, respectively.

Loans are stated at the principal amounts outstanding, net of unamortized loan fees and costs, with interest income recognized on the interest method based upon the terms of the loan.

2 unchanged sentences

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

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.

Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured.

A loan is classified as a TDR loan when the Company separately concludes that a borrower is experiencing financial difficulties and a concession is granted that would not otherwise be considered.

Concessions may include a restructuring of the loan terms to alleviate the burden of the borrower's cash requirements, such as an extension of the payment terms beyond the original maturity date or a change in the interest rate charged.

TDR loans with extended payment terms are accounted for as impaired until performance is established.

A change to the interest rate would change the classification of a loan to a TDR loan if the restructured loan yields a rate that is below a market rate for that of a new loan with comparable risk.

TDR loans with below-market rates are considered impaired until fully collected.

TDR loans may also be reported as nonaccrual or 90 days past due if they are not performing per the restructured terms.

Allowance for Credit Losses for Loans

The Company adopted ASU No.

2016-13 on January 1, 2023, at which time the Company implemented the current expected credit loss model in estimating the allowance for credit losses (ACL) valuation account.

The following table details the changes in the ACL by loan segment for the three months ended March 31, 2023.

Three Months Ended March 31, 2023

Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total

Beginning balance $ 4,804 $ 3,548 $ 357 $ 101 $ 16,575 $ 88 $ 25,473

Adoption of CECL 677 ( 234 ) 121 ( 8 ) 1,911 ( 9 ) 2,458

Charge-offs — — — — — — —

Recoveries 8 — 1 1 — — 10

Provision for credit loss expense (1)

8 ( 148 ) ( 13 ) ( 6 ) 159 — —

Ending balance $ 5,497 $ 3,166 $ 466 $ 88 $ 18,645 $ 79 $ 27,941

(1) The negative provisions for the various segments are related to the decline in outstanding balances in each of those portfolio segments during the time periods disclosed, improvement in qualitative risk factors related to those portfolio segments and/or changes in economic forecasts.

West Bancorporation, Inc.

2 unchanged sentences

(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.

These loans involve the anticipated potential for payment defaults or collateral inadequacies.

A loan on the Watch List is considered impaired when management believes it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement.

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 specific component of the allowance for loan losses.

TDR loans totaled $ 0 and $ 8,599 as of September 30, 2022 and December 31, 2021, respectively, and were included in the nonaccrual category.

There were no loan modifications considered to be TDR that occurred during the three and nine months ended September 30, 2022.

There were six loan modifications related to one borrower considered to be TDR, with a pre- and post-modification recorded investment of $ 14,044 , that occurred during the three and nine months ended September 30, 2021.

A specific reserve of $ 0 and $ 2,500 related to TDR loans was recorded at September 30, 2022 and December 31, 2021, respectively.

No TDR loans that were modified within the 12 months preceding September 30, 2022 and 2021 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.

Prior to the adoption of ASU No.

2016-13 on January 1, 2023, the Company calculated the allowance for loan losses using the incurred loss methodology.

The following table presents the activity in the allowance for loan losses by segment for the three months ended March 31, 2022.

Three Months Ended March 31, 2022

Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total

Beginning balance $ 4,776 $ 3,646 $ 339 $ 91 $ 19,466 $ 46 $ 28,364

Charge-offs — — — — — — —

Recoveries 4 — 1 1 3 — 9

Provision for loan losses (1)

( 72 ) 352 8 9 ( 1,052 ) 5 ( 750 )

Ending balance $ 4,708 $ 3,998 $ 348 $ 101 $ 18,417 $ 51 $ 27,623

(1) The negative provisions for the various segments are related to the decline in outstanding balances in each of those portfolio segments during the time periods disclosed and/or improvement in the credit quality factors related to those portfolio segments.

The following tables present a breakdown of the allowance for credit losses by segment, disaggregated based on the evaluation method as of March 31, 2023 and December 31, 2022.

March 31, 2023

Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total

Ending balance:

Individually evaluated for credit losses $ — $ — $ — $ — $ — $ — $ —

Collectively evaluated for credit losses 5,497 3,166 466 88 18,645 79 27,941

Total $ 5,497 $ 3,166 $ 466 $ 88 $ 18,645 $ 79 $ 27,941

December 31, 2022

Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total

Ending balance:

Individually evaluated for impairment $ — $ — $ — $ — $ — $ — $ —

Collectively evaluated for impairment 4,804 3,548 357 101 16,575 88 25,473

Total $ 4,804 $ 3,548 $ 357 $ 101 $ 16,575 $ 88 $ 25,473

West Bancorporation, Inc.

2 unchanged sentences

(dollars in thousands, except per share data)

The following table summarizes the recorded investment in impaired loans by segment, broken down by loans with no related allowance for loan losses and loans with a related allowance and the amount of that allowance as of September 30, 2022 and December 31, 2021.

