WTBA 8-K
West Bancorporation Inc (WTBA)
8-K
2022-10-27
For: 2022-10-27
View Original
Added on
April 11, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): October 27, 2022
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 515- 222-2300
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 2.02 Results of Operations and Financial Condition.
On October 27, 2022, West Bancorporation, Inc. (the "Company") issued a press release announcing its third quarter earnings results for the period ended September 30, 2022, and the declaration of a quarterly dividend. A copy of the press release is attached hereto as Exhibit 99.1.
The information furnished in this item of this Form 8-K, and the related exhibits, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as may be expressly set forth by specific reference in such filing.
Item 7.01 Regulation FD Disclosure.
The Company hereby furnishes the Earnings Presentation attached hereto as Exhibit 99.2.
The information furnished in this item of this Form 8-K, and the related exhibits, shall not be deemed "filed" for purposes of Section 18 of the Exchange Act, or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as may be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits:
| Exhibit Number | Description | |||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| West Bancorporation, Inc. | ||||||||
| October 27, 2022 | By: | /s/ Jane M. Funk | ||||||
| Name: Jane M. Funk | ||||||||
| Title: Executive Vice President, Treasurer and Chief Financial Officer | ||||||||
Exhibit 99.1
Press Release
October 27, 2022
FOR IMMEDIATE RELEASE
For more information contact:
Jane Funk, Executive Vice President, Treasurer and Chief Financial Officer (515) 222-5766
WEST BANCORPORATION, INC. ANNOUNCES NET INCOME FOR THE THIRD QUARTER OF 2022, DECLARES QUARTERLY DIVIDEND
West Des Moines, IA - West Bancorporation, Inc. (Nasdaq: WTBA; the “Company”), parent company of West Bank, today reported third quarter 2022 net income of $11.6 million, or $0.69 per diluted common share, compared to third quarter 2021 net income of $12.7 million, or $0.76 per diluted common share. For the first nine months of 2022, net income was $37.5 million, or $2.23 per diluted common share, compared to $37.7 million, or $2.25 per diluted common share, for the first nine months of 2021. On October 26, 2022, the Company’s Board of Directors declared a regular quarterly dividend of $0.25 per common share. The dividend is payable on November 23, 2022, to stockholders of record on November 9, 2022.
David Nelson, President and Chief Executive Officer of the Company, commented, “Our company had another strong quarter. Our credit quality remains pristine and we continue to see opportunities for high quality loan growth, although at a slower pace than we experienced the last few quarters. We remain diligent in monitoring and managing our credit quality as we anticipate increasing economic challenges as the Federal Reserve aggressively seeks to reduce inflation by raising interest rates. Our bankers are working hard every day to assist our customers and communities in navigating the current economic and interest rate uncertainties. For the fifth consecutive quarter end, we had no loans greater than 30 days past due.”
David Nelson added, “While the yield on our loan portfolio is increasing, changes in liquidity and competitive deposit pricing, resulting from volatility and uncertainty in the interest rate environment, has put upward pressure on our cost of funds. Our capital position is strong and we remain focused on our highly successful core business model to continue building shareholder value.”
Third Quarter 2022 Financial Highlights
| Return on Average Equity | 21.01 | % | ||||||
| Return on Average Assets | 1.32 | % | ||||||
| Efficiency ratio (a non-GAAP measure) | 43.16 | % | ||||||
| Nonperforming assets to total assets | 0.01 | % | ||||||
Third Quarter 2022 Compared to Second Quarter 2022 Overview
•No provision for loan losses was recorded in the third quarter of 2022, compared to a negative provision for loan losses of $1.75 million in the second quarter of 2022. The negative provision in the second quarter of 2022 was due primarily to the reversal of a specific reserve on an impaired loan. The impaired loan, which had a specific reserve of $2.5 million, was settled in the second quarter of 2022 resulting in a charge-off of $451 thousand.
•The allowance for loan losses to total loans was 0.97 percent at September 30, 2022, compared to 0.99 percent at June 30, 2022. There were no loans greater than 30 days past due at September 30, 2022, for the fifth consecutive quarter. Nonaccrual loans at September 30, 2022 consisted of one loan with a balance of $329 thousand.
•Loan swap fees of $835 thousand were recorded in the third quarter of 2022, compared to none in the second quarter of 2022.
•Loans increased $41.0 million in the third quarter of 2022, or 6.3 percent annualized.
•Deposits decreased $19.6 million in the third quarter of 2022. Included in deposits were brokered deposits totaling $258.1 million at September 30, 2022, compared to $196.5 million at June 30, 2022.
•The efficiency ratio (a non-GAAP measure) was 43.16 percent for the third quarter of 2022, compared to 41.96 percent for the second quarter of 2022.
•Net interest margin, on a fully tax-equivalent basis (a non-GAAP measure), was 2.78 percent for the third quarter of 2022, compared to 2.93 percent for the second quarter of 2022. Net interest income for the third quarter of 2022 was $23.0 million, compared to $24.2 million for the second quarter of 2022. The rising cost of deposits and borrowed funds and the change in mix of liabilities has increased interest expense faster than the increase in the interest income from loan repricing and loan growth.
