What changed in this filing

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Item 1. Business

2024-02-22 compared with 2023-02-23 · 69 added, 63 removed, 363 unchanged (27% of the section changed)

18 unchanged sentences

Raymond James ranked West Bancorporation number 13 in the nation for 2022.

West Bancorporation has been recognized for this award eight out of the last nine years.

• S&P Global Market Intelligence ranked West Bancorporation as the 13th best-performing community bank for 2021 with assets between $3 billion and $10 billion.

West Bancorporation has been recognized for this award nine out of the last ten years.

• S&P Global Market Intelligence ranked West Bancorporation as the 17th best-performing large community bank for 2022 among banks with assets between $3 billion and $10 billion.

The rankings were based on various measures related to profitability, growth and asset quality.

This was the second consecutive year that West Bancorporation was recognized on this list.

This was the third consecutive year that West Bancorporation was recognized on this list.

• West Bancorporation was recognized as one of the nation’s top 200 banks with assets between $2 billion and $10 billion by American Banker, based on three-year average return on equity as of December 31, 2022.

West Bank ranked 39th overall on American Banker’s list and was the top ranked bank of the eight Iowa and Minnesota banks on the list.

West Bank ranked 18th overall on American Banker’s list and was the top ranked bank of the three Iowa and Minnesota banks on the list.

The Company continues to grow, as loans outstanding at the end of 2023 totaled $2.9 billion compared to $2.7 billion at the end of 2022, an increase of 6.7 percent.

Total loans outstanding at the end of 2022 included $1.1 million of Paycheck Protection Program (PPP) loans, compared to $22.2 million at the end of 2021.

Excluding PPP loans, total loans increased 12.6 percent in 2022.

Total deposits declined 4.5 percent as of December 31, 2022 from the balances as of December 31, 2021.

Total deposits increased 3.2 percent as of December 31, 2023 from the balances as of December 31, 2022.

The Company continues to focus on expanding existing and entering into new customer relationships while maintaining strong credit quality.

We anticipate that the current monetary policies of the Federal Reserve will continue to effect customer deposit activity and loan demand in 2023.

We anticipate that the current monetary policies of the Federal Reserve will continue to affect customer deposit activity and loan demand in 2024.

The Company declared and paid cash dividends on its common stock totaling $1.00 per share in 2023 and declared a $0.25 quarterly dividend on January 24, 2024, payable on February 21, 2024, to stockholders of record on February 7, 2024.

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As of December 31, 2023 and 2022, the Company had no intangible assets or preferred stock outstanding.

The decrease in the tangible common equity ratio was primarily due to the increase in accumulated other comprehensive loss related to the decline in market value of the securities portfolio, partially offset by net income less dividends paid in 2022.

Additional information on capital can be found in Item 7.

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West Bank has six offices in the Des Moines area, one office in Coralville, Iowa and one office in each of our four Minnesota markets.

In 2022, West Bank completed construction of a permanent branch office in St.

Cloud, Minnesota.

Additionally, West Bank began construction of a new headquarters building in West Des Moines, Iowa and a permanent branch office in Mankato, Minnesota.

In 2023, West Bank completed construction of a permanent branch office in Mankato, Minnesota.

Additionally, construction continued for the new headquarters building in West Des Moines, Iowa and is expected to be completed in the second quarter of 2024.

West Bank offers many types of credit to its customers, including commercial, real estate and consumer loans.

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Our markets are home to major financial services companies, healthcare systems, educational institutions, technology and agribusiness companies, and state and local governments.

Our markets host major employers such as Principal Financial Group, Wells Fargo, John Deere, Mayo Clinic, University of Iowa, University of Iowa Health Care, UnityPoint Health, CentraCare Health Systems and IBM.

Our markets host major employers such as Principal Financial Group, Wells Fargo, Hy-Vee, John Deere, Mayo Clinic, University of Iowa, University of Iowa Health Care, MercyOne, UnityPoint Health, CentraCare Health Systems and IBM.

The markets in which we operate have generally experienced stable population growth over the past five years.

1 unchanged sentence

Rochester and St.

Cloud are the fourth and fifth largest MSAs in Minnesota.

Cloud are the third and fourth largest MSAs in Minnesota.

We believe our markets are stable and have weathered the economic challenges of the last few years relatively well.

