What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-24 compared with 2024-07-25 · 106 added, 96 removed, 442 unchanged (31% of the section changed)

7 unchanged sentences

Risks and uncertainties that may affect future results include:

interest rate risk, including the effects of sustained high interest rates;

interest rate risk, including the effects of changes in interest rates;

fluctuations in the values of the securities held in our investment portfolio, including as a result of rising interest rates;

competitive pressures, including from non-bank competitors such as "fintech" companies and digital asset service providers;

competitive pressures, including from non-bank competitors such as credit unions, "fintech" companies and digital asset service providers;

pricing pressures on loans and deposits;

1 unchanged sentence

changes in credit and other risks posed by the Company’s loan portfolio, including declines in commercial or residential real estate values or changes in the allowance for credit losses dictated by new market conditions, accounting standards or regulatory requirements;

the concentration of large deposits from certain clients, who have balances above current FDIC insurance limits;

changes in local, national and international economic conditions, including high rates of inflation and possible recession;

the concentration of large deposits from certain clients, including those who have balances above current FDIC insurance limits;

changes in local, national and international economic conditions, including the level and impact of inflation and possible recession;

the effects of recent developments and events in the financial services industry, including the large-scale deposit withdrawals over a short period of time that resulted in recent bank failures;

31 unchanged sentences

The following table reconciles the non-GAAP financial measures of net interest income and net interest margin on a FTE basis and efficiency ratio on an adjusted and FTE basis to their most directly comparable measures under GAAP.

Three Months Ended June 30, Six Months Ended June 30,

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

2024 2023 2024 2023

24 unchanged sentences

The following discussion describes the consolidated operations and financial condition of the Company, West Bank and West Bank's special purpose subsidiaries (which are invested in new markets tax credit activities).

Results of operations for the three and six months ended June 30, 2024 are compared to the results for the same periods in 2023, and the consolidated financial condition of the Company as of June 30, 2024 is compared to that as of December 31, 2023.

Results of operations for the three and nine months ended September 30, 2024 are compared to the results for the same periods in 2023, and the consolidated financial condition of the Company as of September 30, 2024 is compared to that as of December 31, 2023.

This discussion and analysis should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's Annual Report on Form 10-K/A for the year ended December 31, 2023, filed with the SEC on February 23, 2024.

The Company conducts business from its main office in West Des Moines, Iowa and through its branch offices in central Iowa, which is generally the greater Des Moines metropolitan area;

The Company conducts business from its headquarters building in West Des Moines, Iowa and through its branch offices in central Iowa, which is generally the greater Des Moines metropolitan area;

eastern Iowa, which is the area including and surrounding Iowa City and Coralville;

and southern Minnesota, which includes the cities of Rochester, Owatonna, Mankato and St.

Net income for the three months ended June 30, 2024 was $5,192, or $0.31 per diluted common share, compared to $5,862, or $0.35 per diluted common share, for the three months ended June 30, 2023.

The Company's annualized return on average assets and return on average equity for the three months ended June 30, 2024 were 0.53 percent and 9.50 percent, respectively, compared to 0.64 percent and 11.03 percent, respectively, for the three months ended June 30, 2023.

Net interest income for the three months ended June 30, 2024 declined $111, or 0.6 percent, compared to the three months ended June 30, 2023.

The decrease in net interest income was primarily due to the increase in interest expense on deposits, resulting from higher short-term interest rates and changes in deposit mix, partially offset by an increase in interest income on loans.

Noninterest income decreased $43 for the three months ended June 30, 2024 compared to the same period in 2023.

Noninterest expense increased $720 during the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily due to increases in occupancy and equipment, technology and software expense and FDIC insurance, partially offset by a decrease in business development expenses.

Net income for the six months ended June 30, 2024 was $11,001, or $0.65 per diluted common share, compared to $13,706, or $0.82 per diluted common share, for the six months ended June 30, 2023.

The Company's annualized return on average assets and return on average equity for the six months ended June 30, 2024 were 0.57 percent and 10.07 percent, respectively, compared to 0.76 percent and 12.90 percent, respectively, for the six months ended June 30, 2023.

Net interest income for the six months ended June 30, 2024 declined $2,056, or 5.7 percent, compared to the six months ended June 30, 2023.

The decrease in net interest income was primarily due to the increase in interest expense on deposits and other borrowings, resulting from rapidly rising short-term interest rates and changes in funding mix, partially offset by an increase in interest income on loans.