September 30, 2022 December 31, 2021

Recorded Investment Unpaid Principal Balance Related Allowance Recorded Investment Unpaid Principal Balance Related Allowance

With no related allowance recorded:

Commercial $ — $ — $ — $ — $ — $ —

Construction, land and land development — — — — — —

1-4 family residential first mortgages 329 329 — 349 349 —

Home equity — — — — — —

Commercial — — — — — —

Consumer and other — — — — — —

329 329 — 349 349 —

With an allowance recorded:

Commercial — — — — — —

Construction, land and land development — — — — — —

1-4 family residential first mortgages — — — — — —

Home equity — — — — — —

Commercial — — — 8,599 8,599 2,500

Consumer and other — — — — — —

— — — 8,599 8,599 2,500

Commercial — — — — — —

Construction, land and land development — — — — — —

1-4 family residential first mortgages 329 329 — 349 349 —

Home equity — — — — — —

Commercial — — — 8,599 8,599 2,500

Consumer and other — — — — — —

$ 329 $ 329 $ — $ 8,948 $ 8,948 $ 2,500

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

The following tables present the recorded investment in loans, exclusive of unamortized fees and costs, disaggregated based on the evaluation method by segment as of March 31, 2023 and December 31, 2022.

March 31, 2023

Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total

Ending balance:

Individually evaluated for credit losses $ — $ — $ 316 $ — $ — $ — $ 316

Collectively evaluated for credit losses 520,894 336,739 74,907 9,726 1,810,158 7,381 2,759,805

Total $ 520,894 $ 336,739 $ 75,223 $ 9,726 $ 1,810,158 $ 7,381 $ 2,760,121

December 31, 2022

Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total

Ending balance:

Individually evaluated for impairment $ — $ — $ 322 $ — $ — $ — $ 322

Collectively evaluated for impairment 519,196 363,014 74,889 10,322 1,771,940 7,292 2,746,653

Total $ 519,196 $ 363,014 $ 75,211 $ 10,322 $ 1,771,940 $ 7,292 $ 2,746,975

Under the current expected credit loss model, the ACL is a valuation account estimated at each balance sheet date and deducted from the amortized cost basis of loans to present the net amount expected to be collected.

The Company estimates the ACL based on the underlying loans' amortized cost basis, which is the amount at which the loan is originated or acquired, adjusted for collection of cash and charge-offs, as well as applicable accretion or amortization of premiums, discount, and net deferred fees or costs.

The Company's estimate of the ACL reflects losses expected over the remaining contractual life of the assets.

The contractual term does not consider extensions, renewals or modifications unless the Company has identified an expected restructuring.

In the event that collection of principal becomes uncertain, the Company has policies in place to reverse accrued interest in a timely manner.

Therefore, the Company has made a policy election to exclude accrued interest from the measurement of the ACL.

Accrued interest on loans of $ 8,722 and $ 8,665 at March 31, 2023 and December 31, 2022, respectively, is included in accrued interest receivable on the balance sheet and is excluded from the estimate of credit losses.

Expected credit losses are reflected in the allowance for credit losses through a charge to credit loss expense.

When the Company deems all or a portion of a loan to be uncollectible, the appropriate amount is written off and the ACL is reduced by the same amount.

The Company applies judgment to determine when a loan is deemed uncollectible;

however, generally speaking, a loan will be considered uncollectible no later than when all efforts at collection have been exhausted.

Subsequent recoveries, if any, are credited to the ACL when received.

The Company measures expected credit losses of loans on a collective (pool) basis when the loans share similar risk characteristics and uses a cash flow based method to estimate expected credit losses for each of these pools.

The Company's methodology for estimating the ACL considers available relevant information about the collectability of cash flows, including information about past events, current conditions, and reasonable and supportable forecasts.

The methodologies apply historical loss information, adjusted for asset-specific characteristics, economic conditions at the measurement date, and forecasts about future economic conditions expected to exist through the contractual lives of the financial assets that are reasonable and supportable, to the identified pools of financial assets with similar risk characteristics for which the historical experience was observed.

West Bancorporation, Inc.

2 unchanged sentences

(dollars in thousands, except per share data)

The following table summarizes the average recorded investment and interest income recognized on impaired loans by segment for the three and nine months ended September 30, 2022 and 2021.

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized

With no related allowance recorded:

Commercial $ — $ — $ — $ — $ — $ — $ — $ —

Construction, land and land development

— — — — — — — —

1-4 family residential first mortgages

332 — 360 — 338 — 367 —

Home equity — — — — — — — —

Commercial — — — — — — — —

Consumer and other — — — — — — — —

332 — 360 — 338 — 367 —

With an allowance recorded:

Commercial — — — — — — — —

Construction, land and land development

— — — — — — — —

1-4 family residential first mortgages

— — — — — — — —

Home equity — — — — — — — —

Commercial — — 12,781 — 5,090 — 14,310 —

Consumer and other — — — — — — — —

— — 12,781 — 5,090 — 14,310 —

The Company uses the cash flow based model to estimate expected credit losses for all loan segments.

For each of the loan segments, the Company calculates a cash flow projection using contractual terms, estimated prepayment speeds, estimated curtailment rates, and other relevant data.

The Company uses regression analysis that links historical losses of the Company and its peer group to two economic metrics:

national unemployment rate and 10-year treasury rate over 2-year treasury rate spread to establish the loss rates applied to the projected cash flows.

For all loan segments, the Company uses a forecast period of four quarters and reverts to a historical rate after four quarters.

When estimating prepayment speed and curtailment rates, the modeling is based on historical internal data.

Nonaccrual Loans and Delinquency Status

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

The accrual of interest on past due and other individually evaluated 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.