Unemployment rates in all our markets are below the national unemployment rate of 3.5 percent as of December 31, 2022.

Unemployment rates in all our markets are below the national unemployment rate of 3.7 percent as of December 31, 2023, according to data from the U.S.

Bureau of Labor Statistics.

The market areas served by West Bank are highly competitive with respect to both loans and deposits.

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Our team is made up of 181 full-time employees and 9 part-time employees.

We are proud of our culturally and gender diverse workforce, with approximately 18 percent identifying as persons of color and approximately 55 percent as women.

We have a number of multi-lingual employees at West Bank and strive to have at least one bilingual team member in all Central Iowa locations in customer-facing or customer service roles.

We are proud of our culturally and gender diverse workforce, with approximately 14 percent identifying as persons of color and approximately 59 percent as female.

West Bancorporation, Inc.

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20 percent of West Bank’s current executive management team and 48 percent of officers and department managers are women.

Currently, women comprise 23 percent of the directors on our Board.

Currently, women comprise 25 percent of the directors on our Board of Directors.

As part of our compensation philosophy, we believe that we must offer and maintain market competitive compensation and benefit programs for our employees in order to attract and retain talent.

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Our approach also promotes longevity in our workforce.

The average tenure of our employees is over nine years.

72 employees (40 percent) have been with West Bank for over ten years and 42 employees (23 percent) for over 15 years.

Non-teller turnover was approximately 11 percent in 2022.

The average tenure of our employees is over eight years.

Approximately 19 percent have been with West Bank for 10-15 years and approximately 21 percent have been with West Bank for over 15 years.

Non-teller turnover was approximately 10 percent in 2023, compared to 11 percent in 2022.

We conduct periodic company-wide employee engagement surveys to assess employee satisfaction and engagement.

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The Board carefully considers corporate social responsibility when it works with management to determine the Company’s strategic priorities and plans to achieve such priorities.

We recognize that understanding our efforts to improve ESG practices is increasingly important to our stockholders, customers and employees.

Learn more about our ESG practices on the Corporate Governance section of our website at www.westbankstrong.com under Investor Relations/Overview/Governance documents.

1 unchanged sentence

FDIC-insured institutions, their holding companies and their affiliates are extensively regulated under federal and state law.

As a result, our growth and earnings performance may be affected not only by management decisions and general economic conditions, but also by the requirements of federal and state statutes and by the regulations and policies of various bank regulatory agencies, including the Iowa Division of Banking, the Board of Governors of the Federal Reserve System (Federal Reserve), the Federal Deposit Insurance Corporation (FDIC) and the Consumer Financial Protection Bureau (CFPB).

As a result, our growth and earnings performance may be affected not only by management decisions and general economic conditions, but also by the requirements of federal and state statutes and by the regulations and policies of various bank regulatory agencies, including the Iowa Division of Banking, the Board of Governors of the Federal Reserve System (Federal Reserve), the FDIC and the Consumer Financial Protection Bureau (CFPB).

Furthermore, taxation laws administered by the Internal Revenue Service and state taxing authorities, accounting rules developed by the Financial Accounting Standards Board (FASB), securities laws administered by the SEC and state securities authorities, and anti-money laundering laws enforced by the U.S.

63 unchanged sentences

Monetary Policy .

The monetary policy of the Federal Reserve has a significant effect on the operating results of financial or bank holding companies and their subsidiaries, and this is evidenced in its increases in the targeted federal funds rate throughout 2022.

Among the tools available to the Federal Reserve to affect the money supply are open market transactions in U.S.

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At least semi-annually, the FDIC updates its loss and income projections for the DIF and, if needed, increases or decreases the assessment rates, following notice and comment on proposed rulemaking.

The reserve ratio is the DIF balance divided by estimated insured deposits.

For this purpose, the reserve ratio is the DIF balance divided by estimated insured deposits.

In response to the global financial crisis, the Dodd-Frank Act increased the minimum reserve ratio from 1.15% to 1.35% of estimated amount of total insured deposits.

Prior to the COVID-19 pandemic, the reserve ratio briefly exceeded the statutory threshold, but, because of extraordinary insured deposit growth caused by an unprecedented inflow of deposits during the pandemic, the reserve ratio fell below 1.35% and continues to be below the threshold.