Noninterest income decreased $701 for the six months ended June 30, 2024 compared to the same period in 2023, primarily due to a nonrecurring gain from bank-owned life insurance in 2023.

Noninterest expense increased $517 during the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily due to increases in occupancy and equipment, technology and software expense and FDIC insurance, partially offset by a decrease in business development expenses.

Total loans outstanding increased $71,239, or 2.4 percent, during the first six months of 2024.

The credit quality of the loan portfolio remained strong, as evidenced by the Company's ratio of nonperforming loans to total assets of 0.01 percent as of both June 30, 2024 and December 31, 2023.

As of June 30, 2024, the allowance for credit losses was 0.95 percent of total outstanding loans, compared to 0.97 percent as of December 31, 2023.

Management believed the allowance for credit losses at June 30, 2024 was adequate to absorb expected losses in the loan portfolio as of that date.

Net income for the three months ended September 30, 2024 was $5,952, or $0.35 per diluted common share, compared to $5,906, or $0.35 per diluted common share, for the three months ended September 30, 2023.

The Company's annualized return on average assets and return on average equity for the three months ended September 30, 2024 were 0.60 percent and 10.41 percent, respectively, compared to 0.64 percent and 10.89 percent, respectively, for the three months ended September 30, 2023.

Net interest income for the three months ended September 30, 2024 increased $1,326, or 8.0 percent, compared to the three months ended September 30, 2023.

The increase in net interest income was primarily due to the increase in interest income on loans and decrease in interest expense on federal funds purchased and other short-term borrowings, partially offset by the increase in interest expense on deposits.

Noninterest income decreased $463 for the three months ended September 30, 2024 compared to the same period in 2023, due to $431 in loan swap fees earned during the three months ended September 30, 2023.

Noninterest expense increased $987 during the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to increases in occupancy and equipment, technology and software expense and FDIC insurance, partially offset by a decrease in business development expenses.

Net income for the nine months ended September 30, 2024 was $16,953, or $1.00 per diluted common share, compared to $19,612, or $1.17 per diluted common share, for the nine months ended September 30, 2023.

The Company's annualized return on average assets and return on average equity for the nine months ended September 30, 2024 were 0.59 percent and 10.18 percent, respectively, compared to 0.72 percent and 12.22 percent, respectively, for the nine months ended September 30, 2023.

Net interest income for the nine months ended September 30, 2024 declined $730, or 1.4 percent, compared to the nine months ended September 30, 2023.

The decrease in net interest income was primarily due to the increase in interest expense on deposits, resulting from rising short-term interest rates and changes in deposit mix, partially offset by an increase in interest income on loans.

Noninterest income decreased $1,164 for the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to loan swap fees and a nonrecurring gain from bank-owned life insurance in 2023.

Noninterest expense increased $1,504 during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to increases in occupancy and equipment, technology and software expense and FDIC insurance, partially offset by a decrease in business development expenses.

The Company recorded a provision for credit losses on loans of $1,000 for the three and nine months ended September 30, 2024, compared to $200 for the three and nine months ended September 30, 2023.

The provision for credit losses recorded in 2024 was due to changes in the forecasted loss rates, driven by increases in the forecasted unemployment rates.

The Company also recorded a negative provision for credit losses on unfunded commitments of $1,000 for the three and nine months ended September 30, 2024, compared to no provision for the three and nine months ended September 30, 2023.

The negative provision for unfunded commitments recorded in 2024 was due to the decrease in balances of unfunded commitments resulting primarily from the funding of construction loans.

West Bancorporation, Inc.

1 unchanged sentence

(in thousands, except share and per share data)

Total loans outstanding increased $93,686, or 3.2 percent, during the first nine months of 2024.

The credit quality of the loan portfolio remained strong, as evidenced by the Company's ratio of nonperforming loans to total assets of 0.01 percent as of both September 30, 2024 and December 31, 2023.

As of both September 30, 2024 and December 31, 2023, the allowance for credit losses was 0.97 percent of total outstanding loans.

Management believed the allowance for credit losses at September 30, 2024 was adequate to absorb expected losses in the loan portfolio as of that date.

On a quarterly basis, the Company compares three key performance metrics to those of our identified peer group.