•The tangible common equity ratio was 5.65 percent at September 30, 2022, a decrease of 43 basis points compared to 6.22 percent at June 30, 2022 due to continued decline in the market value of the securities portfolio resulting from rising interest rates, which negatively impacts accumulated other comprehensive income.
Third Quarter 2022 Compared to Third Quarter 2021 Overview
•Loans increased $254.6 million at September 30, 2022, or 10.8 percent, compared to September 30, 2021.
•Deposits increased $85.9 million at September 30, 2022, compared to September 30, 2021. Included in deposits were brokered deposits totaling $258.1 million at September 30, 2022, compared to $103.0 million at September 30, 2021.
•Borrowed funds increased to $460.3 million at September 30, 2022, compared to $202.5 million at September 30, 2021. The increase included $58.9 million in subordinated notes that were issued in June 2022, $33.8 million in long-term debt that was issued in December 2021 and $165.1 million in federal funds purchased.
•The efficiency ratio (a non-GAAP measure) was 43.16 percent for the third quarter of 2022, compared to 39.41 percent for the third quarter of 2021. Salaries and benefits were higher in the third quarter of 2022, compared to the third quarter of 2021, due to a higher number of full-time equivalent employees and annual compensation adjustments.
•Net interest margin, on a fully tax-equivalent basis (a non-GAAP measure), was 2.78 percent for the third quarter of 2022, compared to 3.06 percent for the third quarter of 2021. Net interest income for the third quarter of 2022 was $23.0 million, compared to $24.5 million for the third quarter of 2021. Net interest income in the third quarter of 2021 included $1.6 million of PPP loan interest income, compared to $101 thousand in the third quarter of 2022. In 2022, the rising cost of deposits and borrowed funds and the change in mix of liabilities has increased interest expense faster than the increase in the interest income from loan repricing and loan growth.
The Company filed its report on Form 10-Q with the Securities and Exchange Commission today. Please refer to that document for a more in-depth discussion of the Company’s financial results. The Form 10-Q is available on the Investor Relations section of West Bank’s website at www.westbankstrong.com.
The Company will discuss its results in a conference call scheduled for 2:00 p.m. Central Time on Thursday, October 27, 2022. The telephone number for the conference call is 844-200-6205. The access code for the conference call is 014998. A recording of the call will be available until November 10, 2022, by dialing 866-813-9403. The replay access code is 419470.
About West Bancorporation, Inc. (Nasdaq: WTBA)
West Bancorporation, Inc. is headquartered in West Des Moines, Iowa. Serving customers since 1893, West Bank, a wholly-owned subsidiary of West Bancorporation, Inc., is a community bank that focuses on lending, deposit services, and trust services for small- to medium-sized businesses and consumers. West Bank has six offices in the Des Moines, Iowa metropolitan area, one office in Coralville, Iowa, and four offices in Minnesota in the cities of Rochester, Owatonna, Mankato and St. Cloud.
Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to the Company’s business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meanings of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements may appear throughout this report. These forward-looking statements are generally identified by the words “believes,” “expects,” “intends,” “anticipates,” “projects,” “future,” “confident,” “may,” “should,” “will,” “strategy,” “plan,” “opportunity,” “will be,” “will likely result,” “will continue” or similar references, or references to estimates, predictions or future events. Such forward-looking statements are based upon certain underlying assumptions, risks and uncertainties. Because of the possibility that the underlying assumptions are incorrect or do not materialize as expected in the future, actual results could differ materially from these forward-looking statements. Risks and uncertainties that may affect future results include: interest rate risk, including the effects of recent rate increases by the Federal Reserve; fluctuations in the values of the securities held in our investment portfolio, including as a result of rising interest rates; competitive pressures, including from non-bank competitors such as “fintech” companies; pricing pressures on loans and deposits; changes in