WEST BANCORPORATION INC 10-Q

Item 1. Financial Statements West Bancorporation, Inc. and Subsidiary Consolidated Balance Sheet (unaudited) (in thousands, except share and per share data) June 30, 2025 December 31, 2024 ASSETS Cash and due from banks $ 35,796 $ 28,750 Interest-earning deposits with banks 212,450 214,728 Securities purchased under agreements to resell 96,955 — Cash and cash equivalents 345,201 243,478 Securities available for sale, at fair value 536,709 544,565 Federal Home Loan Bank stock, at cost 15,311 15,129 Loans 2,966,357 3,004,860 Allowance for credit losses ( 30,539 ) ( 30,432 ) Loans, net 2,935,818 2,974,428 Premises and equipment, net 109,806 109,985 Accrued interest receivable 12,629 12,825 Bank-owned life insurance 45,567 44,990 Deferred tax assets, net 30,375 33,202 Other assets 25,253 36,389 Total assets $ 4,056,669 $ 4,014,991 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits: Noninterest-bearing demand $ 521,990 $ 541,053 Interest-bearing demand 461,207 543,855 Savings and money market 1,847,926 1,643,891 Time 560,870 628,797 Total deposits 3,391,993 3,357,596 Subordinated notes, net 80,024 79,893 Federal Home Loan Bank advances 270,000 270,000 Long-term debt 40,236 42,736 Accrued expenses and other liabilities 33,486 36,891 Total liabilities 3,815,739 3,787,116 COMMITMENTS AND CONTINGENCIES (NOTE 8) STOCKHOLDERS' EQUITY Preferred stock, $ 0.01 par value; authorized 50,000,000 shares; no shares issued and outstanding at June 30, 2025 and December 31, 2024 — — Common stock, no par value; authorized 50,000,000 shares; 16,940,785 and 16,832,632 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively 3,000 3,000 Additional paid-in capital 35,773 35,619 Retained earnings 285,990 278,613 Accumulated other comprehensive loss ( 83,833 ) ( 89,357 ) Total stockholders' equity 240,930 227,875 Total liabilities and stockholders' equity $ 4,056,669 $ 4,014,991 See Notes to Consolidated Financial Statements. 4 Table of Contents West Bancorporation, Inc. and Subsidiary Consolidated Statements of Income (unaudited) Three Months Ended June 30, Six Months Ended June 30, (in thousands, except per share data) 2025 2024 2025 2024 Interest income: Loans, including fees $ 41,666 $ 41,700 $ 82,654 $ 81,896 Securities: Taxable 2,685 3,394 5,473 6,810 Tax-exempt 742 808 1,485 1,618 Deposits with banks 2,847 1,666 4,464 1,814 Securities purchased under agreements to resell 22 — 22 — Total interest income 47,962 47,568 94,098 92,138 Interest expense: Deposits 22,676 23,943 44,099 45,502 Federal funds purchased and other short-term borrowings — 1,950 — 4,133 Subordinated notes 1,104 1,105 2,209 2,213 Federal Home Loan Bank advances 2,259 2,718 4,494 5,043 Long-term debt 504 622 1,022 1,267 Total interest expense 26,543 30,338 51,824 58,158 Net interest income 21,419 17,230 42,274 33,980 Credit loss expense (benefit) — — — — Net interest income after credit loss expense 21,419 17,230 42,274 33,980 Noninterest income: Service charges on deposit accounts 486 462 957 922 Debit card usage fees 478 490 924 948 Trust services 801 794 1,578 1,570 Increase in cash value of bank-owned life insurance 295 278 577 552 Other income 350 322 617 653 Total noninterest income 2,410 2,346 4,653 4,645 Noninterest expense: Salaries and employee benefits 7,343 7,169 14,347 13,658 Occupancy and equipment 2,034 1,852 3,997 3,299 Data processing 643 754 1,260 1,468 Technology and software 791 731 1,577 1,431 FDIC insurance 670 631 1,257 1,150 Professional fees 303 244 611 501 Director fees 202 236 408 435 Other expenses 1,499 1,577 3,091 3,120 Total noninterest expense 13,485 13,194 26,548 25,062 Income before income taxes 10,344 6,382 20,379 13,563 Income taxes 2,365 1,190 4,558 2,562 Net income $ 7,979 $ 5,192 $ 15,821 $ 11,001 Basic earnings per common share $ 0.47 $ 0.31 $ 0.94 $ 0.66 Diluted earnings per common share $ 0.47 $ 0.31 $ 0.93 $ 0.65 See Notes to Consolidated Financial Statements. 5 Table of Contents West Bancorporation, Inc. and Subsidiary Consolidated Statements of Comprehensive Income (Loss) (unaudited) Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2025 2024 2025 2024 Net income $ 7,979 $ 5,192 $ 15,821 $ 11,001 Other comprehensive income (loss): Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during the period 601 ( 1,436 ) 13,508 ( 9,194 ) Income tax (expense) benefit ( 154 ) 344 ( 3,349 ) 2,254 Other comprehensive income (loss) on securities 447 ( 1,092 ) 10,159 ( 6,940 ) Unrealized gains (losses) on derivatives: Unrealized holding gains (losses) arising during the period ( 1,021 ) 2,364 ( 3,335 ) 9,853 Plus: reclassification adjustment for net gains realized in net income ( 1,412 ) ( 2,898 ) ( 2,816 ) ( 5,813 ) Income tax (expense) benefit 599 132 1,516 ( 997 ) Other comprehensive income (loss) on derivatives ( 1,834 ) ( 402 ) ( 4,635 ) 3,043 Total other comprehensive income (loss) ( 1,387 ) ( 1,494 ) 5,524 ( 3,897 ) Comprehensive income $ 6,592 $ 3,698 $ 21,345 $ 7,104 See Notes to Consolidated Financial Statements. 6 Table of Contents West Bancorporation, Inc. and Subsidiary Consolidated Statements of Stockholders' Equity (unaudited) (in thousands, except share and per share data) Three Months Ended June 30, 2025 Accumulated Additional Other Preferred Common Stock Paid-In Retained Comprehensive Stock Shares Amount Capital Earnings Income (Loss) Total Balance, March 31, 2025 $ — 16,923,280 $ 3,000 $ 35,072 $ 282,247 $ ( 82,446 ) $ 237,873 Net income — — — — 7,979 — 7,979 Other comprehensive loss, net of tax — — — — — ( 1,387 ) ( 1,387 ) Cash dividends declared, $ 0.25 per common share — — — — ( 4,236 ) — ( 4,236 ) Stock-based compensation costs — — — 701 — — 701 Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes — 17,505 — — — — — Balance, June 30, 2025 $ — 16,940,785 $ 3,000 $ 35,773 $ 285,990 $ ( 83,833 ) $ 240,930 Three Months Ended June 30, 2024 Accumulated Additional Other Preferred Common Stock Paid-In Retained Comprehensive Stock Shares Amount Capital Earnings Income (Loss) Total Balance, March 31, 2024 $ — 16,813,952 $ 3,000 $ 33,685 $ 272,997 $ ( 85,926 ) $ 223,756 Net income — — — — 5,192 — 5,192 Other comprehensive loss, net of tax — — — — — ( 1,494 ) ( 1,494 ) Cash dividends declared, $ 0.25 per common share — — — — ( 4,208 ) — ( 4,208 ) Stock-based compensation costs — — — 637 — — 637 Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes — 18,680 — — — — — Balance, June 30, 2024 $ — 16,832,632 $ 3,000 $ 34,322 $ 273,981 $ ( 87,420 ) $ 223,883 See Notes to Consolidated Financial Statements. 7 Table of Contents West Bancorporation, Inc. and Subsidiary Consolidated Statements of Stockholders' Equity (unaudited) (in thousands, except share and per share data) Six Months Ended June 30, 2025 Accumulated Additional Other Preferred Common Stock Paid-In Retained Comprehensive Stock Shares Amount Capital Earnings Income (Loss) Total Balance, December 31, 2024 $ — 16,832,632 $ 3,000 $ 35,619 $ 278,613 $ ( 89,357 ) $ 227,875 Net income — — — — 15,821 — 15,821 Other comprehensive income, net of tax — — — — — 5,524 5,524 Cash dividends declared, $ 0.50 per common share — — — — ( 8,444 ) — ( 8,444 ) Stock-based compensation costs — — — 1,286 — — 1,286 Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes — 108,153 — ( 1,132 ) — — ( 1,132 ) Balance, June 30, 2025 $ — 16,940,785 $ 3,000 $ 35,773 $ 285,990 $ ( 83,833 ) $ 240,930 Six Months Ended June 30, 2024 Accumulated Additional Other Preferred Common Stock Paid-In Retained Comprehensive Stock Shares Amount Capital Earnings Income (Loss) Total Balance, December 31, 2023 $ — 16,725,094 $ 3,000 $ 34,197 $ 271,369 $ ( 83,523 ) $ 225,043 Net income — — — — 11,001 — 11,001 Other comprehensive loss, net of tax — — — — — ( 3,897 ) ( 3,897 ) Cash dividends declared, $ 0.50 per common share — — — — ( 8,389 ) — ( 8,389 ) Stock-based compensation costs — — — 1,212 — — 1,212 Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes — 107,538 — ( 1,087 ) — — ( 1,087 ) Balance, June 30, 2024 $ — 16,832,632 $ 3,000 $ 34,322 $ 273,981 $ ( 87,420 ) $ 223,883 See Notes to Consolidated Financial Statements. 