The peer group for 2024 consists of 22 Midwestern, publicly traded financial institutions, including Bank First Corporation, Bridgewater Bancshares Inc., ChoiceOne Financial Services, Inc., Civista Bancshares, Inc., CrossFirst Bankshares, Inc., Equity Bancshares, Inc., Farmers National Banc Corp., Farmers & Merchants Bancorp., First Business Financial Services, Inc., First Financial Corp., First Mid Bancshares, Inc., German American Bancorp, Inc., HBT Financial Inc., Hills Bancorporation, Isabella Bank Corporation, LCNB Corp., Macatawa Bank Corporation, Mercantile Bank Corporation, MidWest One Financial Group, Inc., Nicolet Bankshares, Inc., Peoples Bancorp, Inc., and Southern Missouri Bancorp, Inc.

The peer group for 2024 consists of 21 Midwestern, publicly traded financial institutions, including Bank First Corporation, Bridgewater Bancshares Inc., ChoiceOne Financial Services, Inc., Civista Bancshares, Inc., CrossFirst Bankshares, Inc., Equity Bancshares, Inc., Farmers National Banc Corp., Farmers & Merchants Bancorp., First Business Financial Services, Inc., First Financial Corp., First Mid Bancshares, Inc., German American Bancorp, Inc., HBT Financial Inc., Hills Bancorporation, Isabella Bank Corporation, LCNB Corp., Mercantile Bank Corporation, MidWest One Financial Group, Inc., Nicolet Bankshares, Inc., Peoples Bancorp, Inc., and Southern Missouri Bancorp, Inc.

The Company is in the middle of the group in terms of asset size.

5 unchanged sentences

Peer Group Range (2)

As of and for the six months ended June 30, 2024 As of and for the three months ended March 31, 2024 As of and for the three months ended March 31, 2024

As of and for the nine months ended September 30, 2024 As of and for the six months ended June 30, 2024 As of and for the six months ended June 30, 2024

Return on average equity 10.18% 10.07% 2.37% - 15.11%

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(2) Latest data available.

At its meeting on July 24, 2024, the Company's Board of Directors declared a regular quarterly cash dividend of $0.25 per common share.

The dividend is payable on August 21, 2024, to stockholders of record on August 7, 2024.

At its meeting on October 23, 2024, the Company's Board of Directors declared a regular quarterly cash dividend of $0.25 per common share.

The dividend is payable on November 20, 2024, to stockholders of record on November 6, 2024.

West Bancorporation, Inc.

2 unchanged sentences

RESULTS OF OPERATIONS

The following table shows selected financial results and measures for the three and six months ended June 30, 2024 compared with the same periods in 2023.

Three Months Ended June 30, Six Months Ended June 30,

The following table shows selected financial results and measures for the three and nine months ended September 30, 2024 compared with the same periods in 2023.

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

2024 2023 Change Change % 2024 2023 Change Change %

11 unchanged sentences

5.73 % 5.85 % (0.12) % 5.68 % 5.88 % (0.20) %

As of June 30,

As of September 30,

2024 2023 Change

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are shown on a FTE basis.

Data for the three months ended June 30:

Data for the three months ended September 30:

Average Balance Interest Income/Expense Yield/Rate

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(in thousands, except share and per share data)

Data for the six months ended June 30:

Data for the nine months ended September 30:

Average Balance Interest Income/Expense Yield/Rate

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The Federal Reserve increased the target federal funds interest rate by a total of 425 basis points in 2022 and an additional 100 basis points in 2023.

The extent and timing of future potential federal funds interest rate changes is unknown.

In September 2024, the Federal Reserve reduced the target federal funds interest rate by 50 basis points.

The timing and extent of additional interest rate reductions is not known at this time.

Net interest margin on a FTE basis, a non-GAAP financial measure, is a measure of the net return on interest-earning assets and is computed by dividing annualized tax-equivalent net interest income by total average interest-earning assets for the period.

The net interest margin for the three and six months ended June 30, 2024 decreased by 16 and 25 basis points, respectively, compared to the three and six months ended June 30, 2023.

Tax-equivalent net interest income for the three and six months ended June 30, 2024 decreased $178 and $2,202, respectively, compared to the same time periods in 2023.

The primary driver of the decrease in the net interest margin and tax-equivalent net interest income was an increase in rates paid on deposits and borrowed funds, which have repriced faster than loans and securities, and an increase in average deposits and borrowed funds balances, partially offset by increases in loan yields and average loan balances.