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

Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured.

The following table presents the amortized cost basis of loans on nonaccrual status, loans on nonaccrual status with no allowance for credit losses recorded, and loans past due 90 days or more and still accruing by loan segment.

Total Nonaccrual Nonaccrual with no Allowance for Credit Losses 90 Days or More Past Due and Accruing

March 31, 2023 December 31, 2022 March 31, 2023 December 31, 2022 March 31, 2023 December 31, 2022

Commercial $ — $ — $ — $ — $ — $ —

Construction, land and land development — — — — — —

— — — — — — — —

1-4 family residential first mortgages 316 322 316 322 — —

332 — 360 — 338 — 367 —

Home equity — — — — — —

1 unchanged sentence

Consumer and other — — — — — —

$ 332 $ — $ 13,141 $ — $ 5,428 $ — $ 14,677 $ —

Total $ 316 $ 322 $ 316 $ 322 $ — $ —

There was no interest income recognized on loans that were on nonaccrual for the three months ended March 31, 2023 and March 31, 2022.

West Bancorporation, Inc.

2 unchanged sentences

(dollars in thousands, except per share data)

The following tables provide an analysis of the payment status of the recorded investment in loans as of September 30, 2022 and December 31, 2021.

September 30, 2022

The following tables provide an analysis of the delinquency status of the amortized cost of loans as of March 31, 2023 and December 31, 2022.

March 31, 2023

Past Due Total

Past Due Current Nonaccrual Loans Total Loans

Past Due Current Total Loans

Commercial $ — $ — $ — $ — $ 520,894 $ 520,894

9 unchanged sentences

Past Due Total

Past Due Current Nonaccrual Loans Total

Past Due Current Total

Commercial $ — $ — $ — $ — $ 519,196 $ 519,196

11 unchanged sentences

(dollars in thousands, except per share data)

The following tables present the recorded investment in loans by credit quality indicator and loan segment as of September 30, 2022 and December 31, 2021.

September 30, 2022

Pass Watch Substandard Doubtful Total

Commercial $ 526,336 $ — $ — $ — $ 526,336

Construction, land and land development 341,500 49 — — 341,549

1-4 family residential first mortgages 69,414 150 427 — 69,991

Home equity 10,271 — — — 10,271

Commercial 1,604,317 57,590 — — 1,661,907

Consumer and other 7,884 — — — 7,884

Total $ 2,559,722 $ 57,789 $ 427 $ — $ 2,617,938

December 31, 2021

Pass Watch Substandard Doubtful Total

Commercial $ 492,545 $ 270 $ — $ — $ 492,815

Construction, land and land development 359,203 55 — — 359,258

1-4 family residential first mortgages 65,596 156 464 — 66,216

Home equity 8,422 — — — 8,422

Commercial 1,458,075 63,544 8,599 — 1,530,218

Consumer and other 3,797 — — — 3,797

Total $ 2,387,638 $ 64,025 $ 9,063 $ — $ 2,460,726

Loan Restructurings Made to Borrowers Experiencing Financial Difficulty

As of March 31, 2023 and December 31, 2022 the Company had no loan restructurings made to borrowers experiencing financial difficulty.

There were no loan restructurings made to borrowers experiencing financial difficulty for which there was a payment default within twelve months following the modification during the three months ended March 31, 2023 and 2022.

A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms.

Credit Quality Indicators

These loans involve the anticipated potential for payment defaults or collateral inadequacies.

A loan on the Watch List is analyzed individually to categorize the loan to the appropriate credit risk category.

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

1 unchanged sentence

The Company utilizes a 9-point risk rating scale as shown below, with ratings 1 - 5 included in the Pass column, rating 6 included in the Watch column, ratings 7 - 8 included in the Substandard column and rating 9 included in the Doubtful column.

All loans classified as impaired that are included in the specific evaluation of the allowance for loan losses are included in the Substandard column along with all other loans with ratings of 7 - 8.

Risk rating 1:

20 unchanged sentences

The loan may be reliant on secondary sources of repayment, including liquidation of collateral and guarantor support.

West Bancorporation, Inc.

and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

Risk rating 7:

8 unchanged sentences

A loan reaching this category would most likely be charged off.

West Bancorporation, Inc.

and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

Credit quality indicators for all loans and the Company's risk rating process are dynamic and updated on a continuous basis.

Risk ratings are updated as circumstances that could affect the repayment of an individual loan are brought to management's attention through an established monitoring process.

Individual bankers initiate changes as appropriate for ratings 1 through 5, and changes for ratings 6 through 9 are approved by management.

Individual bankers initiate changes as appropriate for ratings 1 through 5, and changes for ratings 6 through 9 are initiated by management.

The likelihood of loss increases as the risk rating increases and is generally preceded by a loan appearing on the Watch List, which consists of all loans with a risk rating of 6 or worse.

14 unchanged sentences

The repayment source for consumer loans, including 1-4 family residential and home equity loans, is typically wages.

The allowance for loan losses is established through a provision for loan losses charged to expense.

The allowance is an amount that management believes will be adequate to absorb probable losses on existing loans based on an evaluation of the collectability of loans and prior loss experience.

This evaluation also takes into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, the review of specific problem loans, and the current economic conditions that may affect the borrower's ability to pay.