8 Table of Contents West Bancorporation, Inc. and Subsidiary Consolidated Statements of Cash Flows (unaudited) Six Months Ended June 30, (in thousands) 2025 2024 Cash Flows from Operating Activities: Net income $ 15,821 $ 11,001 Adjustments to reconcile net income to net cash provided by operating activities: Net amortization and accretion 1,542 1,602 Stock-based compensation 1,286 1,212 Increase in cash value of bank-owned life insurance ( 577 ) ( 552 ) Depreciation 2,231 1,517 Provision for deferred income taxes 994 2,083 Change in assets and liabilities: (Increase) decrease in accrued interest receivable 196 ( 558 ) (Increase) decrease in other assets 2,435 ( 792 ) Increase (decrease) in accrued expenses and other liabilities ( 652 ) 610 Net cash provided by operating activities 23,276 16,123 Cash Flows from Investing Activities: Proceeds from principal paydowns, maturities and calls of securities available for sale 19,954 24,802 Purchases of Federal Home Loan Bank stock ( 234 ) ( 53,633 ) Proceeds from redemption of Federal Home Loan Bank stock 52 55,525 Net (increase) decrease in loans 38,610 ( 71,159 ) Purchases of premises and equipment ( 2,256 ) ( 17,593 ) Net cash provided by (used in) investing activities 56,126 ( 62,058 ) Cash Flows from Financing Activities: Net increase in deposits 34,397 207,143 Net decrease in federal funds purchased and other short-term borrowings — ( 64,770 ) Principal payments on long-term debt ( 2,500 ) ( 2,500 ) Common stock dividends paid ( 8,444 ) ( 8,389 ) Restricted stock units withheld for payroll taxes ( 1,132 ) ( 1,087 ) Net cash provided by financing activities 22,321 130,397 Net increase in cash and cash equivalents 101,723 84,462 Cash and Cash Equivalents: Beginning 243,478 65,357 Ending $ 345,201 $ 149,819 Supplemental Disclosures of Cash Flow Information: Cash payments for: Interest $ 52,524 $ 56,673 Income taxes 650 900 See Notes to Consolidated Financial Statements. 9 Table of Contents West Bancorporation, Inc. and Subsidiary Notes to Consolidated Financial Statements (unaudited) (dollars in thousands, except per share data) 1. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared by West Bancorporation, Inc. (the Company) pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to such rules and regulations. Although management believes that the disclosures are adequate to make the information presented understandable, it is suggested that these interim consolidated financial statements be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 20, 2025. In the opinion of management, the accompanying consolidated financial statements of the Company contain all adjustments necessary to fairly present its financial position as of June 30, 2025 and December 31, 2024, net income, comprehensive income (loss) and changes in stockholders' equity for the three and six months ended June 30, 2025 and 2024, and cash flows for the six months ended June 30, 2025 and 2024. The results for these interim periods may not be indicative of results for the entire year or for any other period. The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (GAAP) established by the Financial Accounting Standards Board (FASB). References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codification™ , sometimes referred to as the Codification or ASC. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses for the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term are the fair value of financial instruments and the allowance for credit losses . Cash and cash equivalents and cash flows: For statement of cash flow purposes, the Company considers cash, due from banks, interest-earning deposits with banks and securities purchased under agreements to resell to be cash and cash equivalents. Securities purchased under agreements to resell are short-term investments with maturities of 30 days. Cash inflows and outflows from loans, deposits, federal funds purchased and short-term borrowings, and short-term FHLB advances are reported on a net basis. The accompanying unaudited consolidated financial statements include the accounts of the Company, the Company's wholly-owned subsidiary West Bank and West Bank's special purpose subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. In accordance with GAAP, West Bancorporation Capital Trust I is recorded on the books of the Company using the equity method of accounting and is not consolidated. As a community-oriented financial institution, substantially all of West Bank's operations involve the delivery of loan and deposit products to customers. The chief operating decision maker makes operating decisions and assesses performance based on an ongoing review of the community banking activities, which constitutes the Company's only operating segment for financial reporting purposes. The Company's single segment is managed on a consolidated basis by the chief operating decision maker, which is the Company's chief executive officer. The accounting policies of this segment are the same as those described in the Company's annual report on Form 10-K, filed with the SEC on February 20, 2025. Refer to Note 1 in the Company's annual report on Form 10-K for additional information. The chief operating decision maker assesses performance of the segment and determines the allocation of resources based on consolidated net income, which is reported in the Consolidated Statements of Income. Consolidated net income is used in deciding where to deploy capital and to monitor budget vs. actual results. It is also used in benchmarking performance measures to Company peers for compensation related analysis. The measure of segment assets is reported on the Consolidated Balance Sheets as total consolidated assets. 10 Table of Contents West Bancorporation, Inc. and Subsidiary Notes to Consolidated Financial Statements (unaudited) (dollars in thousands, except per share data) Current accounting developments : In October 2023, the FASB issued ASU No. 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative . The ASU incorporates certain SEC disclosure requirements into the FASB Accounting Standards Codification TM. . The amendments in the ASU are expected to clarify or improve disclosure presentation requirements of a variety of Codification Topics, allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the Codification with the SEC’s regulations. For entities subject to the SEC’s existing disclosure requirements and for entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC removes that related disclosure from its rules. For all other entities, the amendments will be effective two years later. However, if by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendments will be removed from the Codification and not become effective for any entity. These amendments have not had an impact to the Company as of June 30, 2025. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . The ASU is intended to improve the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation table and income taxes paid to be disaggregated by jurisdiction. It also includes certain amendments to improve the effectiveness of income tax disclosures. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2024. The Company adopted this guidance effected January 1, 2025 and will provide the required disclosures in the Company's 2025 filings. In November 2024, the FASB issued ASU No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses . The amendments in this ASU require public companies to disclose, in the notes to the financial statements, specified information about certain costs and expenses at each interim and annual reporting period. Additionally, in January 2025, the FASB issued ASU No. 2025-01, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date . This ASU amends the effective date of ASU No. 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of ASU No. 2024-03 is permitted. The Company is currently evaluating the impact of the ASU on the Company's consolidated financial statements. 