Tax-equivalent interest income on loans increased $6,662 and $13,883 for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023.

The net interest margin for both the three months ended September 30, 2024 and September 30, 2023 was 1.91 percent, while the net interest margin for the nine months ended September 30, 2024 decreased by 17 basis points, compared to the nine months ended September 30, 2023.

Tax-equivalent net interest income for the three months ended September 30, 2024 increased $1,242 when compared to the same period in 2023, and decreased $960 for the nine months ended September 30, 2024, when compared to the nine months ended September 30, 2023.

Tax-equivalent interest income on loans increased $5,702 and $19,585 for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023.

This increase in interest income on loans was driven by a combination of an increase in the average balance of loans and an increase in loan yields.

The average balance of loans for the three and six months ended June 30, 2024 increased $211,030 and $207,554, respectively, compared to the three and six months ended June 30, 2023, while loan yields increased 55 and 58 basis points, respectively.

Rising market interest rates have resulted in increasing rates on variable-rate loans in the portfolio and loan originations and renewals priced at higher prevailing market rates compared to current portfolio rates.

The average balance of loans for the three and nine months ended September 30, 2024 increased $178,059 and $197,591, respectively, compared to the three and nine months ended September 30, 2023, while loan yields increased 46 and 54 basis points, respectively, during these periods.

Higher market interest rates in the first nine months of 2024 compared to the same period in 2023 have resulted in higher rates on variable-rate loans and loan originations and renewals compared to current portfolio rates.

The yield on the Company's loan portfolio is affected by the portfolio's loan mix, the interest rate environment, the effects of competition, the level of nonaccrual loans and reversals of previously accrued interest on charged-off loans.

The yield on the loan portfolio is expected to increase in flat and rising rate environments as variable-rate loans reprice at higher rates and renewals and new originations are priced at prevailing market rates, which exceed the roll-off rate of principal repayments on existing loans.

In a declining rate environment, the yield on variable-rate loans will decline, however as long as market rates remain higher than the yield on the fixed rate portfolio, renewals and originations will continue to increase the yield on the fixed-rate portfolio.

The political and economic environments can also influence the volume of new loan originations and the mix of variable-rate versus fixed-rate loans.

The average balance of deposits increased $311,257 and $271,135 for the three and six months ended June 30, 2024 compared to the same periods in 2023.

The rate paid on deposits increased 85 and 98 basis points for the three and six months ended June 30, 2024 compared to the same periods in 2023.

The average balance of deposits increased $537,065 and $360,488 for the three and nine months ended September 30, 2024 compared to the same periods in 2023.

The rate paid on deposits increased 70 and 89 basis points for the three and nine months ended September 30, 2024 compared to the same periods in 2023.

The increase in the cost of deposits was primarily due to increases in deposit interest rates in response to increases in the target federal funds rate that occurred in 2023, the inverted yield curve, increased competition for deposit balances, and changes in deposit mix.

Interest expense on borrowed funds increased $662 and $1,778 for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023.

The average balance of borrowed funds increased $23,938 and $50,481 for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023.

The average balance of federal funds purchased and other short-term borrowings decreased $46,171 and $37,984 for the three and six months ended June 30, 2024 compared to the same periods in 2023.

The average rate paid on federal funds purchased and other short-term borrowings increased 73 and 91 basis points in the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023.

This increase in average rates paid on federal funds purchased and other short-term borrowings was driven by the increases in the target federal funds rate by the Federal Reserve.

The average balance of FHLB advances increased by $74,890 and $92,983 for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023.

Interest expense on borrowed funds decreased $2,726 and $948 for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023.

The average balance of borrowed funds decreased $231,834 and $44,483 for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023.

The average balance of federal funds purchased and other short-term borrowings decreased $239,933 and $105,868 for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023 primarily due to increases in deposits.

The average rate paid on federal funds purchased and other short-term borrowings increased 56 and 76 basis points in the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023.

This increase in average rates paid on federal funds purchased and other short-term borrowings was driven by the higher federal funds rate in the first nine months of 2024 compared to the same period in 2023.

The average balance of FHLB advances increased by $65,989 for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

This increase in average balances was primarily due to an increase in rolling one-month FHLB advances that are hedged with long-term interest rate swap agreements to provide fixed cost wholesale funding.

