What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-04-24 compared with 2024-10-24 · 110 added, 203 removed, 345 unchanged (48% of the section changed)

14 unchanged sentences

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 imposition of domestic or foreign tariffs or other governmental policies impacting the global supply chain and the value of products produced by our commercial borrowers;

changes in local, national and international economic conditions, including the level and impact of inflation, and future monetary policies of the Federal Reserve in response thereto, 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;

8 unchanged sentences

tax laws, regulations and guidance;

potential changes in federal policy and at regulatory agencies as a result of the upcoming 2024 presidential election;

potential changes in federal policy and at regulatory agencies;

talent and labor shortages;

6 unchanged sentences

Actual results may differ from these estimates under different assumptions or conditions.

The estimates and judgments that management believes involve the most complex and subjective estimates and judgments and have the greatest effect on the Company's reported financial position and results of operations are described as critical accounting policies in the Company's Annual Report on Form 10-K/A for the year ended December 31, 2023, as filed with the SEC on February 23, 2024.

The estimates and judgments that management believes involve the most complex and subjective estimates and judgments and have the greatest effect on the Company's reported financial position and results of operations are described as critical accounting policies in the Company's Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on February 20, 2025.

There have been no significant changes in the critical accounting policies or the assumptions and judgments utilized in applying these policies since December 31, 2024.

11 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 September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Three Months Ended March 31,

Reconciliation of net interest income and net interest margin on a FTE basis to GAAP:

1 unchanged sentence

Tax-equivalent adjustment (1)

29 113 166 396

Net interest income on a FTE basis (non-GAAP) 20,921 16,832

19 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 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.

Results of operations for the three months ended March 31, 2025 are compared to the results for the same period in 2024, and the consolidated financial condition of the Company as of March 31, 2025 is compared to that as of December 31, 2024.

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 for the year ended December 31, 2024, filed with the SEC on February 20, 2025.

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;

1 unchanged sentence

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

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.

Net income for the three months ended March 31, 2025 was $7,842, or $0.46 per diluted common share, compared to $5,809, or $0.35 per diluted common share, for the three months ended March 31, 2024.

The Company's annualized return on average assets and return on average equity for the three months ended March 31, 2025 were 0.81 percent and 13.84 percent, respectively, compared to 0.61 percent and 10.63 percent, respectively, for the three months ended March 31, 2024.

Net interest income for the three months ended March 31, 2025 increased $4,105, or 24.5 percent, compared to the three months ended March 31, 2024.

The increase in net interest income was primarily due to increases in interest income on loans and interest-bearing deposits at other financial institutions and a decrease in interest expense on short term borrowed funds.

Growth in average deposit balances provided for a reduction in average short term borrowings and an increase in average interest bearing deposits in other financial institutions.

Interest expense on deposits declined slightly, as growth in deposit balances was offset by a reduction in deposit interest rates.

A reduction in the interest rates on interest bearing cash deposits, short term borrowings and deposits have been driven by the Federal Reserve's 100 basis point reduction of the federal funds rate in September through December of 2024.

Noninterest income decreased $56 for the three months ended March 31, 2025 compared to the same period in 2024.

Noninterest expense increased $1,195 during the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to increases in salaries and employee benefits and occupancy and equipment expense.

Total loans outstanding increased $11,611, or 0.4 percent, to $3,016,471 during the first three months of 2025.

The credit quality of the loan portfolio remained strong, as evidenced by the Company's ratio of nonperforming loans to total assets of 0.00 percent as of both March 31, 2025 and December 31, 2024.

As of both March 31, 2025 and December 31, 2024, the allowance for credit losses was 1.01 percent of total outstanding loans.

Management believed the allowance for credit losses at March 31, 2025 was adequate to absorb expected losses in the loan portfolio as of that date.

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 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 peer group for 2025 consists of 20 Midwestern, publicly traded financial institutions, including Bank First Corporation, Bridgewater Bancshares Inc., ChoiceOne Financial Services, Inc., Civista Bancshares, 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 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

As of and for the three months ended March 31, 2025 As of and for the year ended December 31, 2024 As of and for the year ended December 31, 2024

Return on average equity 13.84% 10.71% (11.08%) - 14.44%

5 unchanged sentences

(2) Latest data available.

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.

At its meeting on April 23, 2025, the Company's Board of Directors declared a regular quarterly cash dividend of $0.25 per common share.