2. Earnings per Common Share Basic earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per common share reflect the potential dilution that could occur if the Company's outstanding restricted stock units were vested. The dilutive effect was computed using the treasury stock method, which assumes all stock-based awards were exercised and the hypothetical proceeds from exercise were used by the Company to purchase common stock at the average market price during the period. The incremental shares, to the extent they would have been dilutive, were included in the denominator of the diluted earnings per common share calculation. The calculations of earnings per common share and diluted earnings per common share for the three and six months ended June 30, 2025 and 2024 are presented in the following table. Three Months Ended June 30, Six Months Ended June 30, (in thousands, except per share data) 2025 2024 2025 2024 Net income $ 7,979 $ 5,192 $ 15,821 $ 11,001 Weighted average common shares outstanding 16,936 16,828 16,888 16,780 Weighted average effect of restricted stock units outstanding 71 20 97 39 Diluted weighted average common shares outstanding 17,007 16,848 16,985 16,819 Basic earnings per common share $ 0.47 $ 0.31 $ 0.94 $ 0.66 Diluted earnings per common share $ 0.47 $ 0.31 $ 0.93 $ 0.65 Number of anti-dilutive common stock equivalents excluded from diluted earnings per share computation 309 431 319 445 11 Table of Contents West Bancorporation, Inc. and Subsidiary Notes to Consolidated Financial Statements (unaudited) (dollars in thousands, except per share data) 3. Securities Available for Sale The following tables show the amortized cost, gross unrealized gains and losses, and fair value of securities available for sale, by security type as of June 30, 2025 and December 31, 2024. June 30, 2025 Amortized Cost Gross Unrealized Gains Gross Unrealized (Losses) Fair Value Securities available for sale: State and political subdivisions $ 214,772 $ 9 $ ( 44,095 ) $ 170,686 Collateralized mortgage obligations (1) 267,217 — ( 48,090 ) 219,127 Mortgage-backed securities (1) 140,540 1 ( 21,928 ) 118,613 Collateralized loan obligations 15,726 33 — 15,759 Corporate notes 13,750 — ( 1,226 ) 12,524 $ 652,005 $ 43 $ ( 115,339 ) $ 536,709 December 31, 2024 Amortized Cost Gross Unrealized Gains Gross Unrealized (Losses) Fair Value Securities available for sale: State and political subdivisions $ 215,942 $ — $ ( 41,797 ) $ 174,145 Collateralized mortgage obligations (1) 278,754 — ( 59,490 ) 219,264 Mortgage-backed securities (1) 145,992 — ( 26,173 ) 119,819 Collateralized loan obligations 18,932 33 — 18,965 Corporate notes 13,750 — ( 1,378 ) 12,372 $ 673,370 $ 33 $ ( 128,838 ) $ 544,565 (1) Collateralized mortgage obligations and mortgage-backed securities consist of residential and commercial mortgage pass-through securities and collateralized mortgage obligations guaranteed by FNMA, FHLMC, GNMA and SBA. Securities with a total amortized cost of approximately $ 556,286 and $ 572,491 as of June 30, 2025 and December 31, 2024, respectively, were pledged to secure access to Federal Home Loan Bank (FHLB) advances and Federal Reserve credit programs, for public fund deposits, and for other purposes as required or permitted by law or regulation. The amortized cost and fair value of securities available for sale as of June 30, 2025, by contractual maturity, are shown below. Certain securities have call features that allow the issuer to call the securities prior to maturity. Expected maturities may differ from contractual maturities for collateralized mortgage obligations and mortgage-backed securities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Therefore, collateralized mortgage obligations and mortgage-backed securities are not included in the maturity categories within the following maturity summary. June 30, 2025 Amortized Cost Fair Value Due after five years through ten years $ 54,675 $ 50,527 Due after ten years 189,573 148,442 244,248 198,969 Collateralized mortgage obligations and mortgage-backed securities 407,757 337,740 $ 652,005 $ 536,709 12 Table of Contents West Bancorporation, Inc. and Subsidiary Notes to Consolidated Financial Statements (unaudited) (dollars in thousands, except per share data) There were no sales of securities available for sale during the three and six months ended June 30, 2025 and 2024. The following tables show the fair value and gross unrealized losses, aggregated by investment type and length of time that individual securities have been in a continuous loss position, as of June 30, 2025 and December 31, 2024. June 30, 2025 Less than 12 months 12 months or longer Total Fair Value Gross Unrealized (Losses) No. of Securities Fair Value Gross Unrealized (Losses) No. of Securities Fair Value Gross Unrealized (Losses) Securities available for sale: State and political subdivisions $ 1,255 $ ( 30 ) 1 $ 168,826 $ ( 44,065 ) 94 $ 170,081 $ ( 44,095 ) Collateralized mortgage obligations — — — 219,127 ( 48,090 ) 68 219,127 ( 48,090 ) Mortgage-backed securities — — — 118,079 ( 21,928 ) 25 118,079 ( 21,928 ) Corporate notes — — — 12,524 ( 1,226 ) 8 12,524 ( 1,226 ) $ 1,255 $ ( 30 ) 1 $ 518,556 $ ( 115,309 ) 195 $ 519,811 $ ( 115,339 ) December 31, 2024 Less than 12 months 12 months or longer Total Fair Value Gross Unrealized (Losses) No. of Securities Fair Value Gross Unrealized (Losses) No. of Securities Fair Value Gross Unrealized (Losses) Securities available for sale: State and political subdivisions $ 4,485 $ ( 271 ) 7 $ 169,650 $ ( 41,526 ) 90 $ 174,135 $ ( 41,797 ) Collateralized mortgage obligations — — — 219,264 ( 59,490 ) 69 219,264 ( 59,490 ) Mortgage-backed securities 610 ( 3 ) 1 119,209 ( 26,170 ) 25 119,819 ( 26,173 ) Corporate notes — — — 12,372 ( 1,378 ) 8 12,372 ( 1,378 ) $ 5,095 $ ( 274 ) 8 $ 520,495 $ ( 128,564 ) 192 $ 525,590 $ ( 128,838 ) If the Company intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis, then the security is written down to fair value through income. As of June 30, 2025 and December 31, 2024, the Company did not have the intent to sell, nor was it more likely than not that it would be required to sell any of the securities in an unrealized loss position prior to recovery. As of June 30, 2025 and December 31, 2024, the Company also determined that no individual securities in an unrealized loss position represented credit losses that would require an allowance for credit losses. The Company concluded that the unrealized losses were primarily attributable to increases in market interest rates since these securities were purchased and other market conditions. Accrued interest receivable is not included in available-for-sale security balances and is presented in the "Accrued interest receivable" line of the Consolidated Balance Sheets. Interest receivable on securities was $ 2,761 and $ 2,842 as of June 30, 2025 and December 31, 2024, respectively, and was excluded from the measurement of credit losses. 13 Table of Contents West Bancorporation, Inc. and Subsidiary Notes to Consolidated Financial Statements (unaudited) (dollars in thousands, except per share data) 4. Loans and Allowance for Credit Losses Loans consisted of the following segments as of June 30, 2025 and December 31, 2024. June 30, 2025 December 31, 2024 Commercial $ 500,854 $ 514,232 Real estate: Construction, land and land development 459,037 508,147 1-4 family residential first mortgages 86,173 87,858 Home equity 24,285 19,294 Commercial 1,875,857 1,861,195 Consumer and other 22,900 17,287 2,969,106 3,008,013 Net unamortized fees and costs ( 2,749 ) ( 3,153 ) $ 2,966,357 $ 3,004,860 Real estate loans of approximately $ 1,490,000 and $ 1,470,000 were pledged as security for FHLB advances as of June 30, 2025 and December 31, 2024, respectively. Loans are stated at the principal amounts outstanding, net of unamortized loan fees and costs, with interest income recognized on the interest method based upon the terms of the loan. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method. Loans are reported by the portfolio segments identified above and are analyzed by management on this basis. All loan policies identified below apply to all segments of the loan portfolio. Allowance for Credit Losses for Loans The following tables detail the changes in the allowance for credit losses (ACL) by loan segment for the three and six months ended June 30, 2025 and 2024. Three Months Ended June 30, 2025 Real Estate Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total Beginning balance $ 5,846 $ 3,894 $ 635 $ 220 $ 19,701 $ 230 $ 30,526 Charge-offs — — — — — — — Recoveries 7 5 — 1 — — 13 Provision for credit loss expense (1) ( 209 ) 199 ( 12 ) 20 ( 48 ) 50 — Ending balance $ 5,644 $ 4,098 $ 623 $ 241 $ 19,653 $ 280 $ 30,539 Six Months Ended June 30, 2025 Real Estate Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total Beginning balance $ 5,489 $ 4,354 $ 650 $ 200 $ 19,544 $ 195 $ 30,432 Charge-offs — — — — — — — Recoveries 14 7 73 13 — — 107 Provision for credit loss expense (1) 141 ( 263 ) ( 100 ) 28 109 85 — Ending balance $ 5,644 $ 4,098 $ 623 $ 241 $ 19,653 $ 280 $ 30,539 14 Table of Contents West Bancorporation, Inc. and Subsidiary Notes to Consolidated Financial Statements (unaudited) (dollars in thousands, except per share data) Three Months Ended June 30, 2024 Real Estate Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total Beginning balance $ 5,326 $ 4,045 $ 828 $ 140 $ 17,891 $ 143 $ 28,373 Charge-offs ( 4 ) — — — — — ( 4 ) Recoveries 9 4 39 1 — — 53 Provision for credit loss expense (1) ( 225 ) 179 ( 224 ) 7 252 11 — Ending balance $ 5,106 $ 4,228 $ 643 $ 148 $ 18,143 $ 154 $ 28,422 Six Months Ended June 30, 2024 Real Estate Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total Beginning balance $ 5,291 $ 3,668 $ 704 $ 142 $ 18,420 $ 117 $ 28,342 Charge-offs ( 4 ) — — — — — ( 4 ) Recoveries 35 7 40 2 — — 84 Provision for credit loss expense (1) ( 216 ) 553 ( 101 ) 4 ( 277 ) 37 — Ending balance $ 5,106 $ 4,228 $ 643 $ 148 $ 18,143 $ 154 $ 28,422 (1) The negative provisions for the various segments are related to the decline in outstanding balances in each of those portfolio segments during the time periods disclosed, improvement in qualitative risk factors related to those portfolio segments and/or changes in economic forecasts. The following tables present a breakdown of the ACL by segment, disaggregated based on the evaluation method as of June 30, 2025 and December 31, 2024. June 30, 2025 Real Estate Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total Ending balance: Individually evaluated for credit losses $ — $ — $ — $ — $ — $ — $ — Collectively evaluated for credit losses 5,644 4,098 623 241 19,653 280 30,539 Total $ 5,644 $ 4,098 $ 623 $ 241 $ 19,653 $ 280 $ 30,539 December 31, 2024 Real Estate Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total Ending balance: Individually evaluated for credit losses $ — $ — $ — $ — $ — $ — $ — Collectively evaluated for credit losses 5,489 4,354 650 200 19,544 195 30,432 Total $ 5,489 $ 4,354 $ 650 $ 200 $ 19,544 $ 195 $ 30,432 15 Table of Contents West Bancorporation, Inc. and Subsidiary Notes to Consolidated Financial Statements (unaudited) (dollars in thousands, except per share data) The following tables present the recorded investment in loans, exclusive of unamortized fees and costs, disaggregated based on the evaluation method by segment as of June 30, 2025 and December 31, 2024. June 30, 2025 Real Estate Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total Ending balance: Individually evaluated for credit losses $ — $ — $ — $ — $ — $ — $ — Collectively evaluated for credit losses 500,854 459,037 86,173 24,285 1,875,857 22,900 2,969,106 Total $ 500,854 $ 459,037 $ 86,173 $ 24,285 $ 1,875,857 $ 22,900 $ 2,969,106 December 31, 2024 Real Estate Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total Ending balance: Individually evaluated for credit losses $ — $ — $ 133 $ — $ — $ — $ 133 Collectively evaluated for credit losses 514,232 508,147 87,725 19,294 1,861,195 17,287 3,007,880 Total $ 514,232 $ 508,147 $ 87,858 $ 19,294 $ 1,861,195 $ 17,287 $ 3,008,013 The ACL is a valuation account estimated at each balance sheet date and deducted from the amortized cost basis of loans to present the net amount expected to be collected. The Company estimates the ACL based on the underlying loans' amortized cost basis, which is the amount at which the loan is originated or acquired, adjusted for collection of cash and charge-offs, as well as applicable accretion or amortization of premiums, discounts, and net deferred fees or costs. The Company's estimate of the ACL reflects losses expected over the remaining contractual life of the assets. The contractual term does not consider extensions, renewals or modifications unless the Company has identified an expected restructuring. In the event that collection of principal becomes uncertain, the Company has policies in place to reverse accrued interest in a timely manner. Therefore, the Company has made a policy election to exclude accrued interest from the measurement of the ACL. Accrued interest on loans of $ 9,658 and $ 9,835 at June 30, 2025 and December 31, 2024, respectively, was included in the "Accrued interest receivable" line of the Consolidated Balance Sheets and was excluded from the measurement of credit losses. Expected credit losses are reflected in the ACL through a charge to credit loss expense. When the Company deems all or a portion of a loan to be uncollectible, the appropriate amount is written off and the ACL is reduced by the same amount. The Company applies judgment to determine when a loan is deemed uncollectible; however, generally speaking, a loan will be considered uncollectible no later than when all efforts at collection have been exhausted. Subsequent recoveries, if any, are credited to the ACL when received. The Company measures expected credit losses of loans on a collective (pool) basis when the loans share similar risk characteristics and uses a cash flow based method to estimate expected credit losses for each of these pools. The Company's methodology for estimating the ACL considers available relevant information about the collectability of cash flows, including information about past events, current conditions, and reasonable and supportable forecasts. The methodologies apply historical loss information, adjusted for asset-specific characteristics, economic conditions at the measurement date, and forecasts about future economic conditions expected to exist through the contractual lives of the financial assets that are reasonable and supportable, to the identified pools of financial assets with similar risk characteristics for which the historical experience was observed. 16 Table of Contents West Bancorporation, Inc. and Subsidiary Notes to Consolidated Financial Statements (unaudited) (dollars in thousands, except per share data) The Company uses the cash flow based model to estimate expected credit losses for all loan segments. For each of the loan segments, the Company calculates a cash flow projection using contractual terms, estimated prepayment speeds, estimated curtailment rates, and other relevant data. The Company uses regression analysis that links historical losses of the Company and its peer group to two economic metrics: national unemployment rate and 10-year treasury rate over 2-year treasury rate spread to establish the loss rates applied to the projected cash flows. For all loan segments, the Company uses a forecast period of four quarters and reverts to a historical rate after four quarters. When estimating prepayment speed and curtailment rates, the modeling is based on historical internal data. Nonaccrual Loans and Delinquency Status Delinquencies are determined based on the payment terms of the individual loan agreements. The accrual of interest on past due and other individually evaluated loans is generally discontinued at 90 days past due or when, in the opinion of management, the borrower may be unable to make all payments pursuant to contractual terms. Unless considered collectible, all interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income. Generally, all payments received while a loan is on nonaccrual status are applied to the principal balance of the loan. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured. The following table presents the amortized cost basis of loans on nonaccrual status, loans on nonaccrual status with no ACL recorded, and loans past due 90 days or more and still accruing by loan segment as of the dates indicated. Total Nonaccrual Nonaccrual with no Allowance for Credit Losses 90 Days or More Past Due and Accruing June 30, 2025 December 31, 2024 June 30, 2025 December 31, 2024 June 30, 2025 December 31, 2024 Commercial $ — $ — $ — $ — $ — $ — Real estate: Construction, land and land development — — — — — — 1-4 family residential first mortgages — 133 — 133 — — Home equity — — — — — — Commercial — — — — — — Consumer and other — — — — — — Total $ — $ 133 $ — $ 133 $ — $ — There was $ 18 and $ 0 of interest income recognized on loans that were on nonaccrual for the six months ended June 30, 2025 and June 30, 2024, respectively. 