6 unchanged sentences

The allowance for credit losses is management's estimate of expected lifetime losses in the loan portfolio as of the balance sheet date.

The Company recorded no credit loss expense for the three and six months ended June 30, 2024 and June 30, 2023.

Management believed the allowance for credit losses at June 30, 2024 was adequate to absorb expected losses in the loan portfolio as of that date.

The Company recorded a credit loss expense for loans of $1,000 for the three and nine months ended September 30, 2024, compared to a credit loss expense for loans of $200 for the three and nine months ended September 30, 2023, respectively.

The credit loss expense for loans in 2024 was primarily due to the changes in the forecasted loss rates due to increases in forecasted unemployment rates.

Additionally, the Company recorded a negative credit loss expense of $1,000 related to unfunded commitments for the three and nine months ended September 30, 2024, primarily due to decreases in the balance of unfunded commitments resulting primarily from the funding of construction loans.

Management believed the allowance for credit losses at September 30, 2024 was adequate to absorb expected losses in the loan portfolio as of that date.

Factors management considers in establishing an appropriate allowance include:

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In addition, regulatory agencies, as integral parts of their examination processes, periodically review the credit quality of the loan portfolio and the level of the allowance for credit losses.

Such agencies may require West Bank to recognize additional charge-offs or provision for credit losses based on such agencies' review of information available to them at the time of their examinations.

Such agencies may require West Bank to recognize additional charge-offs or provisions for credit losses based on such agencies' review of information available to them at the time of their examinations.

West Bancorporation, Inc.

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Commercially reasonable efforts are made to maximize subsequent recoveries.

The following table summarizes the activity in the Company's allowance for credit losses on loans for the three and six months ended June 30, 2024 and 2023 and related ratios.

Three Months Ended June 30, Six Months Ended June 30,

The following table summarizes the activity in the Company's allowance for credit losses on loans for the three and nine months ended September 30, 2024 and 2023 and related ratios.

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

2024 2023 Change 2024 2023 Change

20 unchanged sentences

The following tables show the variance from the prior year in the noninterest income categories shown in the Consolidated Statements of Income.

Three Months Ended June 30,

Three Months Ended September 30,

Noninterest income:

4 unchanged sentences

Increase in cash value of bank-owned life insurance 287 262 25 9.54 %

Loan swap fees — 431 (431) (100.00) %

Other income 285 340 (55) (16.18) %

Total noninterest income $ 2,359 $ 2,822 $ (463) (16.41) %

Six Months Ended June 30,

Nine Months Ended September 30,

Noninterest income:

5 unchanged sentences

Gain from bank-owned life insurance — 691 (691) (100.00) %

Loan swap fees — 431 (431) (100.00) %

Other income 938 1,116 (178) (15.95) %

Total noninterest income $ 7,004 $ 8,168 $ (1,164) (14.25) %

Revenue from trust services was higher for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 primarily due to increases in one-time estate fees.

The gain from bank-owned life insurance that occurred in the six months ended June 30, 2023 was the result of a death benefit claim.

Revenue from trust services was higher for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily due to increases in one-time estate fees.

The gain from bank-owned life insurance that occurred in the nine months ended September 30, 2023 was the result of a death benefit claim.

Loan swap fees in 2023 consisted of fees earned in the back-to-back swap program.

West Bancorporation, Inc.

4 unchanged sentences

In addition, accounts within the “other expenses” category that represent a significant portion of the total or a significant variance are shown below.

Three Months Ended June 30,

Three Months Ended September 30,

Noninterest expense:

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Total noninterest expense $ 12,892 $ 11,905 $ 987 8.29 %

Six Months Ended June 30,

Nine Months Ended September 30,

Noninterest expense:

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(in thousands, except share and per share data)

Occupancy and equipment expense increased for the three and six months ended June 30, 2024 compared to the same periods in 2023 primarily due to an increase in occupancy costs related to new bank buildings.

Technology and software expenses increased for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 due to the addition of new technology, product updates and information security solutions.

FDIC insurance expense increased for the three and six months ended June 30, 2024 compared to the same periods in 2023 primarily due to an increase in assessment rate.

Occupancy and equipment expense increased for the three and nine months ended September 30, 2024 compared to the same periods in 2023 primarily due to an increase in occupancy costs related to new bank buildings, including the Company's new headquarters building.

Technology and software expenses increased for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 due to the addition of new technology, product updates and information security solutions.