The dividend is payable on May 21, 2025, to stockholders of record on May 7, 2025.

West Bancorporation, Inc.

2 unchanged sentences

RESULTS OF OPERATIONS

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 %

The following table shows selected financial results and measures for the three months ended March 31, 2025 compared with the same period in 2024.

Three Months Ended March 31,

2025 2024 Change Change %

Net income $ 7,842 $ 5,809 $ 2,033 35.00 %

10 unchanged sentences

5.83 % 5.77 % 0.06 %

As of September 30,

As of March 31,

2025 2024 Change

21 unchanged sentences

Net Interest Income

The following tables present average balances and related interest income or interest expense, with the resulting annualized average yield or rate by category of interest-earning assets or interest-bearing liabilities.

The following table presents average balances and related interest income or interest expense, with the resulting annualized average yield or rate by category of interest-earning assets or interest-bearing liabilities.

Interest income and the resulting net interest income

are shown on a FTE basis.

Data for the three months ended September 30:

Average Balance Interest Income/Expense Yield/Rate

2024 2023 Change Change-

% 2024 2023 Change Change-

% 2024 2023 Change

Interest-earning assets:

Commercial $ 507,127 $ 525,596 $ (18,469) (3.51) % $ 8,514 $ 8,332 $ 182 2.18 % 6.68 % 6.29 % 0.39 %

Real estate (3)

2,469,145 2,278,129 191,016 8.38 % 33,721 28,310 5,411 19.11 % 5.43 % 4.93 % 0.50 %

Consumer and other 15,000 9,488 5,512 58.09 % 282 173 109 63.01 % 7.48 % 7.24 % 0.24 %

Total loans 2,991,272 2,813,213 178,059 6.33 % 42,517 36,815 5,702 15.49 % 5.65 % 5.19 % 0.46 %

Taxable 468,100 514,488 (46,388) (9.02) % 3,261 3,427 (166) (4.84) % 2.79 % 2.66 % 0.13 %

Tax-exempt (3)

141,214 148,531 (7,317) (4.93) % 822 934 (112) (11.99) % 2.33 % 2.52 % (0.19) %

Total securities 609,314 663,019 (53,705) (8.10) % 4,083 4,361 (278) (6.37) % 2.68 % 2.63 % 0.05 %

Interest-bearing deposits 149,102 1,821 147,281 8,087.92 % 2,041 29 2,012 6,937.93 % 5.45 % 6.36 % (0.91) %

Total interest-earning assets (3)

$ 3,749,688 $ 3,478,053 $ 271,635 7.81 % 48,641 41,205 7,436 18.05 % 5.16 % 4.70 % 0.46 %

Interest-bearing liabilities:

Interest-bearing demand $ 453,589 $ 434,649 $ 18,940 4.36 % 2,167 1,680 487 28.99 % 1.90 % 1.53 % 0.37 %

Savings and money market 1,609,695 1,329,963 279,732 21.03 % 15,566 11,080 4,486 40.49 % 3.85 % 3.31 % 0.54 %

Time deposits 665,938 427,545 238,393 55.76 % 8,343 4,396 3,947 89.79 % 4.98 % 4.08 % 0.90 %

Total deposits 2,729,222 2,192,157 537,065 24.50 % 26,076 17,156 8,920 51.99 % 3.80 % 3.10 % 0.70 %

Borrowed Funds:

Federal funds purchased and

other short-term borrowings 8,132 248,065 (239,933) (96.72) % 115 3,165 (3,050) (96.37) % 5.62 % 5.06 % 0.56 %

Subordinated notes, net 79,792 79,533 259 0.33 % 1,112 1,113 (1) (0.09) % 5.55 % 5.55 % — %

Federal Home Loan Bank

advances 315,000 302,119 12,881 4.26 % 2,748 2,329 419 17.99 % 3.47 % 3.06 % 0.41 %

Long-term debt 44,407 49,448 (5,041) (10.19) % 601 695 (94) (13.53) % 5.38 % 5.57 % (0.19) %

Total borrowed funds 447,331 679,165 (231,834) (34.14) % 4,576 7,302 (2,726) (37.33) % 4.07 % 4.27 % (0.20) %

Total interest-bearing

liabilities $ 3,176,553 $ 2,871,322 $ 305,231 10.63 % 30,652 24,458 6,194 25.33 % 3.84 % 3.38 % 0.46 %

Net interest income (FTE) (4)

$ 17,989 $ 16,747 $ 1,242 7.42 %

Net interest spread (FTE) 1.32 % 1.32 % — %

Net interest margin (FTE) (4)

1.91 % 1.91 % — %

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Data for the nine months ended September 30:

Data for the three months ended March 31:

Average Balance Interest Income/Expense Yield/Rate

47 unchanged sentences

Interest rates earned and paid are also affected by general economic conditions, particularly changes in market interest rates, and by competitive factors, government policies and actions of regulatory authorities.