Loans are charged-off against the allowance for loan losses when management believes that collectability of the principal is unlikely.

While management uses the best information available to make its evaluations, future adjustments to the allowance may be necessary if there are significant changes in economic conditions or the other factors relied upon.

West Bancorporation, Inc.

2 unchanged sentences

(dollars in thousands, except per share data)

The allowance for loan losses consists of specific and general components.

The specific component relates to loans that meet the definition of impaired.

The general component covers the remaining loans and is based on historical loss experience adjusted for qualitative factors such as delinquency trends, loan growth, economic elements and local market conditions.

These same policies are applied to all segments of loans.

In addition, regulatory agencies, as an integral part 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.

The following tables detail the changes in the allowance for loan losses by segment for the three and nine months ended September 30, 2022 and 2021.

Three Months Ended September 30, 2022

Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total

Beginning balance $ 4,661 $ 4,043 $ 373 $ 95 $ 16,189 $ 73 $ 25,434

Charge-offs — — ( 31 ) — — — ( 31 )

Recoveries 9 — 1 1 4 — 15

Provision (1)

429 ( 557 ) 20 9 82 17 —

Ending balance $ 5,099 $ 3,486 $ 363 $ 105 $ 16,275 $ 90 $ 25,418

Three Months Ended September 30, 2021

Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total

Beginning balance $ 4,464 $ 2,950 $ 359 $ 91 $ 20,129 $ 49 $ 28,042

Charge-offs — — — — — — —

Recoveries 45 — 1 1 4 5 56

Provision (1)

191 498 ( 5 ) 9 ( 686 ) ( 7 ) —

Ending balance $ 4,700 $ 3,448 $ 355 $ 101 $ 19,447 $ 47 $ 28,098

Nine Months Ended September 30, 2022

Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total

Beginning balance $ 4,776 $ 3,646 $ 339 $ 91 $ 19,466 $ 46 $ 28,364

Charge-offs — — ( 31 ) — ( 451 ) — ( 482 )

Recoveries 21 — 2 3 10 — 36

Provision (1)

302 ( 160 ) 53 11 ( 2,750 ) 44 ( 2,500 )

Ending balance $ 5,099 $ 3,486 $ 363 $ 105 $ 16,275 $ 90 $ 25,418

Nine Months Ended September 30, 2021

Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total

Beginning balance $ 4,718 $ 2,634 $ 360 $ 114 $ 21,535 $ 75 $ 29,436

Charge-offs — — — — — — —

Recoveries 142 — 2 3 10 5 162

Provision (1)

( 160 ) 814 ( 7 ) ( 16 ) ( 2,098 ) ( 33 ) ( 1,500 )

Ending balance $ 4,700 $ 3,448 $ 355 $ 101 $ 19,447 $ 47 $ 28,098

The following tables present the amortized cost basis of loans by loan segment, credit quality indicator and origination year, and the current period gross write-off by loan segment and origination year, based on the analysis performed as of March 31, 2023 and December 31, 2022.

Term Loans by Origination Year

As of March 31, 2023 2023 2022 2021 2020 2019 Prior Revolving Loans Total

Pass $ 64,257 $ 129,097 $ 60,612 $ 46,986 $ 8,937 $ 49,173 $ 161,832 $ 520,894

Watch — — — — — — — —

Substandard — — — — — — — —

Doubtful — — — — — — — —

Total $ 64,257 $ 129,097 $ 60,612 $ 46,986 $ 8,937 $ 49,173 $ 161,832 $ 520,894

Current period gross writeoffs $ — $ — $ — $ — $ — $ — $ — $ —

Construction, land and land development

Pass $ 6,086 $ 53,833 $ 21,637 $ 2,389 $ 1,536 $ 193 $ 251,021 $ 336,695

Watch — 44 — — — — — 44

Substandard — — — — — — — —

Doubtful — — — — — — — —

Total $ 6,086 $ 53,877 $ 21,637 $ 2,389 $ 1,536 $ 193 $ 251,021 $ 336,739

Current period gross writeoffs $ — $ — $ — $ — $ — $ — $ — $ —

1-4 family residential first mortgages

Pass $ 5,203 $ 22,187 $ 21,218 $ 13,459 $ 3,955 $ 4,614 $ 4,036 $ 74,672

Watch 147 — — — — — — 147

Substandard — 88 — — 316 — — 404

Doubtful — — — — — — — —

Total $ 5,350 $ 22,275 $ 21,218 $ 13,459 $ 4,271 $ 4,614 $ 4,036 $ 75,223

Current period gross writeoffs $ — $ — $ — $ — $ — $ — $ — $ —

Pass $ 129 $ 401 $ 585 $ 488 $ 129 $ 162 $ 7,832 $ 9,726

Watch — — — — — — — —

Substandard — — — — — — — —

Doubtful — — — — — — — —

Total $ 129 $ 401 $ 585 $ 488 $ 129 $ 162 $ 7,832 $ 9,726

Current period gross writeoffs $ — $ — $ — $ — $ — $ — $ — $ —

Pass $ 43,243 $ 434,292 $ 416,913 $ 405,642 $ 90,607 $ 215,846 $ 151,040 $ 1,757,583

Watch — 22,390 30,185 — — — — 52,575

Substandard — — — — — — — —

Doubtful — — — — — — — —

Total $ 43,243 $ 456,682 $ 447,098 $ 405,642 $ 90,607 $ 215,846 $ 151,040 $ 1,810,158

Current period gross writeoffs $ — $ — $ — $ — $ — $ — $ — $ —

Consumer and other

Pass $ 297 $ 623 $ 703 $ 85 $ 74 $ 203 $ 5,396 $ 7,381

Watch — — — — — — — —

Substandard — — — — — — — —

Doubtful — — — — — — — —

Total $ 297 $ 623 $ 703 $ 85 $ 74 $ 203 $ 5,396 $ 7,381

Current period gross writeoffs $ — $ — $ — $ — $ — $ — $ — $ —

West Bancorporation, Inc.