FDIC insurance expense increased for the three and nine months ended September 30, 2024 compared to the same periods in 2023 primarily due to an increase in assessment rate.

Income Tax Expense

The Company recorded income tax expense of $1,190 (18.6 percent of pre-tax income) and $2,562 (18.9 percent of pre-tax income) for the three and six months ended June 30, 2024, compared with $1,394 (19.2 percent of pre-tax income) and $3,131 (18.6 percent of pre-tax income) for the three and six months ended June 30, 2023.

The Company recorded income tax expense of $1,475 (19.9 percent of pre-tax income) and $4,037 (19.2 percent of pre-tax income) for the three and nine months ended September 30, 2024, compared with $1,445 (19.7 percent of pre-tax income) and $4,576 (18.9 percent of pre-tax income) for the three and nine months ended September 30, 2023.

The Company's consolidated income tax rate differs from the federal statutory income tax rate in each period, primarily due to tax-exempt interest income, the tax-exempt increase in cash value of bank-owned life insurance, tax-exempt gain from bank-owned life insurance, disallowed interest expense, and state income taxes.

The tax rates for the first six months of 2024 and 2023 were also impacted by year-to-date federal low income housing tax credits and a new markets tax credit of approximately $754 and $749, respectively.

The tax rates for the first nine months of 2024 and 2023 were also impacted by year-to-date federal low income housing tax credits and a new markets tax credit of approximately $1,131 and $1,123, respectively.

West Bancorporation, Inc.

2 unchanged sentences

FINANCIAL CONDITION

The Company had total assets of $3,965,115 as of June 30, 2024, compared to total assets of $3,825,758 as of December 31, 2023.

The Company had total assets of $3,988,566 as of September 30, 2024, compared to total assets of $3,825,758 as of December 31, 2023.

Changes in the balance sheet included increases in interest-bearing cash deposits, loans, premises and equipment and total deposits and decreases in securities available for sale and federal funds purchased and other short-term borrowings.

Securities available for sale decreased by $35,467 during the six months ended June 30, 2024.

This decrease was due to calls and principal paydowns on securities and the decline in fair value of the securities available for sale resulting from the increase in market interest rates since December 31, 2023.

Management concluded the unrealized losses are the result of increases in risk-free market interest rates since the securities were purchased and are not an indication of declining credit quality.

Securities available for sale decreased by $26,174 during the nine months ended September 30, 2024.

This decrease was due to calls and principal paydowns on securities since December 31, 2023, partially offset by a decrease in unrealized losses on securities.

Management concluded unrealized losses in the portfolio as of September 30, 2024 are the result of increases in risk-free market interest rates since the securities were purchased and are not an indication of declining credit quality.

Unrealized losses are recorded in accumulated other comprehensive loss, net of tax.

The Company expects the securities portfolio as a percentage of total assets to decrease over time as the proceeds from paydowns and maturities may be used for loan growth or repayment of borrowed funds.

As of June 30, 2024, approximately 61 percent of the available for sale securities portfolio consisted of government agency guaranteed collateralized mortgage obligations and mortgage-backed securities.

As of September 30, 2024, approximately 61 percent of the available for sale securities portfolio consisted of government agency guaranteed collateralized mortgage obligations and mortgage-backed securities.

Management believes these securities have little to no credit risk and provide cash flows for liquidity and repricing opportunities.

Loans and Nonperforming Assets

Loans outstanding increased $71,239 from $2,927,535 as of December 31, 2023 to $2,998,774 as of June 30, 2024.

Changes in the loan portfolio during the first six months of 2024 included an increase of $83,387 in construction, land and land development loans and a decrease of $14,458 in 1-4 family residential first mortgage loans.

Loans outstanding increased $93,686 from $2,927,535 as of December 31, 2023 to $3,021,221 as of September 30, 2024.

Changes in the loan portfolio during the first nine months of 2024 included an increase of $107,039 in construction, land and land development loans and a decrease of $18,710 in commercial loans.

In accordance with regulatory guidelines, the Company exercises heightened risk management practices when non-owner occupied commercial real estate lending exceeds 300 percent of total risk-based capital or construction, land and land development loans exceed 100 percent of total risk-based capital.

Although the commercial real estate portfolio exceeded these regulatory guidelines as of June 30, 2024, they were within the Company's established policy limits and management believes that the Company has appropriate risk management policies and procedures to regularly monitor the commercial real estate portfolio.