credit and other risks posed by the Company’s loan portfolio, including declines in commercial or residential real estate values or changes in the allowance for loan losses dictated by new market conditions, accounting standards (including as a result of the future implementation of the current expected credit loss (CECL) accounting standard) or regulatory requirements; changes in local, national and international economic conditions, including rising rates of inflation; changes in legal and regulatory requirements, limitations and costs; changes in customers’ acceptance of the Company’s products and services; cyber-attacks; unexpected outcomes of existing or new litigation involving the Company; the monetary, trade and other regulatory policies of the U.S. government; acts of war or terrorism, including the Russian invasion of Ukraine, widespread disease or pandemics, such as the COVID-19 pandemic, or other adverse external events; developments and uncertainty related to the future use and availability of some reference rates, such as the London Interbank Offered Rate, as well as other alternative reference rates; changes to U.S. tax laws, regulations and guidance; talent and labor shortages; the new 1% excise tax on stock buybacks by publicly traded companies; and any other risks described in the “Risk Factors” sections of reports filed by the Company with the Securities and Exchange Commission. The Company undertakes no obligation to revise or update such forward-looking statements to reflect current or future events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
| WEST BANCORPORATION, INC. AND SUBSIDIARY | ||||||||||||||||||||||||||||||||
| Financial Information (unaudited) | ||||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||
| As of | ||||||||||||||||||||||||||||||||
| CONDENSED BALANCE SHEETS | September 30, 2022 | June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | |||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
| Cash and due from banks | $ | 58,342 | $ | 26,174 | $ | 21,896 | $ | 17,555 | $ | 30,922 | ||||||||||||||||||||||
| Federal funds sold | 1,049 | 766 | 122,359 | 175,270 | 1,547 | |||||||||||||||||||||||||||
| Securities available for sale, at fair value | 671,752 | 731,970 | 797,912 | 758,822 | 763,397 | |||||||||||||||||||||||||||
| Federal Home Loan Bank stock, at cost | 18,350 | 15,532 | 10,269 | 9,965 | 11,544 | |||||||||||||||||||||||||||
| Loans | 2,614,145 | 2,573,129 | 2,485,366 | 2,456,196 | 2,359,567 | |||||||||||||||||||||||||||
| Allowance for loan losses | (25,418) | (25,434) | (27,623) | (28,364) | (28,098) | |||||||||||||||||||||||||||
| Loans, net | 2,588,727 | 2,547,695 | 2,457,743 | 2,427,832 | 2,331,469 | |||||||||||||||||||||||||||
| Premises and equipment, net | 44,592 | 41,807 | 40,898 | 34,568 | 33,287 | |||||||||||||||||||||||||||
| Bank-owned life insurance | 44,318 | 44,072 | 43,836 | 43,609 | 43,376 | |||||||||||||||||||||||||||
| Other assets | 90,387 | 66,775 | 52,156 | 32,580 | 34,158 | |||||||||||||||||||||||||||
| Total assets | $ | 3,517,517 | $ | 3,474,791 | $ | 3,547,069 | $ | 3,500,201 | $ | 3,249,700 | ||||||||||||||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||||||||||||||||||
| Deposits | $ | 2,822,847 | $ | 2,842,451 | $ | 3,091,252 | $ | 3,016,005 | $ | 2,736,923 | ||||||||||||||||||||||
| Federal funds purchased | 204,500 | 133,000 | — | 2,880 | 39,380 | |||||||||||||||||||||||||||
| Other borrowings | 255,789 | 255,751 | 196,954 | 196,986 | 163,116 | |||||||||||||||||||||||||||
| Other liabilities | 35,617 | 27,400 | 22,383 | 24,002 | 57,905 | |||||||||||||||||||||||||||
| Stockholders’ equity | 198,764 | 216,189 | 236,480 | 260,328 | 252,376 | |||||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 3,517,517 | $ | 3,474,791 | $ | 3,547,069 | $ | 3,500,201 | $ | 3,249,700 | ||||||||||||||||||||||
| For the quarter ended | ||||||||||||||||||||||||||||||||
| AVERAGE BALANCES | September 30, 2022 | June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | |||||||||||||||||||||||||||
| Assets | $ | 3,475,894 | $ | 3,503,686 | $ | 3,544,564 | $ | 3,421,020 | $ | 3,325,522 | ||||||||||||||||||||||
| Loans | 2,579,862 | 2,537,152 | 2,449,521 | 2,379,872 | 2,337,355 | |||||||||||||||||||||||||||
| Deposits | 2,864,648 | 3,002,535 | 3,067,019 | 2,964,585 | 2,874,005 | |||||||||||||||||||||||||||
| Stockholders’ equity | 219,065 | 222,731 | 255,130 | 255,224 | 251,770 | |||||||||||||||||||||||||||
| WEST BANCORPORATION, INC. AND SUBSIDIARY | ||||||||||||||||||||||||||||||||