2 unchanged sentences

(dollars in thousands, except per share data)

The following tables present a breakdown of the allowance for loan losses disaggregated on the basis of impairment analysis method by segment as of September 30, 2022 and December 31, 2021.

September 30, 2022

Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total

Ending balance:

Individually evaluated for impairment $ — $ — $ — $ — $ — $ — $ —

Collectively evaluated for impairment 5,099 3,486 363 105 16,275 90 25,418

Term Loans by Origination Year

As of December 31, 2022 2022 2021 2020 2019 2018 Prior Revolving Loans Total

Pass $ 148,637 $ 64,984 $ 63,072 $ 9,873 $ 23,771 $ 24,103 $ 184,756 $ 519,196

Watch — — — — — — — —

Substandard — — — — — — — —

Doubtful — — — — — — — —

Total $ 148,637 $ 64,984 $ 63,072 $ 9,873 $ 23,771 $ 24,103 $ 184,756 $ 519,196

December 31, 2021

Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total

Ending balance:

Individually evaluated for impairment $ — $ — $ — $ — $ 2,500 $ — $ 2,500

Collectively evaluated for impairment 4,776 3,646 339 91 16,966 46 25,864

Current period gross writeoffs $ — $ — $ — $ — $ — $ — $ — $ —

Construction, land and land development

Pass $ 75,946 $ 24,095 $ 2,501 $ 1,562 $ 196 $ — $ 258,667 $ 362,967

Watch 47 — — — — — — 47

Substandard — — — — — — — —

Doubtful — — — — — — — —

Total $ 75,993 $ 24,095 $ 2,501 $ 1,562 $ 196 $ — $ 258,667 $ 363,014

The following tables present the recorded investment in loans, exclusive of unamortized fees and costs, disaggregated on the basis of impairment analysis method by segment as of September 30, 2022 and December 31, 2021.

September 30, 2022

Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total

Ending balance:

Individually evaluated for impairment $ — $ — $ 329 $ — $ — $ — $ 329

Collectively evaluated for impairment 526,336 341,549 69,662 10,271 1,661,907 7,884 2,617,609

Current period gross writeoffs $ — $ — $ — $ — $ — $ — $ — $ —

1-4 family residential first mortgages

Pass $ 23,608 $ 23,460 $ 14,879 $ 4,229 $ 1,283 $ 4,267 $ 2,927 $ 74,653

Watch — 148 — — — — — 148

Substandard 88 — — 322 — — — 410

Doubtful — — — — — — — —

Total $ 23,696 $ 23,608 $ 14,879 $ 4,551 $ 1,283 $ 4,267 $ 2,927 $ 75,211

December 31, 2021

Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total

Ending balance:

Individually evaluated for impairment $ — $ — $ 349 $ — $ 8,599 $ — $ 8,948

Collectively evaluated for impairment 492,815 359,258 65,867 8,422 1,521,619 3,797 2,451,778

Current period gross writeoffs $ — $ — $ — $ — $ — $ 31 $ — $ 31

Pass $ 413 $ 613 $ 512 $ 130 $ 169 $ — $ 8,485 $ 10,322

Watch — — — — — — — —

Substandard — — — — — — — —

Doubtful — — — — — — — —

Total $ 413 $ 613 $ 512 $ 130 $ 169 $ — $ 8,485 $ 10,322

Current period gross writeoffs $ — $ — $ — $ — $ — $ — $ — $ —

Pass $ 429,826 $ 421,283 $ 403,195 $ 92,304 $ 54,723 $ 169,055 $ 147,518 $ 1,717,904

Watch 22,553 30,573 — 910 — — — 54,036

Substandard — — — — — — — —

Doubtful — — — — — — — —

Total $ 452,379 $ 451,856 $ 403,195 $ 93,214 $ 54,723 $ 169,055 $ 147,518 $ 1,771,940

Current period gross writeoffs $ — $ 451 $ — $ — $ — $ — $ — $ 451

Consumer and other

Pass $ 1,176 $ 1,082 $ 136 $ 86 $ 272 $ 72 $ 4,468 $ 7,292

Watch — — — — — — — —

Substandard — — — — — — — —

Doubtful — — — — — — — —

Total $ 1,176 $ 1,082 $ 136 $ 86 $ 272 $ 72 $ 4,468 $ 7,292

Current period gross writeoffs $ — $ — $ — $ — $ — $ — $ — $ —

West Bancorporation, Inc.

2 unchanged sentences

(dollars in thousands, except per share data)

Collateral Dependent Loans

Loans that do not share risk characteristics are evaluated on an individual basis.