17 Table of Contents West Bancorporation, Inc. and Subsidiary Notes to Consolidated Financial Statements (unaudited) (dollars in thousands, except per share data) The following tables provide an analysis of the delinquency status of the amortized cost of loans as of June 30, 2025 and December 31, 2024. June 30, 2025 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due Total Past Due Current Total Loans Commercial $ — $ — $ — $ — $ 500,854 $ 500,854 Real estate: Construction, land and land development — — — — 459,037 459,037 1-4 family residential first mortgages 27 — — 27 86,146 86,173 Home equity — — — — 24,285 24,285 Commercial — — — — 1,875,857 1,875,857 Consumer and other — — — — 22,900 22,900 Total $ 27 $ — $ — $ 27 $ 2,969,079 $ 2,969,106 December 31, 2024 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due Total Past Due Current Total Loans Commercial $ — $ — $ — $ — $ 514,232 $ 514,232 Real estate: Construction, land and land development — — — — 508,147 508,147 1-4 family residential first mortgages — — — — 87,858 87,858 Home equity — — — — 19,294 19,294 Commercial — — — — 1,861,195 1,861,195 Consumer and other — — — — 17,287 17,287 Total $ — $ — $ — $ — $ 3,008,013 $ 3,008,013 18 Table of Contents West Bancorporation, Inc. and Subsidiary Notes to Consolidated Financial Statements (unaudited) (dollars in thousands, except per share data) Loan Restructurings Made to Borrowers Experiencing Financial Difficulty As of June 30, 2025 and December 31, 2024, the Company had no loan restructurings made to borrowers experiencing financial difficulty. There were no loan restructurings made to borrowers experiencing financial difficulty for which there was a payment default within twelve months following the modification during the three and six months ended June 30, 2025 and 2024. A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms. Credit Quality Indicators Based upon its ongoing assessment of credit quality within the loan portfolio, the Company maintains a Watch List, which includes loans classified as Doubtful, Substandard and Watch according to the Company's classification criteria. These loans involve the anticipated potential for payment defaults or collateral inadequacies. A loan on the Watch List is analyzed individually to categorize the loan to the appropriate credit risk category. All loans are subject to the assessment of a credit quality indicator. Risk ratings are assigned for each loan at the time of approval, and they change as circumstances dictate during the term of the loan. The Company utilizes a 9-point risk rating scale as shown below, with ratings 1 - 5 included in the Pass column, rating 6 included in the Watch column, ratings 7 - 8 included in the Substandard column and rating 9 included in the Doubtful column. Risk rating 1: The loan is secured by cash equivalent collateral. Risk rating 2: The loan is secured by properly margined marketable securities, bonds or cash surrender value of life insurance. Risk rating 3: The borrower is in strong financial condition and has strong debt service capacity. The loan is performing as agreed, and the financial characteristics and trends of the borrower exceed industry statistics. Risk rating 4: The borrower's financial condition is satisfactory and stable. The borrower has satisfactory debt service capacity, and the loan is well secured. The loan is performing as agreed, and the financial characteristics and trends fall in line with industry statistics. Risk rating 5: The borrower's financial condition is less than satisfactory. The loan is still generally paying as agreed, but strained cash flows may cause some slowness in payments. The collateral values adequately preclude loss on the loan. Financial characteristics and trends lag industry statistics. There may be noncompliance with loan covenants. Risk rating 6: The borrower's financial condition is deficient. Payment delinquencies may be more common. Collateral values still protect from loss, but margins are narrow. The loan may be reliant on secondary sources of repayment, including liquidation of collateral and guarantor support. Risk rating 7: The loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Well-defined weaknesses exist that jeopardize the liquidation of the debt. The Company is inadequately protected by the valuation or paying capacity of the collateral pledged. If deficiencies are not corrected, there is a distinct possibility that a loss will be sustained. Risk rating 8: All the characteristics of rating 7 exist with the added condition that the loan is past due more than 90 days or there is reason to believe the Company will not receive its principal and interest according to the terms of the loan agreement. Risk rating 9: All the weaknesses inherent in risk ratings 7 and 8 exist with the added condition that collection or liquidation, on the basis of currently known facts, conditions and values, is highly questionable and improbable. A loan reaching this category would most likely be charged off. 19 Table of Contents West Bancorporation, Inc. and Subsidiary Notes to Consolidated Financial Statements (unaudited) (dollars in thousands, except per share data) Credit quality indicators for all loans and the Company's risk rating process are dynamic and updated on a continuous basis. Risk ratings are updated as circumstances that could affect the repayment of an individual loan are brought to management's attention through an established monitoring process. Individual bankers initiate changes as appropriate for ratings 1 through 5, and changes for ratings 6 through 9 are initiated by management. The likelihood of loss increases as the risk rating increases and is generally preceded by a loan appearing on the Watch List, which consists of all loans with a risk rating of 6 or worse. Written action plans with firm target dates for resolution of identified problems are maintained and reviewed on a quarterly basis for all segments of loans included on the Watch List. In addition to the Company's internal credit monitoring practices and procedures, an outsourced independent credit review function is in place to further assess assigned internal risk classifications and monitor compliance with internal lending policies and procedures. In all portfolio segments, the primary risks are that a borrower's income stream diminishes to the point that the borrower is not able to make scheduled principal and interest payments and any collateral securing the loan declines in value. The risk of declining collateral values is present for most types of loans. Commercial loans consist primarily of loans to businesses for various purposes, including revolving lines to finance current operations, inventory and accounts receivable, and capital expenditure loans to finance equipment and other fixed assets. These loans generally have short maturities, have either adjustable or fixed interest rates, and are either unsecured or secured by inventory, accounts receivable and/or fixed assets. For commercial loans, the primary source of repayment is from the operation of the business. Real estate loans include various types of loans for which the Company holds real property as collateral, and consist of loans on commercial properties and single and multifamily residences. Real estate loans are typically structured to mature or reprice every five years with payments based on amortization periods up to 30 years. The majority of construction loans are to contractors and developers for construction of commercial buildings or residential real estate. These loans typically have maturities of up to 24 months. The Company's loan policy includes minimum appraisal and other credit guidelines. Consumer loans include loans extended to individuals for household, family and other personal expenditures not secured by real estate. The majority of the Company's consumer lending is for vehicles, consolidation of personal debts and household improvements. The repayment source for consumer loans, including 1-4 family residential and home equity loans, is typically wages. 