| Financial Information (unaudited) | ||||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||
| As of | ||||||||||||||||||||||||||||||||
| ANALYSIS OF LOAN PORTFOLIO | September 30, 2022 | June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | |||||||||||||||||||||||||||
| Loan mix: | ||||||||||||||||||||||||||||||||
| Commercial | $ | 526,336 | $ | 475,704 | $ | 466,874 | $ | 492,815 | $ | 491,344 | ||||||||||||||||||||||
| Real estate: | ||||||||||||||||||||||||||||||||
| Construction, land and land development | 341,549 | 390,137 | 388,424 | 359,258 | 325,655 | |||||||||||||||||||||||||||
| 1-4 family residential first mortgages | 69,991 | 69,829 | 65,978 | 66,216 | 63,881 | |||||||||||||||||||||||||||
| Home equity | 10,271 | 8,564 | 9,213 | 8,422 | 8,993 | |||||||||||||||||||||||||||
| Commercial | 1,661,907 | 1,627,150 | 1,555,001 | 1,530,218 | 1,471,170 | |||||||||||||||||||||||||||
| Consumer and other | 7,884 | 5,912 | 4,068 | 3,797 | 3,698 | |||||||||||||||||||||||||||
| 2,617,938 | 2,577,296 | 2,489,558 | 2,460,726 | 2,364,741 | ||||||||||||||||||||||||||||
| Net unamortized fees and costs | (3,793) | (4,167) | (4,192) | (4,530) | (5,174) | |||||||||||||||||||||||||||
| Total loans | $ | 2,614,145 | $ | 2,573,129 | $ | 2,485,366 | $ | 2,456,196 | $ | 2,359,567 | ||||||||||||||||||||||
| Less allowance for loan losses | (25,418) | (25,434) | (27,623) | (28,364) | (28,098) | |||||||||||||||||||||||||||
| Net loans | $ | 2,588,727 | $ | 2,547,695 | $ | 2,457,743 | $ | 2,427,832 | $ | 2,331,469 | ||||||||||||||||||||||
| ANALYSIS OF DEPOSITS | ||||||||||||||||||||||||||||||||
| Deposit mix: | ||||||||||||||||||||||||||||||||
| Noninterest-bearing demand | $ | 712,722 | $ | 690,335 | $ | 710,697 | $ | 720,136 | $ | 713,076 | ||||||||||||||||||||||
| Interest-bearing demand | 469,257 | 472,919 | 554,235 | 548,242 | 458,165 | |||||||||||||||||||||||||||
| Savings and money market | 1,252,694 | 1,360,020 | 1,632,690 | 1,550,636 | 1,379,321 | |||||||||||||||||||||||||||
| Time | 388,174 | 319,177 | 193,630 | 196,991 | 186,361 | |||||||||||||||||||||||||||
| Total deposits | $ | 2,822,847 | $ | 2,842,451 | $ | 3,091,252 | $ | 3,016,005 | $ | 2,736,923 | ||||||||||||||||||||||
| ANALYSIS OF BORROWINGS | ||||||||||||||||||||||||||||||||
| Borrowings mix: | ||||||||||||||||||||||||||||||||
| Federal funds purchased | $ | 204,500 | $ | 133,000 | $ | — | $ | 2,880 | $ | 39,380 | ||||||||||||||||||||||
| Subordinated notes, net | 79,303 | 79,265 | 20,468 | 20,465 | 20,462 | |||||||||||||||||||||||||||
| Federal Home Loan Bank advances | 125,000 | 125,000 | 125,000 | 125,000 | 125,000 | |||||||||||||||||||||||||||
| Long-term debt | 51,486 | 51,486 | 51,486 | 51,521 | 17,654 | |||||||||||||||||||||||||||
| Total borrowings | $ | 460,289 | $ | 388,751 | $ | 196,954 | $ | 199,866 | $ | 202,496 | ||||||||||||||||||||||
| STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||||||||||||
| Preferred stock | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||
| Common stock | 3,000 | 3,000 | 3,000 | 3,000 | 3,000 | |||||||||||||||||||||||||||
| Additional paid-in capital | 31,152 | 30,283 | 29,421 | 30,183 | 29,536 | |||||||||||||||||||||||||||
| Retained earnings | 262,776 | 255,334 | 246,827 | 237,782 | 229,845 | |||||||||||||||||||||||||||
| Accumulated other comprehensive loss | (98,164) | (72,428) | (42,768) | (10,637) | (10,005) | |||||||||||||||||||||||||||
| Total Stockholders’ Equity | $ | 198,764 | $ | 216,189 | $ | 236,480 | $ | 260,328 | $ | 252,376 | ||||||||||||||||||||||
| WEST BANCORPORATION, INC. AND SUBSIDIARY | ||||||||||||||||||||||||||||||||
| Financial Information (unaudited) | ||||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||
| For the Quarter Ended | ||||||||||||||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | September 30, 2022 | June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | |||||||||||||||||||||||||||
| Interest income: | ||||||||||||||||||||||||||||||||
| Loans, including fees | $ | 28,102 | $ | 24,848 | $ | 23,286 | $ | 24,179 | $ | 24,229 | ||||||||||||||||||||||
| Securities: | ||||||||||||||||||||||||||||||||
| Taxable | 3,147 | 3,090 | 2,889 | 2,590 | 2,412 | |||||||||||||||||||||||||||
| Tax-exempt | 890 | 892 | 858 | 829 | 762 | |||||||||||||||||||||||||||
| Federal funds sold | 30 | 67 | 82 | 66 | 82 | |||||||||||||||||||||||||||
| Total interest income | 32,169 | 28,897 | 27,115 | 27,664 | 27,485 | |||||||||||||||||||||||||||
| Interest expense: | ||||||||||||||||||||||||||||||||
| Deposits | 6,289 | 3,146 | 2,151 | 2,055 | 2,021 | |||||||||||||||||||||||||||