For collateral dependent loans where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loans to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date.

When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the present value of expected cash flows from the operation of collateral.

When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the fair value of the underlying collateral less estimated cost to sell.

The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the loan.

The following table presents the amortized cost basis of collateral dependent loans, by primary collateral type, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans.

As of March 31, 2023

Primary Type of Collateral

Real Estate Equipment Other Total ACL Allocation

Commercial $ — $ — $ — $ — $ —

Construction, land and land development — — — — —

1-4 family residential first mortgages 316 — — 316 —

Home equity — — — — —

Commercial — — — — —

Consumer and other — — — — —

Total $ 316 $ — $ — $ 316 $ —

As of December 31, 2022

Primary Type of Collateral

Real Estate Equipment Other Total ACL Allocation

Commercial $ — $ — $ — $ — $ —

Construction, land and land development — — — — —

1-4 family residential first mortgages 322 — — 322 —

Home equity — — — — —

Commercial — — — — —

Consumer and other — — — — —

Total $ 322 $ — $ — $ 322 $ —

West Bancorporation, Inc.

and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

Allowance for Credit Losses on Off-Balance-Sheet Credit Exposures

The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company.

The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.

The Company has recorded an allowance for credit losses for unfunded commitments of $ 2,344 as of March 31, 2023.

The allowance for credit losses for off-balance-sheet credit exposures is presented in the "Accrued expenses and other liabilities" line of the Consolidated Balance Sheets.

Changes in the allowance for credit losses for off-balance-sheet credit exposures is reflected in the "Credit loss expense " line of the Consolidated Statements of Income.

There were no changes to the allowance for credit losses for off-balance-sheet credit exposures during the three months ended March 31, 2023.

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

2 unchanged sentences

Interest Rate Swaps Designated as a Cash Flow Hedge:

The Company had interest rate swaps designated as cash flow hedges with total notional amounts of $ 280,000 and $ 255,000 at September 30, 2022 and December 31, 2021, respectively.

As of September 30, 2022, the Company had swaps with a total notional amount of $ 150,000 that hedge the interest payments of rolling fixed-rate one-month funding consisting of FHLB advances or brokered deposits.

The Company had interest rate swaps designated as cash flow hedges with total notional amounts of $ 375,000 and $ 310,000 at March 31, 2023 and December 31, 2022, respectively.

As of March 31, 2023, the Company had swaps with a total notional amount of $ 245,000 that hedge the interest payments of rolling fixed-rate one-month funding consisting of FHLB advances or brokered deposits.

One of these swaps with a total notional amount of $ 25,000 is a forward-starting swap with a starting date in September 2023.

Also as of September 30, 2022, 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 accumulated other comprehensive income (AOCI) and recorded in noninterest income at termination.

Also as of March 31, 2023, 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.

Derivatives Not Designated as Accounting Hedges:

7 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.

The table below identifies the balance sheet category and fair values of the Company's derivative instruments as of September 30, 2022 and December 31, 2021.

September 30, 2022 December 31, 2021

West Bancorporation, Inc.

and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

The table below identifies the balance sheet category and fair values of the Company's derivative instruments as of March 31, 2023 and December 31, 2022.

March 31, 2023 December 31, 2022

Cash Flow Hedges:

9 unchanged sentences

Fair value in other liabilities ( 12,508 ) ( 15,309 )

West Bancorporation, Inc.

and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

The following table identifies the pre-tax gains or losses recognized on the Company's derivative instruments designated as cash flow hedges for the three and nine months ended September 30, 2022 and 2021.

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Pre-tax gain recognized in other comprehensive income $ 8,637 $ 359 $ 23,239 $ 5,801

The following table identifies the pre-tax gains or losses recognized on the Company's derivative instruments designated as cash flow hedges for the three months ended March 31, 2023 and 2022.

Three Months Ended March 31,

Pre-tax gain (loss) recognized in other comprehensive income $ ( 1,634 ) $ 10,536

Reclassification from AOCI into income:

Increase (decrease) in interest expense $ ( 1,958 ) $ 1,045

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

The Company estimates there will be approximately $ 2,615 reclassified from accumulated other comprehensive income to reduce interest expense through the 12 months ending September 30, 2023 related to cash flow hedges.

The Company estimates there will be approximately $ 8,695 reclassified from accumulated other comprehensive income to reduce interest expense through the 12 months ending March 31, 2024 related to cash flow hedges.

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.

1 unchanged sentence

These agreements protect the interests of the Company and its counterparties should either party suffer a credit rating deterioration.

As of September 30, 2022 and December 31, 2021, the Company pledged $ 0 and $ 4,500 , respectively, of collateral to the counterparties in the form of cash on deposit.

As of September 30, 2022 and December 31, 2021, the Company's counterparties pledged $ 32,390 and $ 0 , respectively, of collateral to the Company in the form of cash on deposit.

As of both March 31, 2023 and December 31, 2022, the Company pledged $ 0 of collateral to the counterparties in the form of cash on deposit.

As of March 31, 2023 and December 31, 2022, the Company's counterparties pledged $ 26,280 and $ 31,560 , respectively, of collateral to the Company in the form of cash on deposit.

The interest rate swap product with the borrower is cross-collateralized with the underlying loan and therefore there is no pledged cash collateral under swap contracts with customers.