The FDIC staff closely monitors the factors that affect the reserve ratio, and, in order to raise the reserve ratio to 1.35 % by September 30, 2028, the FDIC increased the initial deposit insurance rates by two basis points, beginning with the first quarterly assessment period of the 2023 assessment.

As a result of this change, West Bank’s FDIC insurance assessment will increase beginning in 2023.

The DIF balance was $125.5 billion on September 30, 2022, up $1.0 billion from the end of the second quarter.

The reserve ratio remained at 1.26% as growth in the fund balance kept pace with growth in insured deposits.

The FDIC staff continues to closely monitor the factors that affect the reserve ratio, and any change could impact FDIC assessments.

In the semiannual update in June 2022, the FDIC projected that the reserve ratio was at risk of not reaching the statutory minimum of 1.35% by September 30, 2028, the statutory deadline.

Based on this update, the FDIC approved an increase in initial base deposit insurance assessment rate schedules by two basis points, applicable to all insured depository institutions.

The increase was effective on January 1, 2023, applicable to the first quarterly assessment period of the 2023 assessment (January 1 through March 31, 2023).

In addition, because the total cost of the failures of Silicon Valley Bank and Signature Bank was approximately $16.3 billion, the FDIC adopted a special assessment for banks having deposits above $5 billion, at an annual rate of 13.4 basis points, beginning with the first quarterly assessment period of 2024 (January 1 through March 31, 2024) with an invoice payment date of June 28, 2024, and will continue to collect special assessments for an anticipated total of eight quarterly assessment periods.

The base for the special assessment is equal to an insured depository institution’s estimated uninsured deposits for the December 31, 2022 reporting period, adjusted to exclude the first $5 billion in estimated uninsured deposits.

Because West Bank’s uninsured deposits at December 31, 2023 were less than $5 billion, this special assessment does not apply.

Supervisory Assessments .

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and Subsidiary

In July 2023, federal banking agencies proposed a revision to capital rules that would apply to all banking organizations with $100 billion or more in total assets.

The rules are intended to improve consistency of risk measurement in the capital rules for large banking organizations;

apply the capital standards for large banking organizations to a broader set of large banking organizations to ensure regulatory capital is calculated in a consistent manner;

require all large banking organizations to meet the supplementary leverage ratio requirements.

Smaller banking organizations could be subject to the newly revised market risk capital rule if its trading assets and trading liabilities are at least $5 billion or at least 10 percent of its total assets, to satisfy minimum capital requirements.

If finalized, the proposal would provide transition provisions to allow banking organizations sufficient time to adjust to the proposed requirements.

Specifically, the proposal would phase in the requirements over three years, such that the new provisions would be fully implemented starting in the fourth year after the effective date of the rule.

Capital Levels .

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The Basel III Rule also changed the definition of capital by establishing more stringent criteria that instruments must meet to be considered Additional Tier 1 Capital (primarily non-cumulative perpetual preferred stock that meets certain requirements) and Tier 2 Capital (primarily other types of preferred stock and subordinated debt, subject to limitations).

The Basel III Rule also constrained the inclusion of minority interests, mortgage-servicing assets, and deferred tax assets in capital and required deductions from Common Equity Tier 1 Capital in the event that such assets exceeded a percentage of a banking institution’s Common Equity Tier 1 Capital.

The Basel III Rule also constrained the inclusion of minority interests, mortgage-servicing assets, and deferred tax assets in capital and required deductions from Common Equity Tier 1 Capital if such assets exceeded a percentage of a banking institution’s Common Equity Tier 1 Capital.

The Basel III Rule required minimum capital ratios as of January 1, 2015, as follows:

6 unchanged sentences

Factoring in the conservation buffer increases the minimum ratios depicted above to 7% for Common Equity Tier 1 Capital, 8.5% for Tier 1 Capital and 10.5% for Total Capital.

West Bancorporation, Inc.

and Subsidiary

Well-Capitalized Requirements .

8 unchanged sentences

, Tier 1 Capital less all intangible assets), well above the minimum levels.

West Bancorporation, Inc.

and Subsidiary

Under the capital regulations of the FDIC, in order to be well‑capitalized, West Bank must maintain:

28 unchanged sentences

less than $10 billion in total consolidated assets, limited amounts of certain assets and off-balance sheet exposures, and a CBLR greater than 9%.