| Federal funds purchased | 655 | 157 | — | 1 | 2 | |||||||||||||||||||||||||||
| Subordinated notes | 1,106 | 394 | 248 | 254 | 254 | |||||||||||||||||||||||||||
| Federal Home Loan Bank advances | 649 | 635 | 630 | 656 | 656 | |||||||||||||||||||||||||||
| Long-term debt | 466 | 326 | 258 | 96 | 66 | |||||||||||||||||||||||||||
| Total interest expense | 9,165 | 4,658 | 3,287 | 3,062 | 2,999 | |||||||||||||||||||||||||||
| Net interest income | 23,004 | 24,239 | 23,828 | 24,602 | 24,486 | |||||||||||||||||||||||||||
| Provision for loan losses | — | (1,750) | (750) | — | — | |||||||||||||||||||||||||||
Net interest income after provision for loan losses | 23,004 | 25,989 | 24,578 | 24,602 | 24,486 | |||||||||||||||||||||||||||
| Noninterest income: | ||||||||||||||||||||||||||||||||
| Service charges on deposit accounts | 553 | 585 | 580 | 603 | 589 | |||||||||||||||||||||||||||
| Debit card usage fees | 498 | 507 | 472 | 505 | 490 | |||||||||||||||||||||||||||
| Trust services | 780 | 622 | 629 | 633 | 695 | |||||||||||||||||||||||||||
| Increase in cash value of bank-owned life insurance | 246 | 236 | 227 | 233 | 230 | |||||||||||||||||||||||||||
| Loan swap fees | 835 | — | — | 24 | — | |||||||||||||||||||||||||||
| Realized securities gains, net | — | — | — | — | 11 | |||||||||||||||||||||||||||
| Other income | 364 | 328 | 481 | 350 | 386 | |||||||||||||||||||||||||||
| Total noninterest income | 3,276 | 2,278 | 2,389 | 2,348 | 2,401 | |||||||||||||||||||||||||||
| Noninterest expense: | ||||||||||||||||||||||||||||||||
| Salaries and employee benefits | 6,578 | 6,410 | 6,298 | 5,928 | 6,018 | |||||||||||||||||||||||||||
| Occupancy | 1,315 | 1,242 | 1,086 | 1,532 | 1,203 | |||||||||||||||||||||||||||
| Data processing | 644 | 656 | 624 | 630 | 616 | |||||||||||||||||||||||||||
| FDIC insurance | 127 | 289 | 337 | 460 | 528 | |||||||||||||||||||||||||||
| Professional fees | 250 | 202 | 217 | 183 | 212 | |||||||||||||||||||||||||||
| Director fees | 209 | 222 | 168 | 184 | 176 | |||||||||||||||||||||||||||
| Other expenses | 2,335 | 2,245 | 1,932 | 2,954 | 1,959 | |||||||||||||||||||||||||||
| Total noninterest expense | 11,458 | 11,266 | 10,662 | 11,871 | 10,712 | |||||||||||||||||||||||||||
| Income before income taxes | 14,822 | 17,001 | 16,305 | 15,079 | 16,175 | |||||||||||||||||||||||||||
| Income taxes | 3,220 | 4,334 | 3,121 | 3,169 | 3,469 | |||||||||||||||||||||||||||
| Net income | $ | 11,602 | $ | 12,667 | $ | 13,184 | $ | 11,910 | $ | 12,706 | ||||||||||||||||||||||
| Basic earnings per common share | $ | 0.70 | $ | 0.76 | $ | 0.80 | $ | 0.72 | $ | 0.77 | ||||||||||||||||||||||
| Diluted earnings per common share | $ | 0.69 | $ | 0.75 | $ | 0.78 | $ | 0.71 | $ | 0.76 | ||||||||||||||||||||||
| WEST BANCORPORATION, INC. AND SUBSIDIARY | ||||||||||||||
| Financial Information (unaudited) | ||||||||||||||
| (in thousands) | ||||||||||||||
| For the Nine Months Ended | ||||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | September 30, 2022 | September 30, 2021 | ||||||||||||
| Interest income: | ||||||||||||||
| Loans, including fees | $ | 76,236 | $ | 71,406 | ||||||||||
| Securities: | ||||||||||||||
| Taxable | 9,126 | 5,952 | ||||||||||||
| Tax-exempt | 2,640 | 2,032 | ||||||||||||
| Federal funds sold | 179 | 226 | ||||||||||||
| Total interest income | 88,181 | 79,616 | ||||||||||||
| Interest expense: | ||||||||||||||
| Deposits | 11,586 | 5,893 | ||||||||||||
| Federal funds purchased | 812 | 4 | ||||||||||||
| Subordinated notes | 1,748 | 754 | ||||||||||||
| Federal Home Loan Bank advances | 1,914 | 2,288 | ||||||||||||
| Long-term debt | 1,050 | 220 | ||||||||||||
| Total interest expense | 17,110 | 9,159 | ||||||||||||
| Net interest income | 71,071 | 70,457 | ||||||||||||
| Provision for loan losses | (2,500) | (1,500) | ||||||||||||
Net interest income after provision for loan losses | 73,571 | 71,957 | ||||||||||||
| Noninterest income: | ||||||||||||||
| Service charges on deposit accounts | 1,718 | 1,749 | ||||||||||||
| Debit card usage fees | 1,477 | 1,443 | ||||||||||||
| Trust services | 2,031 | 2,038 | ||||||||||||
| Increase in cash value of bank-owned life insurance | 709 | 690 | ||||||||||||
| Loan swap fees | 835 | 42 | ||||||||||||
| Realized securities gains, net | — | 51 | ||||||||||||
| Other income | 1,173 | 1,368 | ||||||||||||
| Total noninterest income | 7,943 | 7,381 | ||||||||||||
| Noninterest expense: | ||||||||||||||
| Salaries and employee benefits | 19,286 | 17,298 | ||||||||||||