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.

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.

The Federal Reserve decreased the target federal funds interest rate by a total of 100 basis points from September through December of 2024, which impacted the comparability of the net interest margin between the three months ended March 31, 2025 and three months ended March 31, 2024.

The timing and extent of additional interest rate changes by the Federal Reserve 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 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 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 net interest margin for the three months ended March 31, 2025 increased by 40 basis points compared to the three months ended March 31, 2024.

Tax-equivalent net interest income for the three months ended March 31, 2025 increased $4,089 when compared to the same period in 2024.

Tax-equivalent interest income on loans increased $778 for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

The increase in interest income on loans was driven primarily by an increase in the average balance of loans.

The average balance of loans for the three months ended March 31, 2025 increased $66,446 compared to the three months ended March 31, 2024.

The yield on the loan portfolio increased by 3 basis points for the three months ended March 31, 2025 compared to the same period in 2024.

While the fixed-rate loan portfolio has benefited from higher prevailing market rates for originations and renewals compared to the roll off rates, the yield on the variable-rate loan portfolio has decreased due to reductions in the prime rate and SOFR rates driven by the reductions in the federal funds rate from September through December 2024.

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

Interest income on interest-bearing deposits in other financial institutions increased $1,469 for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.

The increase was primarily due to the increase in the average balance of interest-bearing deposits in other financial institutions.

This increase in balance sheet liquidity was driven by the growth in average deposit balances.

The average balance of deposits increased $335,243 for the three months ended March 31, 2025 compared to the same period in 2024.

The rate paid on deposits decreased 42 basis points for the three months ended March 31, 2025 compared to the same period in 2024.

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

The decrease in the cost of deposits was primarily driven by the reduction in the federal funds rate from September through December of 2024.

Interest expense on borrowed funds decreased $2,403 for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

The average balance of borrowed funds decreased $206,292 for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

The average balance of federal funds purchased and other short-term borrowings decreased $156,533 for the three months ended March 31, 2025, compared to the same period in 2024 primarily due to increases in deposits.

The average balance of FHLB advances decreased by $45,000 for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

This decrease in average balances was due to the maturity of two FHLB advances with a total balance of $45,000 in the fourth quarter of 2024.

One of these FHLB advances, with a balance of $25,000, was a one-month rolling advance that was hedged with a long-term interest rate swap agreement that matured.

West Bancorporation, Inc.

5 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 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.

The Company recorded no credit loss expense for loans for both the three months ended March 31, 2025 and March 31, 2024.

Management believed the allowance for credit losses at March 31, 2025 was adequate to absorb expected losses in the loan portfolio as of that date.

Factors management considers in establishing an appropriate allowance include:

27 unchanged sentences

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 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

The following table summarizes the activity in the Company's allowance for credit losses on loans for the three months ended March 31, 2025 and 2024 and related ratios.

Three Months Ended March 31,

2025 2024 Change

Balance at beginning of period $ 30,432 $ 28,342 $ 2,090

Adoption of CECL — — — — 2,458 (2,458)

Charge-offs — — —

1 unchanged sentence

Net (charge-offs) recoveries 94 31 63

Provision for credit losses charged

(credited) to operations 1,000 200 800 1,000 200 800

Provision for credit losses charged (credited) to operations — — —

Balance at end of period $ 30,526 $ 28,373 $ 2,153

Average loans outstanding $ 3,016,119 $ 2,949,672

Ratio of annualized net (charge-offs)

recoveries during the period to average

Ratio of annualized net (charge-offs) recoveries during the period to average

loans outstanding 0.01 % 0.00 %

Ratio of allowance for credit losses for

loans to average loans outstanding 0.98 % 1.00 % 0.99 % 1.01 %

Ratio of allowance for credit losses for

loans to total loans at end of period 0.97 % 0.99 % 0.97 % 0.99 %

Ratio of allowance for credit losses for loans to average loans outstanding 1.01 % 0.96 %

Ratio of allowance for credit losses for loans to total loans at end of period 1.01 % 0.95 %

West Bancorporation, Inc.