West Bank may elect the CBLR framework at any time but has not currently determined to do so.

West Bank has not elected to use the CBLR framework at this time.

Liquidity Requirements .

Liquidity is a measure of the ability and ease with which bank assets may be converted to cash.

Liquid assets are those that can be converted to cash quickly if needed to meet financial obligations.

To remain viable, FDIC-insured institutions must have enough liquid assets to meet their near-term obligations, such as withdrawals by depositors.

In addition to liquidity guidelines already in place, the U.S.

bank regulatory agencies implemented the Basel III Liquidity Coverage Ratio or LCR in September 2014, which require large financial firms to hold levels of liquid assets sufficient to protect against constraints on their funding during times of financial turmoil.

While the LCR only applies to the largest banking organizations in the country, we continue to review our liquidity risk management policies in light of developments.

Liquidity is a measure of the ability and ease with which bank assets may be converted to meet financial obligations such as deposits or other funding sources.

Banks are required to implement liquidity risk management frameworks that ensure they maintain sufficient liquidity, including a cushion of unencumbered, high quality liquid assets, to withstand a range of stress events.

The level and speed of deposit outflows contributing to the failures of Silicon Valley Bank, Signature Bank and First Republic Bank in the first half of 2023 was unprecedented and contributed to acute liquidity and funding strain.

These events have further underscored the importance of liquidity risk management and contingency funding planning by insured depository institutions like West Bank.

West Bancorporation, Inc.

and Subsidiary

The primary role of liquidity risk management is to:

(i) prospectively assess the need for funds to meet financial obligations;

and (ii) ensure the availability of cash or collateral to fulfill those needs at the appropriate time by coordinating the various sources of funds available to the institution under normal and stressed conditions.

Basel III includes a liquidity framework that requires the largest insured institutions to measure their liquidity against specific liquidity tests.

One test, referred to as the Liquidity Coverage Ratio, or LCR, is designed to ensure that the banking entity has an adequate stock of unencumbered high-quality liquid assets that can be converted easily and immediately in private markets into cash to meet liquidity needs for a 30-calendar day liquidity stress scenario.

The other test, known as the Net Stable Funding Ratio, or NSFR, is designed to promote more medium- and long-term funding of the assets and activities of FDIC-insured institutions over a one-year horizon.

These tests provide an incentive for banks and holding companies to increase their holdings in Treasury securities and other sovereign debt as a component of assets, increase the use of long-term debt as a funding source and rely on stable funding like core deposits (in lieu of brokered deposits).

Although these tests do not, and will not, apply to West Bank, we continue to review our liquidity risk management policies in light of regulatory requirements and industry developments.

Dividend Payments .

5 unchanged sentences

Notwithstanding the availability of funds for dividends, however, the FDIC and the Iowa Division of Banking may prohibit the payment of dividends by West Bank if either or both determine such payment would constitute an unsafe or unsound practice.

In addition, under the Basel III Rule, institutions that seek the freedom to pay dividends will have to maintain 2.5 percent in Common Equity Tier 1 Capital attributable to the capital conservation buffer.

In addition, under the Basel III Rule, institutions that want to pay dividends will have to maintain 2.5 percent in Common Equity Tier 1 Capital attributable to the capital conservation buffer.

See “—Bank Capital Requirements” above.

West Bancorporation, Inc.

and Subsidiary

State Bank Investments and Activities .

11 unchanged sentences

The federal banking agencies have adopted operational and managerial standards to promote the safety and soundness of such institutions that address internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, asset quality and earnings.

West Bancorporation, Inc.

and Subsidiary

In general, the safety and soundness standards prescribe the goals to be achieved in each area, and each institution is responsible for establishing its own procedures to achieve those goals.

18 unchanged sentences

These security and privacy policies and procedures are in effect across all business lines and geographic locations.

West Bancorporation, Inc.

and Subsidiary

Branching Authority .

5 unchanged sentences

and (iii) state law limitations requiring the merging bank to have been in existence for a minimum period of time (not to exceed five years) prior to the merger.

Transaction Account Reserves .