| Occupancy | 3,643 | 3,630 | ||||||||||||
| Data processing | 1,924 | 1,835 | ||||||||||||
| FDIC insurance | 753 | 1,358 | ||||||||||||
| Professional fees | 669 | 763 | ||||||||||||
| Director fees | 599 | 581 | ||||||||||||
| Other expenses | 6,512 | 6,044 | ||||||||||||
| Total noninterest expense | 33,386 | 31,509 | ||||||||||||
| Income before income taxes | 48,128 | 47,829 | ||||||||||||
| Income taxes | 10,675 | 10,132 | ||||||||||||
| Net income | $ | 37,453 | $ | 37,697 | ||||||||||
| Basic earnings per common share | $ | 2.25 | $ | 2.28 | ||||||||||
| Diluted earnings per common share | $ | 2.23 | $ | 2.25 | ||||||||||
| WEST BANCORPORATION, INC. AND SUBSIDIARY | ||||||||||||||||||||||||||||||||||||||||||||
| Financial Information (unaudited) | ||||||||||||||||||||||||||||||||||||||||||||
| As of and for the Quarter Ended | For the Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||||
| COMMON SHARE DATA | September 30, 2022 | June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||||||||||||||||||||||||||||||
| Earnings per common share (basic) | $ | 0.70 | $ | 0.76 | $ | 0.80 | $ | 0.72 | $ | 0.77 | $ | 2.25 | $ | 2.28 | ||||||||||||||||||||||||||||||
| Earnings per common share (diluted) | 0.69 | 0.75 | 0.78 | 0.71 | 0.76 | 2.23 | 2.25 | |||||||||||||||||||||||||||||||||||||
| Dividends per common share | 0.25 | 0.25 | 0.25 | 0.24 | 0.24 | 0.75 | 0.70 | |||||||||||||||||||||||||||||||||||||
Book value per common share(1) | 11.94 | 12.99 | 14.22 | 15.73 | 15.24 | |||||||||||||||||||||||||||||||||||||||
| Closing stock price | 20.81 | 24.34 | 27.21 | 31.07 | 30.03 | |||||||||||||||||||||||||||||||||||||||
Market price/book value(2) | 174.29 | % | 187.37 | % | 191.35 | % | 197.52 | % | 197.05 | % | ||||||||||||||||||||||||||||||||||
Price earnings ratio(3) | 7.49 | % | 7.98 | % | 8.39 | % | 10.88 | % | 9.83 | % | ||||||||||||||||||||||||||||||||||
Annualized dividend yield(4) | 4.81 | % | 4.11 | % | 3.68 | % | 3.89 | % | 3.20 | % | ||||||||||||||||||||||||||||||||||
| REGULATORY CAPITAL RATIOS | ||||||||||||||||||||||||||||||||||||||||||||
| Consolidated: | ||||||||||||||||||||||||||||||||||||||||||||
| Total risk-based capital ratio | 12.34 | % | 12.53 | % | 10.72 | % | 10.89 | % | 11.12 | % | ||||||||||||||||||||||||||||||||||
| Tier 1 risk-based capital ratio | 9.72 | 9.81 | 9.81 | 9.92 | 10.11 | |||||||||||||||||||||||||||||||||||||||
| Tier 1 leverage capital ratio | 8.85 | 8.59 | 8.39 | 8.49 | 8.51 | |||||||||||||||||||||||||||||||||||||||
| Common equity tier 1 ratio | 9.11 | 9.17 | 9.16 | 9.24 | 9.40 | |||||||||||||||||||||||||||||||||||||||
| West Bank: | ||||||||||||||||||||||||||||||||||||||||||||
| Total risk-based capital ratio | 13.38 | % | 13.62 | % | 11.88 | % | 12.10 | % | 11.18 | % | ||||||||||||||||||||||||||||||||||
| Tier 1 risk-based capital ratio | 12.60 | 12.81 | 10.98 | 11.13 | 10.17 | |||||||||||||||||||||||||||||||||||||||
| Tier 1 leverage capital ratio | 11.47 | 11.22 | 9.39 | 9.53 | 8.56 | |||||||||||||||||||||||||||||||||||||||
| Common equity tier 1 ratio | 12.60 | 12.81 | 10.98 | 11.13 | 10.17 | |||||||||||||||||||||||||||||||||||||||
| KEY PERFORMANCE RATIOS AND OTHER METRICS | ||||||||||||||||||||||||||||||||||||||||||||
Return on average assets(5) | 1.32 | % | 1.45 | % | 1.51 | % | 1.38 | % | 1.52 | % | 1.43 | % | 1.56 | % | ||||||||||||||||||||||||||||||
Return on average equity(6) | 21.01 | 22.81 | 20.96 | 18.51 | 20.02 | 21.57 | 20.98 | |||||||||||||||||||||||||||||||||||||
Net interest margin(7)(13) | 2.78 | 2.93 | 2.85 | 3.00 | 3.06 | 2.85 | 3.07 | |||||||||||||||||||||||||||||||||||||
Yield on interest-earning assets(8) | 3.87 | 3.49 | 3.24 | 3.36 | 3.43 | 3.53 | 3.47 | |||||||||||||||||||||||||||||||||||||
| Cost of interest-bearing liabilities | 1.45 | 0.73 | 0.52 | 0.50 | 0.51 | 0.90 | 0.55 | |||||||||||||||||||||||||||||||||||||
Efficiency ratio(9)(13) | 43.16 | 41.96 | 40.14 | 43.32 | 39.41 | 41.75 | 40.08 | |||||||||||||||||||||||||||||||||||||
Non-performing assets to total assets(10) | 0.01 | 0.01 | 0.25 | 0.26 | 0.28 | |||||||||||||||||||||||||||||||||||||||
ALLL ratio(11) | 0.97 | 0.99 | 1.11 | 1.15 | 1.19 | |||||||||||||||||||||||||||||||||||||||
| Loans/total assets | 74.32 | 74.05 | 70.07 | 70.17 | 72.61 | |||||||||||||||||||||||||||||||||||||||
| Loans/total deposits | 92.61 | 90.53 | 80.40 | 81.44 | 86.21 | |||||||||||||||||||||||||||||||||||||||
Tangible common equity ratio(12) | 5.65 | 6.22 | 6.67 | 7.44 | 7.77 | |||||||||||||||||||||||||||||||||||||||
(1) Includes accumulated other comprehensive income (loss).