20 Table of Contents West Bancorporation, Inc. and Subsidiary Notes to Consolidated Financial Statements (unaudited) (dollars in thousands, except per share data) The following tables present the amortized cost basis of loans by loan segment, credit quality indicator and origination year, and the current period gross write-off by loan segment and origination year, based on the analysis performed as of June 30, 2025 and December 31, 2024. Term Loans by Origination Year As of June 30, 2025 2025 2024 2023 2022 2021 Prior Revolving Loans Total Commercial Pass $ 64,450 $ 75,245 $ 65,562 $ 68,610 $ 30,395 $ 50,424 $ 142,014 $ 496,700 Watch 2,081 405 602 503 71 — 492 4,154 Substandard — — — — — — — — Doubtful — — — — — — — — Total $ 66,531 $ 75,650 $ 66,164 $ 69,113 $ 30,466 $ 50,424 $ 142,506 $ 500,854 Current period gross writeoffs $ — $ — $ — $ — $ — $ — $ — $ — Real estate: Construction, land and land development Pass $ 40,366 $ 120,763 $ 135,728 $ 73,233 $ 3,307 $ 626 $ 85,014 $ 459,037 Watch — — — — — — — — Substandard — — — — — — — — Doubtful — — — — — — — — Total $ 40,366 $ 120,763 $ 135,728 $ 73,233 $ 3,307 $ 626 $ 85,014 $ 459,037 Current period gross writeoffs $ — $ — $ — $ — $ — $ — $ — $ — 1-4 family residential first mortgages Pass $ 10,129 $ 10,984 $ 19,304 $ 17,096 $ 13,829 $ 9,526 $ 2,548 $ 83,416 Watch — — 2,216 — — — 541 2,757 Substandard — — — — — — — — Doubtful — — — — — — — — Total $ 10,129 $ 10,984 $ 21,520 $ 17,096 $ 13,829 $ 9,526 $ 3,089 $ 86,173 Current period gross writeoffs $ — $ — $ — $ — $ — $ — $ — $ — Home equity Pass $ 89 $ 341 $ 2,696 $ 148 $ 408 $ — $ 20,603 $ 24,285 Watch — — — — — — — — Substandard — — — — — — — — Doubtful — — — — — — — — Total $ 89 $ 341 $ 2,696 $ 148 $ 408 $ — $ 20,603 $ 24,285 Current period gross writeoffs $ — $ — $ — $ — $ — $ — $ — $ — Commercial Pass $ 146,834 $ 237,288 $ 133,669 $ 448,589 $ 421,069 $ 446,846 $ 37,685 $ 1,871,980 Watch — 1,448 1,459 — — — 970 3,877 Substandard — — — — — — — — Doubtful — — — — — — — — Total $ 146,834 $ 238,736 $ 135,128 $ 448,589 $ 421,069 $ 446,846 $ 38,655 $ 1,875,857 Current period gross writeoffs $ — $ — $ — $ — $ — $ — $ — $ — Consumer and other Pass $ 469 $ 11,995 $ 513 $ 71 $ 176 $ 428 $ 9,248 $ 22,900 Watch — — — — — — — — Substandard — — — — — — — — Doubtful — — — — — — — — Total $ 469 $ 11,995 $ 513 $ 71 $ 176 $ 428 $ 9,248 $ 22,900 Current period gross writeoffs $ — $ — $ — $ — $ — $ — $ — $ — 21 Table of Contents West Bancorporation, Inc. and Subsidiary Notes to Consolidated Financial Statements (unaudited) (dollars in thousands, except per share data) Term Loans by Origination Year As of December 31, 2024 2024 2023 2022 2021 2020 Prior Revolving Loans Total Commercial Pass $ 97,976 $ 80,842 $ 77,087 $ 33,698 $ 17,460 $ 41,006 $ 158,395 $ 506,464 Watch 4,223 116 2,747 620 — 62 — 7,768 Substandard — — — — — — — — Doubtful — — — — — — — — Total $ 102,199 $ 80,958 $ 79,834 $ 34,318 $ 17,460 $ 41,068 $ 158,395 $ 514,232 Current period gross writeoffs $ 16 $ — $ 4 $ — $ — $ — $ — $ 20 Real estate: Construction, land and land development Pass $ 168,579 $ 144,604 $ 84,281 $ 27,584 $ 805 $ — $ 82,294 $ 508,147 Watch — — — — — — — — Substandard — — — — — — — — Doubtful — — — — — — — — Total $ 168,579 $ 144,604 $ 84,281 $ 27,584 $ 805 $ — $ 82,294 $ 508,147 Current period gross writeoffs $ — $ — $ — $ — $ — $ — $ — $ — 1-4 family residential first mortgages Pass $ 12,573 $ 24,889 $ 17,803 $ 16,283 $ 10,251 $ 3,986 $ 1,940 $ 87,725 Watch — — — — — — — — Substandard — 133 — — — — — 133 Doubtful — — — — — — — — Total $ 12,573 $ 25,022 $ 17,803 $ 16,283 $ 10,251 $ 3,986 $ 1,940 $ 87,858 Current period gross writeoffs $ — $ — $ — $ — $ — $ — $ — $ — Home equity Pass $ 425 $ 2,721 $ 175 $ 443 $ 32 $ — $ 15,498 $ 19,294 Watch — — — — — — — — Substandard — — — — — — — — Doubtful — — — — — — — — Total $ 425 $ 2,721 $ 175 $ 443 $ 32 $ — $ 15,498 $ 19,294 Current period gross writeoffs $ — $ — $ — $ — $ — $ — $ — $ — Commercial Pass $ 228,197 $ 141,894 $ 467,411 $ 431,448 $ 342,828 $ 218,440 $ 30,396 $ 1,860,614 Watch — — 332 249 — — — 581 Substandard — — — — — — — — Doubtful — — — — — — — — Total $ 228,197 $ 141,894 $ 467,743 $ 431,697 $ 342,828 $ 218,440 $ 30,396 $ 1,861,195 Current period gross writeoffs $ — $ — $ — $ — $ — $ — $ — $ — Consumer and other Pass $ 4,114 $ 600 $ 108 $ 214 $ 13 $ 113 $ 12,125 $ 17,287 Watch — — — — — — — — Substandard — — — — — — — — Doubtful — — — — — — — — Total $ 4,114 $ 600 $ 108 $ 214 $ 13 $ 113 $ 12,125 $ 17,287 Current period gross writeoffs $ — $ — $ — $ — $ — $ — $ — $ — 22 Table of Contents West Bancorporation, Inc. and Subsidiary Notes to Consolidated Financial Statements (unaudited) (dollars in thousands, except per share data) Collateral Dependent Loans Loans that do not share risk characteristics are evaluated on an individual basis. For collateral dependent loans where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loans to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the present value of expected cash flows from the operation of collateral. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the fair value of the underlying collateral less estimated cost to sell. The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the loan. The following tables present the amortized cost basis of collateral dependent loans, by primary collateral type, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans as of June 30, 2025 and December 31, 2024. As of June 30, 2025 Primary Type of Collateral Real Estate Equipment Other Total ACL Allocation Total $ — $ — $ — $ — $ — As of December 31, 2024 Primary Type of Collateral Real Estate Equipment Other Total ACL Allocation 1-4 family residential first mortgages $ 133 $ — $ — $ 133 $ — Total $ 133 $ — $ — $ 133 $ — Allowance for Credit Losses on Off-Balance-Sheet Credit Exposures The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The Company's allowance for credit losses for unfunded commitments was $ 1,544 as of June 30, 2025 and December 31, 2024. The allowance for credit losses for off-balance-sheet credit exposures is presented in the "Accrued expenses and other liabilities" line of the Consolidated Balance Sheets. Changes in the allowance for credit losses for off-balance-sheet credit exposures is reflected in the "Credit loss expense" line of the Consolidated Statements of Income. There was no provision for credit losses for off-balance-sheet credit exposures during the three and six months ended June 30, 2025 and 2024. 5. Derivatives The Company has entered into interest rate swap agreements and interest rate collars as part of its interest rate risk management strategy. The Company uses interest rate derivatives to manage its interest rate risk exposure on certain loans, borrowings and deposits due to interest rate movements. The notional amounts of the interest rate derivatives do not represent amounts exchanged by the counterparties, but rather, the notional amount is used to determine, along with other terms of the derivative, the amounts to be exchanged between the counterparties. 23 Table of Contents West Bancorporation, Inc. and Subsidiary Notes to Consolidated Financial Statements (unaudited) (dollars in thousands, except per share data) Interest Rate Derivatives Designated as a Cash Flow Hedge: The Company had interest rate derivatives designated as cash flow hedges with total notional amounts of $ 495,000 and $ 420,000 at June 30, 2025 and December 31, 2024, respectively. As of June 30, 2025, the Company had interest rate swaps with a total notional amount of $ 270,000 that hedge the interest payments of rolling one-month funding consisting of FHLB advances or brokered deposits. Also, as of June 30, 2025, the Company had interest rate swaps with a total notional amount of $ 40,000 that effectively convert variable-rate long-term debt to fixed-rate debt and swaps with a total notional amount of $ 110,000 that hedge the interest payments of certain customer deposit accounts. The Company had interest rate collars designated as cash flow hedges with total notional amounts of $ 75,000 and $ 0 as of June 30, 2025 and December 31, 2024, respectively. The Company enters into interest rate collars, to mitigate interest rate risk on certain customer deposits. The structure of the interest rate collars is such that the Company pays the counterparty an incremental amount if the index rate falls below the floor rate. Conversely, the Company receives an incremental amount if the index rate rises above the cap rate. Derivatives Not Designated as Accounting Hedges: To accommodate customer needs, the Company on occasion offers loan level interest rate swaps to its customers and offsets its exposure from such contracts by entering into mirror image swaps with a swap counterparty (back-to-back swap