2 unchanged sentences

Noninterest Income

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 September 30,

Noninterest income:

2024 2023 Change Change %

Service charges on deposit accounts $ 459 $ 463 $ (4) (0.86) %

Debit card usage fees 500 495 5 1.01 %

Trust services 828 831 (3) (0.36) %

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) %

Nine Months Ended September 30,

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

Three Months Ended March 31,

Noninterest income:

4 unchanged sentences

Increase in cash value of bank-owned life insurance 282 274 8 2.92 %

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

Loan swap fees — 431 (431) (100.00) %

Other income 267 331 (64) (19.34) %

Total noninterest income $ 2,243 $ 2,299 $ (56) (2.44) %

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.

Management's Discussion and Analysis

(in thousands, except share and per share data)

The decrease in other income was primarily due to a decrease in letter of credit and loan related fees during the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Noninterest Expense

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

The following table shows the variance from the prior year in the noninterest expense categories shown in the Consolidated Statements of Income.

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 September 30,

Three Months Ended March 31,

Noninterest expense:

8 unchanged sentences

Other expenses:

Business development 216 287 (71) (24.74) %

Insurance expense 294 192 102 53.13 %

Trust 168 159 9 5.66 %

Consulting fees 61 56 5 8.93 %

Marketing 12 34 (22) (64.71) %

Charitable contributions — 60 (60) (100.00) %

Low income housing projects amortization 123 136 (13) (9.56) %

New markets tax credit project amortization and management

fees 230 230 — — %

All other 470 545 (75) (13.76) %

Total other expenses 1,477 1,685 (208) (12.34) %

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

Nine Months Ended September 30,

Noninterest expense:

2024 2023 Change Change %

Salaries and employee benefits $ 20,481 $ 20,592 $ (111) (0.54) %

Occupancy and equipment 5,225 4,008 1,217 30.36 %

Data processing 2,239 2,067 172 8.32 %

Technology and software 2,153 1,665 488 29.31 %

FDIC insurance 1,861 1,275 586 45.96 %

Professional fees 740 791 (51) (6.45) %

Director fees 658 652 6 0.92 %

Other expenses:

Business development 215 209 6 2.71 %

Insurance expense 592 610 (18) (2.87) %

Trust 202 170 32 18.82 %

1 unchanged sentence

Marketing 11 36 (25) (69.44) %

Charitable contributions — 180 (180) (100.00) %

Low income housing projects amortization 151 165 (14) (8.48) %

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Total noninterest expense $ 13,063 $ 11,868 $ 1,195 10.07 %

Salaries and employee benefits increased for the three months ended March 31, 2025 compared to the same period in 2024 due primarily to an increase in incentive compensation related accruals.

Occupancy and equipment expense increased for the three months ended March 31, 2025 compared to the three months March 31, 2024 primarily due to an increase in occupancy costs related to new bank buildings, including the Company's new headquarters building, which opened in April 2024, and the new branch building in Owatonna, Minnesota, which opened in January 2025.

Insurance expense increased due to increased coverage related to these new bank buildings and general increases in insurance costs.

West Bancorporation, Inc.

1 unchanged sentence

(in thousands, except share and per share data)

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.

Technology and software expense increased for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 due to updates in information technology solutions.

New market tax credit project amortization declined due to the expiration of the related tax credit.

Income Tax Expense

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 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.

The Company recorded income tax expense of $2,193 (21.9 percent of pre-tax income) for the three months ended March 31, 2025, compared with $1,372 (19.1 percent of pre-tax income) for the three months ended March 31, 2024.

The increase in effective tax rate was primarily due to the expiration of the new market tax credit at the end of 2024.

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, disallowed interest expense, and state income taxes.

Additionally, for the three months ended March 31, 2025, a tax benefit of $67 was recorded as a result of the increase in fair value of restricted stock over the vesting period.

For the three months ended March 31, 2024, a tax expense of $5 was recorded as a result of the decrease in fair value of restricted stock over the vesting period.

The tax rates for the first three months of 2025 and 2024 were also impacted by year-to-date tax credits of approximately $165 and $377, respectively.

West Bancorporation, Inc.

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FINANCIAL CONDITION

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 $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.

The Company had total assets of $3,986,669 as of March 31, 2025, compared to total assets of $4,014,991 as of December 31, 2024.