(2) Closing stock price divided by book value per common share.
(3) Closing stock price divided by annualized earnings per common share (basic).
(4) Annualized dividend divided by period end closing stock price.
(5) Annualized net income divided by average assets.
(6) Annualized net income divided by average stockholders’ equity.
(7) Annualized tax-equivalent net interest income divided by average interest-earning assets.
(8) Annualized tax-equivalent interest income on interest-earning assets divided by average interest-earning assets.
(9) Noninterest expense (excluding other real estate owned expense and write-down of premises) divided by noninterest income (excluding net securities gains/losses and gains/losses on disposition of premises and equipment) plus tax-equivalent net interest income.
(10) Total nonperforming assets divided by total assets.
(11) Allowance for loan losses divided by total loans.
(12) Common equity less intangible assets (none held) divided by tangible assets.
(13) A non-GAAP measure.
NON-GAAP FINANCIAL MEASURES
This report contains references to financial measures that are not defined in GAAP. Such non-GAAP financial measures include the Company’s presentation of net interest income and net interest margin on a fully taxable equivalent (FTE) basis and the presentation of the efficiency ratio on an adjusted and FTE basis, excluding certain income and expenses. Management believes these non-GAAP financial measures provide useful information to both management and investors to analyze and evaluate the Company’s financial performance. These measures are considered standard measures of comparison within the banking industry. Additionally, management believes providing measures on a FTE basis enhances the comparability of income arising from taxable and nontaxable sources. Limitations associated with non-GAAP financial measures include the risks that persons might disagree as to the appropriateness of items included in these measures and that different companies might calculate these measures differently. These non-GAAP disclosures should not be considered an alternative to the Company’s GAAP results. The following table reconciles the non-GAAP financial measures of net interest income and net interest margin on a fully taxable equivalent basis and efficiency ratio on an adjusted and FTE basis.
| (in thousands) | As of and for the Quarter Ended | For the Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||||
| September 30, 2022 | June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | September 30, 2022 | September 30, 2021 | ||||||||||||||||||||||||||||||||||||||
| Reconciliation of net interest income and net interest margin on a FTE basis to GAAP: | ||||||||||||||||||||||||||||||||||||||||||||
| Net interest income (GAAP) | $ | 23,004 | $ | 24,239 | $ | 23,828 | $ | 24,602 | $ | 24,486 | $ | 71,071 | $ | 70,457 | ||||||||||||||||||||||||||||||
Tax-equivalent adjustment (1) | 270 | 326 | 329 | 397 | 306 | 925 | 805 | |||||||||||||||||||||||||||||||||||||
| Net interest income on a FTE basis (non-GAAP) | 23,274 | 24,565 | 24,157 | 24,999 | 24,792 | 71,996 | 71,262 | |||||||||||||||||||||||||||||||||||||
| Average interest-earning assets | 3,322,522 | 3,362,313 | 3,432,114 | 3,309,625 | 3,212,283 | 3,371,915 | 3,099,066 | |||||||||||||||||||||||||||||||||||||
| Net interest margin on a FTE basis (non-GAAP) | 2.78 | % | 2.93 | % | 2.85 | % | 3.00 | % | 3.06 | % | 2.85 | % | 3.07 | % | ||||||||||||||||||||||||||||||
| Reconciliation of efficiency ratio on an adjusted and FTE basis to GAAP: | ||||||||||||||||||||||||||||||||||||||||||||
| Net interest income on a FTE basis (non-GAAP) | $ | 23,274 | $ | 24,565 | $ | 24,157 | $ | 24,999 | $ | 24,792 | $ | 71,996 | $ | 71,262 | ||||||||||||||||||||||||||||||
| Noninterest income | 3,276 | 2,278 | 2,389 | 2,348 | 2,401 | 7,943 | 7,381 | |||||||||||||||||||||||||||||||||||||
| Adjustment for realized securities gains, net | — | — | — | — | (11) | — | (51) | |||||||||||||||||||||||||||||||||||||
| Adjustment for losses on disposal of premises and equipment, net | — | 9 | 18 | 55 | — | 27 | 29 | |||||||||||||||||||||||||||||||||||||
| Adjusted income | 26,550 | 26,852 | 26,564 | 27,402 | 27,182 | 79,966 | 78,621 | |||||||||||||||||||||||||||||||||||||
| Noninterest expense | 11,458 | 11,266 | 10,662 | 11,871 | 10,712 | 33,386 | 31,509 | |||||||||||||||||||||||||||||||||||||
Efficiency ratio on an adjusted and FTE basis (non-GAAP) (2) | 43.16 | % | 41.96 | % | 40.14 | % | 43.32 | % | 39.41 | % | 41.75 | % | 40.08 | % | ||||||||||||||||||||||||||||||
(1) Computed on a tax-equivalent basis using a federal income tax rate of 21 percent, adjusted to reflect the effect of the nondeductible interest expense associated with owning tax-exempt securities and loans. Management believes the presentation of this non-GAAP measure provides supplemental useful information for proper understanding of the financial results, as it enhances the comparability of income arising from taxable and nontaxable sources.