program). The interest rate swaps are free-standing derivatives and are recorded at fair value. The Company enters into a floating-rate loan and a fixed-rate swap with our customer. Simultaneously, the Company enters into an offsetting fixed-rate swap with a swap counterparty. In connection with each swap transaction, the Company agrees to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on the same notional amount at a fixed interest rate. At the same time, the Company agrees to pay a swap counterparty the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. These transactions allow the Company’s customers to effectively convert variable-rate loans to fixed-rate loans. The customer accommodations and any offsetting swaps are treated as non-hedging derivative instruments which do not qualify for hedge accounting. The table below identifies the balance sheet category and fair values of the Company's derivative instruments as of June 30, 2025 and December 31, 2024. June 30, 2025 December 31, 2024 Cash Flow Hedges: Interest Rate Swaps : Gross notional amount $ 420,000 $ 420,000 Fair value in other assets 4,671 9,897 Fair value in other liabilities ( 986 ) ( 270 ) Weighted-average floating rate received 4.63 % 4.84 % Weighted-average fixed rate paid 3.30 % 3.30 % Weighted-average maturity in years 1.9 2.4 Interest Rate Collars : Gross notional amount $ 75,000 $ — Fair value in other assets — — Fair value in other liabilities ( 208 ) — Weighted-average maturity in years 3.1 0.0 Non-Hedging Derivatives: Gross notional amount $ 283,631 $ 287,235 Fair value in other assets 10,810 14,284 Fair value in other liabilities ( 10,810 ) ( 14,284 ) 24 Table of Contents West Bancorporation, Inc. and Subsidiary Notes to Consolidated Financial Statements (unaudited) (dollars in thousands, except per share data) The following table identifies the pre-tax gains or losses recognized on the Company's derivative instruments designated as cash flow hedges for the three and six months ended June 30, 2025 and 2024. Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Pre-tax gain (loss) recognized in other comprehensive income $ ( 1,021 ) $ 2,364 $ ( 3,335 ) $ 9,853 Decrease in interest expense ( 1,412 ) ( 2,898 ) ( 2,816 ) ( 5,813 ) The Company estimates there will be approximately $ 5,583 reclassified from accumulated other comprehensive income (loss) to decrease interest expense through the 12 months ending June 30, 2026 related to cash flow hedges. The Company is exposed to credit risk in the event of nonperformance by interest rate derivative counterparties, which is minimized by collateral-pledging provisions in the agreements. Derivative contracts are executed with a Credit Support Annex, which is a bilateral ratings-sensitive agreement that requires collateral postings at established credit threshold levels. These agreements protect the interests of the Company and its counterparties should either party suffer a credit rating deterioration. As of June 30, 2025 and December 31, 2024, the Company pledged $ 270 and $ 30 , respectively, of collateral to the counterparties in the form of cash on deposit. As of June 30, 2025 and December 31, 2024, the Company's counterparties pledged $ 13,760 and $ 24,160 , respectively, of collateral to the Company in the form of cash on deposit. The interest rate swap product with the borrower is cross-collateralized with the underlying loan collateral and therefore there is no pledged cash collateral under swap contracts with customers. 6. Income Taxes Net deferred tax assets consisted of the following as of June 30, 2025 and December 31, 2024. June 30, 2025 December 31, 2024 Deferred tax assets: Allowance for credit losses $ 7,893 $ 7,866 Net unrealized losses on securities available for sale 28,478 31,814 Lease liabilities 1,069 1,120 Accrued expenses 235 220 Restricted stock unit compensation 672 1,077 State net operating loss carryforward 2,185 2,042 Other 197 494 40,729 44,633 Deferred tax liabilities: Right-of-use assets 1,033 1,083 Deferred loan costs 224 224 Net unrealized gains on interest rate swaps 859 2,375 Premises and equipment 5,443 5,095 New markets tax credit loan 474 474 Other 136 138 8,169 9,389 Net deferred tax assets before valuation allowance 32,560 35,244 Valuation allowance ( 2,185 ) ( 2,042 ) Net deferred tax assets $ 30,375 $ 33,202 25 Table of Contents West Bancorporation, Inc. and Subsidiary Notes to Consolidated Financial Statements (unaudited) (dollars in thousands, except per share data) The Company has recorded a valuation allowance against the tax effect of the state net operating loss carryforwards, as management believes it is more likely than not that these carryforwards will expire without being utilized. The state net operating loss carryforwards expire in 2025 and thereafter. On July 4, 2025, the President signed H.R. 1, the "One Big Beautiful Bill Act," into law. The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic R&D expenditures, reinstatement of 100 percent bonus depreciation, and more favorable rules for determining the limitation on business interest expense. The Company is currently evaluating the impact on future periods. 7 . Accumulated Other Comprehensive Income (Loss) The following table summarizes the changes in the balances of each component of accumulated other comprehensive income (loss), net of tax, for the six months ended June 30, 2025 and 2024. Unrealized Unrealized Accumulated Gains Gains Other (Losses) on (Losses) on Comprehensive Securities Derivatives Income (Loss) Balance, December 31, 2024 $ ( 96,564 ) $ 7,207 $ ( 89,357 ) Other comprehensive income (loss) before reclassifications 10,172 ( 2,514 ) 7,658 Amounts reclassified from accumulated other comprehensive income (loss) ( 13 ) ( 2,121 ) ( 2,134 ) Net current period other comprehensive income (loss) 10,159 ( 4,635 ) 5,524 Balance, June 30, 2025 $ ( 86,405 ) $ 2,572 $ ( 83,833 ) Balance, December 31, 2023 $ ( 91,233 ) $ 7,710 $ ( 83,523 ) Other comprehensive income (loss) before reclassifications ( 6,924 ) 7,421 497 Amounts reclassified from accumulated other comprehensive income (loss) ( 16 ) ( 4,378 ) ( 4,394 ) Net current period other comprehensive income (loss) ( 6,940 ) 3,043 ( 3,897 ) Balance, June 30, 2024 $ ( 98,173 ) $ 10,753 $ ( 87,420 ) 8. Commitments and Contingencies Financial instruments with off-balance-sheet risk : The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations that it uses for on-balance-sheet instruments. The Company's commitments consisted of the following amounts as of June 30, 2025 and December 31, 2024. June 30, 2025 December 31, 2024 Commitments to fund real estate construction loans $ 158,552 $ 180,986 Other commitments to extend credit 532,779 598,510 Standby letters of credit 13,204 10,734 $ 704,535 $ 790,230 26 Table of Contents West Bancorporation, Inc. and Subsidiary Notes to Consolidated Financial Statements (unaudited) (dollars in thousands, except per share data) West Bank previously executed Mortgage Partnership Finance (MPF) Master Commitments (Commitments) with the FHLB of Des Moines to deliver residential mortgage loans and to guarantee the payment of any realized losses that exceed the FHLB's first loss account for mortgages delivered under the Commitments. West Bank receives credit enhancement fees from the FHLB for providing this guarantee and continuing to assist with managing the credit risk of the MPF Program residential mortgage loans. The outstanding balance of mortgage loans sold under the MPF Program was $ 15,751 and $ 17,032 at June 30, 2025 and December 31, 2024, respectively. Contractual commitments : The Company had remaining commitments to invest in qualified affordable housing projects totaling $ 1,488 and $ 861 as of June 30, 2025 and December 31, 2024, respectively. Concentrations of credit risk : Substantially all of the Company's loans, commitments to extend credit and standby letters of credit have been granted to customers in the Company's market areas. The concentrations of credit by type of loan are set forth in Note 4. The distribution by type of loan of commitments to extend credit approximates the distribution by type of loan outstanding. Standby letters of credit were granted primarily to commercial borrowers. Contingencies : Neither the Company nor West Bank is a party, and no property of these entities is subject, to any material pending legal proceedings, other than ordinary routine litigation incidental to West Bank's business. The Company does not know of any proceeding contemplated by a governmental authority against the Company or West Bank. 9. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts business. The Company's balance sheet contains securities available for sale and derivative instruments that are recorded at fair value on a recurring basis. The three-level valuation hierarchy for disclosure of fair value is as follows: Level 1 uses quoted market prices in active markets for identical assets or liabilities. Level 2 uses observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3 uses unobservable inputs that are not corroborated by market data. The Company's policy is to recognize transfers between levels at the end of each reporting period, if applicable. There were no transfers between levels of the fair value hierarchy during the six months ended June 30, 2025. The following is a description of valuation methodologies used for financial assets and liabilities recorded at fair value on a recurring basis. Securities available for sale: When available, quoted market prices are used to determine the fair value of securities (Level 1). If quoted market prices are not available, the Company determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable (Level 2). The fair values of these securities are determined by pricing models that consider observable market data such as interest rate volatilities, yield curves, credit spreads, prices from market makers and live trading systems. Management obtains the fair value of securities at the end of each reporting period via a third-party pricing service. Management reviewed the valuation process used by the third party and believed the process was valid. On a quarterly basis, management corroborates the fair values of securities by obtaining pricing from an independent financial market data vendor and comparing the two sets of fair values. Any significant variances are reviewed and investigated. For a sample of securities, prices are further validated by management by obtaining details of the inputs used by the pricing service. Those inputs were independently tested, and management concluded the fair values were consistent with GAAP requirements and the securities were properly classified in the fair value hierarchy. 27 Table of Contents West Bancorporation, Inc. and Subsidiary Notes to Consolidated Financial Statements (unaudited) (dollars in thousands, except per share data) Derivative instruments: The Company's derivative instruments consist of interest rate swaps and interest rate collars accounted for as cash flow hedges, as well as interest rate swaps, which are accounted for as non-hedging derivatives. The Company's derivative positions are classified within Level 2 of the fair value hierarchy and are valued using models generally accepted in the financial services industry and that use actively quoted or observable market input values from external market data providers and/or non-binding broker-dealer quotations. The fair value of the derivatives is determined using discounted cash flow models. These models’ key assumptions include the contractual terms of the respective contract along with significant observable inputs, including interest rates, yield curves, nonperformance risk and volatility. The following tables present the balances of financial assets and liabilities measured at fair value on a recurring basis by level as of June 30, 2025 and December 31, 2024. June 30, 2025 Total Level 1 Level 2 Level 3 Financial assets: Securities available for sale: State and political subdivisions $ 170,686 $ — $ 170,686 $ — Collateralized mortgage obligations 219,127 — 219,127 — Mortgage-backed securities 118,613 — 118,613 — Collateralized loan obligations 15,759 — 15,759 — Corporate notes 12,524 — 12,524 — Derivative instruments 15,481 — 15,481 — Financial liabilities: Derivative instruments $ 12,004 $ — $ 12,004 $ — December 31, 2024 Total Level 1 Level 2 Level 3 Financial assets: Securities available for sale: State and political subdivisions $ 174,145 $ — $ 174,145 $ — Collateralized mortgage obligations 219,264 — 219,264 — Mortgage-backed securities 119,819 — 119,819 — Collateralized loan obligations 18,965 — 18,965 — Corporate notes 12,372 — 12,372 — Derivative instruments 24,181 — 24,181 — Financial liabilities: Derivative instruments $ 14,554 $ — $ 14,554 $ — Certain assets are measured at fair value on a nonrecurring basis. That is, they are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Individually evaluated loans that are deemed to have impairment are classified within Level 3 of the fair value hierarchy and are recorded at fair value, which is based on the value of the collateral securing these loans. As of both June 30, 2025 and December 31, 2024, there were no individually evaluated loans with a fair value adjustment. 28 Table of Contents West Bancorporation, Inc. and Subsidiary Notes to Consolidated Financial Statements (unaudited) (dollars in thousands, except per share data) In determining the estimated net realizable value of the underlying collateral of individually evaluated loans, the Company primarily uses third-party appraisals or broker opinions which may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available and include consideration of variations in location, size, and income production capacity of the property. Additionally, the appraisals are periodically further adjusted by the Company in consideration of charges that may be incurred in the event of foreclosure and are based on management’s historical knowledge, changes in business factors and changes in market conditions. Because of the high degree of judgment required in estimating the fair value of collateral underlying individually evaluated loans and because of the relationship between fair value and general economic conditions, the Company considers the fair value of individually evaluated loans to be highly sensitive to changes in market conditions. GAAP requires disclosure of the fair value of financial assets and financial liabilities, including those that are not measured and reported at fair value on a recurring or nonrecurring basis . The following table presents the carrying amounts and approximate fair values of financial assets and liabilities as of June 30, 2025 and December 31, 2024. June 30, 2025 Carrying Amount Approximate Fair Value Level 1 Level 2 Level 3 Financial assets: Cash and due from banks $ 35,796 $ 35,796 $ 35,796 $ — $ — Interest-earning deposits with banks 212,450 212,450 212,450 — — Securities purchased under agreements to resell 96,955 96,955 — 96,955 Securities available for sale 536,709 536,709 — 536,709 — Federal Home Loan Bank stock 15,311 15,311 — 15,311 — Loans, net 2,935,818 2,909,561 — 2,909,561 Accrued interest receivable 12,629 12,629 12,629 — — Derivative instruments 15,481 15,481 — 15,481 — Financial liabilities: Deposits $ 3,391,993 $ 3,391,264 $ — $ 3,391,264 $ — Subordinated notes, net 80,024 71,962 — 71,962 — Federal Home Loan Bank advances 270,000 270,000 — 270,000 — Long-term debt 40,236 40,236 — 40,236 — Accrued interest payable 7,696 7,696 7,696 — — Derivative instruments 12,004 12,004 — 12,004 — 29 Table of Contents West Bancorporation, Inc. and Subsidiary Notes to Consolidated Financial Statements (unaudited) (dollars in thousands, except per share data) December 31, 2024 Carrying Amount Approximate Fair Value Level 1 Level 2 Level 3 Financial assets: Cash and due from banks $ 28,750 $ 28,750 $ 28,750 $ — $ — Interest-earning deposits with banks 214,728 214,728 214,728 — — Securities available for sale 544,565 544,565 — 544,565 — Federal Home Loan Bank stock 15,129 15,129 — 15,129 — Loans, net 2,974,428 2,905,574 — 2,905,574 Accrued interest receivable 12,825 12,825 12,825 — — Derivative instruments 24,181 24,181 — 24,181 — Financial liabilities: Deposits $ 3,357,596 $ 3,357,219 $ — $ 3,357,219 $ — Subordinated notes, net 79,893 68,522 — 68,522 — Federal Home Loan Bank advances 270,000 270,000 — 270,000 — Long-term debt 42,736 42,736 — 42,736 — Accrued interest payable 8,396 8,396 8,396 — — Derivative instruments 14,554 14,554 — 14,554 — 30 Table of Contents West Bancorporation, Inc. Management's Discussion and Analysis (in thousands, except share and per share data)