3 unchanged sentences

(dollars in thousands, except per share data)

Net deferred tax assets consisted of the following as of September 30, 2022 and December 31, 2021.

September 30, 2022 December 31, 2021

Net deferred tax assets consisted of the following as of March 31, 2023 and December 31, 2022.

March 31, 2023 December 31, 2022

Deferred tax assets:

Allowance for loan losses $ 6,202 $ 7,176

Allowance for credit losses $ 7,420 $ 6,241

Net unrealized losses on securities available for sale 31,639 34,544

Net unrealized losses on interest rate swaps — 1,903

Lease liabilities 1,069 1,147

6 unchanged sentences

Right-of-use assets 1,022 1,099

Net deferred loan fees and costs 246 247

Deferred loan costs 260 249

Net unrealized gains on interest rate swaps 3,121 4,003

Premises and equipment 1,198 1,219

Other 355 312

New markets tax credit loan 325 303

Net deferred tax assets before valuation allowance 36,649 38,085

3 unchanged sentences

The state net operating loss carryforwards expire in 2023 and thereafter.

In the second quarter of 2022, the Company recorded a one-time increase in state income tax expense related to the June 2022 enactment of changes in the Iowa bank franchise tax rates.

This legislation reduces the Iowa bank franchise tax rate applied to apportioned income for 2023 and future years.

This future reduction in the state tax rate required the Company to reduce net deferred tax assets as of June 30, 2022 by $ 671 and in turn caused the one-time increase in 2022 tax expense.

The effective tax rate for the nine months ended September 30, 2022 was 22.18 percent.

Excluding this one-time state tax expense, the effective tax rate for the nine months ended September 30, 2022 would have been 20.79 percent.

West Bancorporation, Inc.

3 unchanged sentences

Accumulated Other Comprehensive Income (Loss)

The following table summarizes the changes in the balances of each component of accumulated other comprehensive income (loss), net of tax, for the nine months ended September 30, 2022 and 2021.

The following table summarizes the changes in the balances of each component of accumulated other comprehensive income (loss), net of tax, for the three months ended March 31, 2023 and 2022.

Unrealized Unrealized Accumulated

6 unchanged sentences

Net current period other comprehensive income (loss) 8,756 ( 2,710 ) 6,046

Balance, September 30, 2022 $ ( 111,043 ) $ 12,879 $ ( 98,164 )

Balance, March 31, 2023 $ ( 94,924 ) $ 9,499 $ ( 85,425 )

Balance, December 31, 2021 $ ( 5,021 ) $ ( 5,616 ) $ ( 10,637 )

2 unchanged sentences

Net current period other comprehensive income (loss) ( 40,782 ) 8,651 ( 32,131 )

Balance, September 30, 2021 $ ( 1,870 ) $ ( 8,135 ) $ ( 10,005 )

Balance, March 31, 2022 $ ( 45,803 ) $ 3,035 $ ( 42,768 )

Commitments and Contingencies

5 unchanged sentences

The Company uses the same credit policies in making commitments and conditional obligations that it uses for on-balance-sheet instruments.

The Company's commitments consisted of the following amounts as of September 30, 2022 and December 31, 2021.

September 30, 2022 December 31, 2021

The Company adopted ASU No.

2016-13 effective January 1, 2023 which requires an allowance for credit losses on off-balance sheet credit exposure.

See Note 4 for additional information.

The Company's commitments consisted of the following amounts as of March 31, 2023 and December 31, 2022.

March 31, 2023 December 31, 2022

Commitments to fund real estate construction loans $ 403,841 $ 336,900

2 unchanged sentences

$ 1,122,180 $ 1,085,123

West Bank previously executed Mortgage Partnership Finance (MPF) Master Commitments (Commitments) with the FHLB of Des Moines to deliver residential mortgage loans and to guarantee the payment of any realized losses that exceed the FHLB's first loss account for mortgages delivered under the Commitments.

West Bank receives credit enhancement fees from the FHLB for providing this guarantee and continuing to assist with managing the credit risk of the MPF Program residential mortgage loans.

The outstanding balance of mortgage loans sold under the MPF Program was $ 24,197 and $ 31,552 at September 30, 2022 and December 31, 2021, respectively.

Contractual commitments :

The Company had remaining commitments to invest in qualified affordable housing projects totaling $ 3,707 and $ 3,986 as of September 30, 2022 and December 31, 2021, respectively.

West Bancorporation, Inc.

2 unchanged sentences

(dollars in thousands, except per share data)

West Bank entered into a construction contract for the construction of a new headquarters building in West Des Moines, Iowa subsequent to quarter-end.

West Bank receives credit enhancement fees from the FHLB for providing this guarantee and continuing to assist with managing the credit risk of the MPF Program residential mortgage loans.

The outstanding balance of mortgage loans sold under the MPF Program was $ 22,720 and $ 23,337 at March 31, 2023 and December 31, 2022, respectively.

Contractual commitments :

The Company had remaining commitments to invest in qualified affordable housing projects totaling $ 3,012 and $ 3,431 as of March 31, 2023 and December 31, 2022, respectively.

West Bank entered into a construction contract in 2022 for the construction of a new headquarters building in West Des Moines, Iowa.