Although the commercial real estate portfolio exceeded these regulatory guidelines as of September 30, 2024, they were within the Company's established policy limits and management believes that the Company has appropriate risk management policies and procedures to regularly monitor the commercial real estate portfolio.

An analysis of the Company's non-owner occupied commercial real estate portfolio as of December 31, 2023 was presented in the Company's Form 10-K/A, filed with the SEC on February 23, 2024, and the Company has not experienced any material changes to that portfolio since December 31, 2023.

The following table sets forth the amount of nonperforming assets held by the Company and common ratio measurements of those assets as of the dates shown.

June 30, 2024 December 31, 2023 Change

September 30, 2024 December 31, 2023 Change

Nonaccrual loans $ 233 $ 296 $ (63)

8 unchanged sentences

Loan restructurings on nonaccrual status are categorized as nonaccrual.

There were no loan restructurings categorized as nonaccrual as of June 30, 2024 or December 31, 2023.

There were no loan restructurings categorized as nonaccrual as of September 30, 2024 or December 31, 2023.

West Bancorporation, Inc.

1 unchanged sentence

(in thousands, except share and per share data)

Deposits increased $207,143, or 7.0 percent, during the first six months of 2024.

Brokered deposits increased to $370,290 at June 30, 2024, from $305,411 at December 31, 2023.

Excluding brokered deposits, deposits increased $142,264, or 5.3 percent, during the first six months of 2024.

In the second quarter of 2024, a local municipal customer deposited approximately $120,000 of bond proceeds that are expected to be withdrawn over the next 12-18 months.

Deposits increased $304,774, or 10.2 percent, during the first nine months of 2024.

Brokered deposits increased to $425,870 at September 30, 2024, from $305,411 at December 31, 2023.

Excluding brokered deposits, deposits increased $184,315, or 6.9 percent, during the first nine months of 2024.

Deposit growth included a mix of public funds and commercial and consumer deposits.

Deposit inflows and outflows are influenced by prevailing market interest rates, competition, local and national economic conditions and fluctuations in our business customers' own liquidity needs.

In particular, significant competition for deposits driven by high interest rate alternatives for depositors is currently impacting deposit fluctuations and increasing our cost of deposits.

In particular, significant competition for deposits driven by high interest rate alternatives for depositors has impacted deposit fluctuations and increased our cost of deposits.

West Bank participates in the IntraFi ® ICS and CDARS reciprocal deposit network which enables depositors to receive FDIC insurance coverage on deposits otherwise exceeding the maximum insurable amount.

As of June 30, 2024, estimated uninsured deposits, which excludes deposits in the IntraFi ® reciprocal network, brokered deposits and public funds protected by state programs, were approximately 26.3 percent of total deposits.

As of September 30, 2024, estimated uninsured deposits, which excludes deposits in the IntraFi ® reciprocal network, brokered deposits and public funds protected by state programs, were approximately 27.8 percent of total deposits.

Borrowed Funds

Federal funds purchased and other short-term borrowings decreased from $150,270 at December 31, 2023 to $85,500 as of June 30, 2024.

The fluctuations in the balances of federal funds purchased and other short-term borrowings is based on customer loan and deposit activity and the Company's balance sheet management objectives, which from time to time may require the Company to draw on the federal funds purchased lines with our correspondent banks, FHLB advances or other liquidity sources.

The Company had $315,000 of FHLB advances outstanding at June 30, 2024, $295,000 of which are one-month rolling advances hedged with long-term interest rate swaps.

The interest rate swaps that hedge the interest rates on these FHLB advances have maturity dates ranging from August 2024 through June 2029 and fixed rates ranging from 1.69 percent to 4.65 percent.

Additionally, the Company has one forward starting interest rate swap with a notional amount of $20,000 and a starting date in August 2024, which replaces a maturing swap.

Federal funds purchased and other short-term borrowings decreased from $150,270 at December 31, 2023 to $0 as of September 30, 2024.

Federal funds purchased and other short-term borrowings were reduced during the first nine months of 2024 as a result of the increase in deposits.

The Company had $315,000 of FHLB advances outstanding at September 30, 2024, $295,000 of which are one-month rolling advances hedged with long-term interest rate swaps.

The interest rate swaps that hedge the interest rates on these FHLB advances have maturity dates ranging from November 2024 through June 2029 and fixed rates ranging from 1.69 percent to 4.42 percent.