Changes in the balance sheet included increases in loans and stockholders' equity and decreases in interest-bearing cash deposits and total deposits.

Securities available for sale increased by $2,054 during the three months ended March 31, 2025.

This increase was due to a decrease in unrealized losses on securities since December 31, 2024, partially offset by calls and principal paydowns on securities.

Management concluded unrealized losses in the portfolio as of March 31, 2025 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 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.

As of March 31, 2025, approximately 63 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 $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.

Loans outstanding increased $11,611 from $3,004,860 as of December 31, 2024 to $3,016,471 as of March 31, 2025.

Changes in the loan portfolio during the first three months of 2025 included increases of $48,135 in commercial real estate loans and $17,035 in commercial loans and a decrease of $56,917 in construction, land and land development 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 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.

Although the commercial real estate portfolio exceeded these regulatory guidelines as of March 31, 2025, 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, 2024 was presented in the Company's Form 10-K, filed with the SEC on February 20, 2025, and the Company has not experienced any material changes to that portfolio since December 31, 2024.

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.

September 30, 2024 December 31, 2023 Change

March 31, 2025 December 31, 2024 Change

Nonaccrual loans $ 181 $ 133 $ 48

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Loan restructurings on nonaccrual status are categorized as nonaccrual.

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

There were no loan restructurings categorized as nonaccrual as of March 31, 2025 or December 31, 2024.

West Bancorporation, Inc.

1 unchanged sentence

(in thousands, except share and per share data)

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 has impacted deposit fluctuations and increased our cost of deposits.

Deposits decreased $33,078, or 1.0 percent, during the first three months of 2025.

Brokered deposits increased to $335,494 at March 31, 2025, from $266,418 at December 31, 2024.

Excluding brokered deposits, deposits decreased $102,154, or 3.3 percent, during the first three months of 2025.

The decline in deposits was due to normal cash flow fluctuations of our core depositors.

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

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 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.

As of March 31, 2025, estimated uninsured deposits, which exclude deposits in the IntraFi ® reciprocal network, brokered deposits and public funds protected by state programs, were approximately 28.0 percent of total deposits.

Borrowed Funds

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.

The Company had $270,000 of FHLB advances outstanding at March 31, 2025, all 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 July 2026 through June 2029 and fixed rates ranging from 1.86 percent to 4.32 percent.

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

The objectives of liquidity management are to ensure the availability of sufficient cash flows to meet all financial commitments and to capitalize on opportunities for profitable business expansion.

3 unchanged sentences

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 $157,803 as of September 30, 2024 compared with $65,357 as of December 31, 2023.

The Company had liquid assets (cash and cash equivalents) of $210,610 as of March 31, 2025 compared with $243,478 as of December 31, 2024.

Our deposit growth strategy emphasizes core deposit growth.

2 unchanged sentences

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

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.

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 needs as of 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.

At March 31, 2025, the Company had $335,494 in brokered deposits, which included fixed-rate deposits with terms through September 2026 and variable-rate deposits with terms through February 2026.

As of March 31, 2025, West Bank had additional borrowing capacity available from the FHLB of approximately $635,000, as well as approximately $119,000 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 $9,749 to liquidity for the three months ended March 31, 2025.

Management believed that the combination of high levels of liquid assets, unencumbered securities, cash flows from operations, and additional borrowing capacity were sufficient to meet our liquidity needs as of March 31, 2025.

The Company had remaining commitments to invest in qualified affordable housing projects totaling $663 and $861 as of March 31, 2025 and December 31, 2024, respectively.

West Bancorporation, Inc.

1 unchanged sentence

(in thousands, except share and per share data)

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

The Company's total stockholders' equity increased to $237,873 at March 31, 2025 from $227,875 at December 31, 2024.

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 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.

At March 31, 2025, the Company's tangible common equity as a percent of tangible assets was 5.97 percent compared to 5.68 percent as of December 31, 2024.

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

2 unchanged sentences

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 September 30, 2024.

Management believed the Company and West Bank met all capital adequacy requirements to which they were subject as of March 31, 2025.

West Bancorporation, Inc.

6 unchanged sentences

Amount Ratio Amount Ratio Amount Ratio Amount Ratio

As of September 30, 2024

As of March 31, 2025

Total Capital (to Risk-Weighted Assets)

25 unchanged sentences

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

At March 31, 2025, 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