West Bank will pay the contractor a contract price consisting of the cost of work plus a fee, subject to a guaranteed maximum price of $42,309, with anticipated construction completed in 2024.

As of September 30, 2022, $1,499 has been paid under this construction contract.

As of March 31, 2023, there was a remaining commitment of $ 30,415 under this contract.

West Bank is also building a new office in Mankato, Minnesota to be completed in the fall of 2023, which had a remaining commitment of $ 5,426 as of March 31, 2023.

Concentrations of credit risk :

Substantially all of the Company's loans, commitments to extend credit and standby letters of credit have been granted to customers in the Company's market areas.

The concentrations of credit by type of loan are set forth in Note 4.

The distribution by type of loan of commitments to extend credit approximates the distribution by type of loan outstanding.

Standby letters of credit were granted primarily to commercial borrowers.

Contingencies :

9 unchanged sentences

The Company's policy is to recognize transfers between levels at the end of each reporting period, if applicable.

There were no transfers between levels of the fair value hierarchy during the nine months ended September 30, 2022.

There were no transfers between levels of the fair value hierarchy during the three months ended March 31, 2023.

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

3 unchanged sentences

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.

West Bancorporation, Inc.

and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

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

9 unchanged sentences

These models’ key assumptions include the contractual terms of the respective contract along with significant observable inputs, including interest rates, yield curves, nonperformance risk and volatility.

West Bancorporation, Inc.

and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

The following tables present the balances of financial assets and liabilities measured at fair value on a recurring basis by level as of September 30, 2022 and December 31, 2021.

September 30, 2022

The following tables present the balances of financial assets and liabilities measured at fair value on a recurring basis by level as of March 31, 2023 and December 31, 2022.

March 31, 2023

Total Level 1 Level 2 Level 3

21 unchanged sentences

Derivative instruments, interest rate swaps $ 15,309 $ — $ 15,309 $ —

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).

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

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 September 30, 2022, there were no loans for which a fair value adjustment was recorded.

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.

Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available and include consideration of variations in location, size, and income production capacity of the property.

Additionally, the appraisals are periodically further adjusted by the Company in consideration of charges that may be incurred in the event of foreclosure and are based on management’s historical knowledge, changes in business factors and changes in market conditions.

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.

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 nonrecurring basis.

Valuation Technique Unobservable Inputs Range (Weighted Average)

September 30, 2022

Impaired loans — — —

December 31, 2021

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

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 both March 31, 2023 and December 31, 2022, there were no individually evaluated loans with a fair value adjustment.

Individually evaluated loans are classified within Level 3 of the fair value hierarchy and are evaluated and valued at the lower of cost or fair value when the loan is individually evaluated.

Fair value is based on the value of the collateral securing these loans.

In determining the estimated net realizable value of the underlying collateral of individually evaluated 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.

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

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

The following table presents the carrying amounts and approximate fair values of financial assets and liabilities as of September 30, 2022 and December 31, 2021.

September 30, 2022

The following table presents the carrying amounts and approximate fair values of financial assets and liabilities as of March 31, 2023 and December 31, 2022.

March 31, 2023

Carrying Amount Approximate Fair Value Level 1 Level 2 Level 3

1 unchanged sentence

Cash and due from banks $ 21,579 $ 21,579 $ 21,579 $ — $ —

Federal funds sold 1,049 1,049 1,049 — —

Interest-bearing deposits 901 901 901 — —

Securities available for sale 665,358 665,358 — 665,358 —

5 unchanged sentences

Deposits $ 2,798,393 $ 2,798,370 $ — $ 2,798,370 $ —

Federal funds purchased 204,500 204,500 204,500 — —

Federal funds purchased and other short-term borrowings 229,290 229,290 229,290 — —

Subordinated notes, net 79,435 69,275 — 69,275 —

14 unchanged sentences

Cash and due from banks $ 24,896 $ 24,896 $ 24,896 $ — $ —

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

Interest-bearing deposits 1,643 1,643 1,643 — —

Securities available for sale 664,115 664,115 — 664,115 —

5 unchanged sentences

Deposits $ 2,880,408 $ 2,880,495 $ — $ 2,880,495 $ —

Federal funds purchased 2,880 2,880 2,880 — —

Federal funds purchased and other short-term borrowings 200,000 200,000 200,000 — —

Subordinated notes, net 79,369 68,047 — 68,047 —

6 unchanged sentences

Standby letters of credit — — — — —

Subordinated Notes

On June 14, 2022, the Company issued $ 60,000 of subordinated notes (the Notes).

The Notes initially bear interest at 5.25 percent per annum, with interest payable semi-annually for the first five years of the Notes.

Beginning June 15, 2027, the interest rate will reset quarterly to a floating rate per annum that is expected to be three-month term Secured Overnight Financing Rate (SOFR) plus 2.41 percent with payments due quarterly .

The Company may redeem the Notes, in whole or in part, on and after June 15, 2027 at a price equal to 100 percent of the principal amount of the Notes being redeemed plus accrued and unpaid interest.

The Notes will mature on June 15, 2032 if they are not earlier redeemed.

Proceeds from this debt issuance were used to make a $ 58,650 capital injection into the Company's subsidiary, West Bank.

West Bancorporation, Inc.

2 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-Q

Item 1. Financial Statements