Additionally, the Company has one forward starting interest rate swap with a notional amount of $20,000 and a starting date in November 2024, which replaces a maturing swap.

This strategy of hedging short-term rolling funding effectively provides fixed cost wholesale funding through the maturity dates of the various interest rate swaps.

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Investments in liquid assets are adjusted based on expected loan demand, projected loan and securities maturities and payments, expected deposit flows and the objectives set by the Company's asset-liability management policy.

The Company had liquid assets (cash and cash equivalents) of $149,819 as of June 30, 2024 compared with $65,357 as of December 31, 2023.

The Company had liquid assets (cash and cash equivalents) of $157,803 as of September 30, 2024 compared with $65,357 as of December 31, 2023.

Our deposit growth strategy emphasizes core deposit growth.

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Brokered deposits are obtained through various programs administered by IntraFi ® , and through other third party brokers.

At June 30, 2024, the Company had $370,290 in brokered deposits, which included fixed-rate deposits with terms through February 2029 and variable-rate deposits with terms through September 2025.

As of June 30, 2024, West Bank had additional borrowing capacity available from the FHLB of approximately $525,000, as well as approximately $72,000 through the Federal Reserve discount window and $75,000 through unsecured federal funds lines of credit with correspondent banks.

Net cash from operating activities contributed $16,123 to liquidity for the six months ended June 30, 2024.

Management believed that the combination of high levels of potentially liquid assets, unencumbered securities, cash flows from operations, and additional borrowing capacity were sufficient to meet our liquidity and capital needs as of June 30, 2024.

At September 30, 2024, the Company had $425,870 in brokered deposits, which included fixed-rate deposits with terms through February 2029 and variable-rate deposits with terms through September 2025.

As of September 30, 2024, West Bank had additional borrowing capacity available from the FHLB of approximately $628,000, as well as approximately $125,000 through the Federal Reserve discount window and $75,000 through unsecured federal funds lines of credit with correspondent banks.

Net cash from operating activities contributed $29,056 to liquidity for the nine months ended September 30, 2024.

The Company had remaining commitments to invest in qualified affordable housing projects totaling $1,253 and $1,649 as of September 30, 2024 and December 31, 2023, respectively.

West Bancorporation, Inc.

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(in thousands, except share and per share data)

The Company had remaining commitments to invest in qualified affordable housing projects totaling $1,468 and $1,649 as of June 30, 2024 and December 31, 2023, respectively.

The Company's total stockholders' equity decreased to $223,883 at June 30, 2024 from $225,043 at December 31, 2023.

The decrease was primarily the result of the increase in accumulated other comprehensive loss, which was primarily the result of the negative effect that rising interest rates continue to have on the unrealized market value adjustment of our available for sale investment portfolio.

The Company's total stockholders' equity increased to $235,353 at September 30, 2024 from $225,043 at December 31, 2023.

The increase was primarily the result of retained net income and the increase in the market value of our available for sale investment portfolio.

While accumulated other comprehensive losses reduce tangible common equity, they have no impact on regulatory capital.

At June 30, 2024, the Company's tangible common equity as a percent of tangible assets was 5.65 percent compared to 5.88 percent as of December 31, 2023.

At September 30, 2024, the Company's tangible common equity as a percent of tangible assets was 5.90 percent compared to 5.88 percent as of December 31, 2023.

The Company and West Bank are subject to various regulatory capital requirements administered by federal and state banking agencies.

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The Company's and West Bank's capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Management believed the Company and West Bank met all capital adequacy requirements to which they were subject as of June 30, 2024.

Management believed the Company and West Bank met all capital adequacy requirements to which they were subject as of September 30, 2024.

West Bancorporation, Inc.

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Amount Ratio Amount Ratio Amount Ratio Amount Ratio

As of June 30, 2024

As of September 30, 2024

Total Capital (to Risk-Weighted Assets)

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A banking organization with a capital conservation buffer of less than the required amount will be subject to limitations on capital distributions, including dividend payments, and certain discretionary bonus payments to executive officers.

At June 30, 2024, the capital ratios for the Company and West Bank were sufficient to meet the conservation buffer.

At September 30, 2024, the capital ratios for the Company and West Bank were sufficient to meet the conservation buffer.

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 2. Management’s Discussion and Analysis