Federal law requires FDIC-insured institutions to maintain reserves against their transaction accounts (primarily NOW and regular checking accounts) to provide liquidity.

The amount of reserves is established by the Federal Reserve based on tranches of zero, three and ten percent of a bank’s transaction account deposits.

However, in March 2020, in an unprecedented move, the Federal Reserve announced that the banking system had ample reserves, and, as reserve requirements no longer played a significant role in this regime, it reduced all reserve tranches to zero percent, thereby freeing banks from the legally mandated reserve maintenance requirement.

The action permits West Bank to loan or invest funds that were previously unavailable.

The Federal Reserve has indicated that it expects to continue to operate in an ample reserves regime for the foreseeable future.

Community Reinvestment Act Requirements .

CRA requires West Bank to have a continuing and affirmative obligation in a safe and sound manner to help meet the credit needs of its entire community, including low- and moderate-income neighborhoods.

The CRA requires West Bank to have a continuing and affirmative obligation in a safe and sound manner to help meet the credit needs of the entire community, including low- and moderate-income neighborhoods.

Federal regulators regularly assess West Bank’s record of meeting the credit needs of its communities.

Applications for additional acquisitions would be affected by the evaluation of West Bank’s effectiveness in meeting its CRA requirements.

In May 2022, the bank regulatory agencies issued a notice of proposed rulemaking called the Joint Proposal to Strengthen and Modernize Community Reinvestment Act Regulations (the “CRA Proposal”).

The CRA Proposal is designed to update how CRA activities qualify for consideration, where CRA activities are considered, and how CRA activities are evaluated.

More specifically, the bank regulatory agencies described the goals of the CRA Proposal as follows:

Applications for acquisitions would be affected by the evaluation of West Bank’s effectiveness in meeting its CRA requirements.

On October 24, 2023, the bank regulatory agencies issued a final rule to strengthen and modernize the CRA regulations (the CRA Rule), some of which is effective on April 1, 2024.

The CRA Rule is designed to update how CRA activities qualify for consideration, where CRA activities are considered, and how CRA activities are evaluated.

More specifically, the bank regulatory agencies described the goals of the CRA Rule as follows:

(i) to expand access to credit, investment, and basic banking services in low and moderate income communities;

(ii) to adapt to changes in the banking industry, including mobile and internet banking by modernizing assessment areas while maintaining a focus on branch based areas;

(iii) to provide greater clarity, consistency, and transparency in the application of the regulations through the use of standardized metrics as part of CRA evaluation and clarifying eligible CRA activities focused on low and moderate income communities and under served rural communities;

(iv) to tailor CRA rules and data collection to bank size and business model;

and (v) to maintain a unified approach among the regulators.

A final rule has not yet been issued.

Management of West Bank is assessing the impact of the CRA Rule on its CRA lending and investment activities in its markets.

West Bancorporation, Inc.

and Subsidiary

Anti-Money Laundering .

The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), the Bank Secrecy Act and other similar laws are designed to deny terrorists and criminals the ability to obtain access to the U.S.

The Bank Secrecy Act (BSA) is the common name for a series of laws and regulations enacted in the United States to combat money laundering and the financing of terrorism.

They are designed to deny terrorists and criminals the ability to obtain access to the U.S.

financial system and have significant implications for FDIC-insured institutions and other businesses involved in the transfer of money.

These laws mandate financial services companies to have policies and procedures with respect to measures designed to address any or all of the following matters:

The so-called Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) regime under the BSA provides a foundation to promote financial transparency and deter and detect those who seek to misuse the U.S.

financial system to launder criminal proceeds, finance terrorist acts, or move funds for other illicit purposes.

The laws mandate financial services companies to have policies and procedures with respect to measures designed to address:

(i) customer identification programs;

16 unchanged sentences

Additional monitoring processes have been implemented to manage this increased risk.

West Bancorporation, Inc.

and Subsidiary

Consumer Financial Services .

9 unchanged sentences

The principal executive offices of the Company are located at 1601 22 nd Street, West Des Moines, Iowa 50266.

As of April 15, 2024, the Company’s corporate headquarters will be located at 3330 Westown Parkway, West Des Moines, Iowa 50266.

The Company’s telephone number is (515) 222-2300, and its internet address is www.westbankstrong.com.

4 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 1. Business