(2) The efficiency ratio expresses noninterest expense as a percent of fully taxable equivalent net interest income and noninterest income, excluding specific noninterest income and expenses. Management believes the presentation of this non-GAAP measure provides supplemental useful information for proper understanding of the Company's financial performance. It is a standard measure of comparison within the banking industry. A lower ratio is more desirable.
1 Third Quarter 2022 Earnings Highlights October 27, 2022
2 Certain statements in this presentation, other than purely historical information, including estimates, projections, statements relating to the Company’s business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meanings of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Forward-looking statements may appear throughout this presentation. These forward- looking statements are generally identified by the words “believes,” “expects,” “intends,” “anticipates,” “projects,” “future,” “confident,” “may,” “should,” “will,” “strategy,” “plan,” “opportunity,” “will be,” “will likely result,” “will continue” or similar references, or references to estimates, predictions or future events. Such forward-looking statements are based upon certain underlying assumptions, risks and uncertainties. Because of the possibility that the underlying assumptions are incorrect or do not materialize as expected in the future, actual results could differ materially from these forward-looking statements. Risks and uncertainties that may affect future results include: interest rate risk, including the effects of recent rate increases by the Federal Reserve; fluctuations in the values of the securities held in our investment portfolio, including as a result of rising interest rates; competitive pressures, including from non-bank competitors such as “fintech” companies; pricing pressures on loans and deposits; changes in credit and other risks posed by the Company’s loan portfolio, including declines in commercial or residential real estate values or changes in the allowance for loan losses dictated by new market conditions, accounting standards (including as a result of the future implementation of the current expected credit loss (CECL) accounting standard) or regulatory requirements; changes in local, national and international economic conditions, including rising rates of inflation; changes in legal and regulatory requirements, limitations and costs; changes in customers’ acceptance of the Company’s products and services; cyber-attacks; unexpected outcomes of existing or new litigation involving the Company; the monetary, trade and other regulatory policies of the U.S. government; acts of war or terrorism, including the Russian invasion of Ukraine, widespread disease or pandemics, such as the COVID-19 pandemic, or other adverse external events; developments and uncertainty related to the future use and availability of some reference rates, such as the London Interbank Offered Rate, as well as other alternative reference rates; changes to U.S. tax laws, regulations and guidance; talent and labor shortages; the new 1% excise tax on stock buybacks by publicly traded companies; and any other risks described in the “Risk Factors” sections of reports filed by the Company with the Securities and Exchange Commission. The Company undertakes no obligation to revise or update such forward-looking statements to reflect current or future events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Except as otherwise indicated, this presentation speaks as of the date hereof. The delivery of this presentation shall not, under any circumstances, create any implication that there has been no change in the affairs of West Bancorporation, Inc. after the date hereof. Certain of the information contained herein may be derived from information provided by industry sources. We believe that such information is accurate and that the sources from which it has been obtained are reliable. We cannot guarantee the accuracy of such information, however, and we have not independently verified such information. This presentation contains references to financial measures that are not defined in GAAP. Such non-GAAP financial measures include the Company’s presentation of net interest income and net interest margin on a fully taxable equivalent (FTE) basis and the presentation of the efficiency ratio on an adjusted and FTE basis, excluding certain income and expenses. Management believes these non-GAAP financial measures provide useful information to both management and investors to analyze and evaluate the Company’s financial performance. These measures are considered standard measures of comparison within the banking industry. Additionally, management believes providing measures on a FTE basis enhances the comparability of income arising from taxable and nontaxable sources. Limitations associated with non-GAAP financial measures include the risks that persons might disagree as to the appropriateness of items included in these measures and that different companies might calculate these measures differently. These non-GAAP disclosures should not be considered an alternative to the Company’s GAAP results. This presentation includes reconciliations of non-GAAP financial measures to comparable GAAP financial measures. Disclaimers
3 3Q 2022 Financial Highlights (1) Presented on a fully taxable equivalent basis; see Appendix for “Non-GAAP Financial Measures” $26.26 NASDAQ: WTBA September 30, 2022 Closing Price: $20.81 3Q 2022 Price Range: $20.39 to $26.26 Cash Dividend Declared On October 26, 2022: $0.25 (payable on November 23, 2022) Annualized Dividend Yield: 4.81% Efficiency Ratio 1 43.16% ROA 1.32% NPAs/Assets 0.01% ROE 21.01% NIM 1 2.78% Diluted EPS $0.69
4 • West Bancorporation, Inc. (the “Company”) is a publicly-traded financial holding company (NASDAQ: WTBA) established in 1984 whose sole subsidiary is West Bank, founded in 1893. • West Bank is headquartered in West Des Moines, Iowa and has 11 branches and commercial banking offices serving the greater Des Moines, Iowa area; eastern Iowa, which includes Iowa City and Coralville; and Southern Minnesota, which includes Rochester, Owatonna, Mankato, and St. Cloud, Minnesota. • Reliable, dividend paying community bank focused on commercial banking with $3.5 billion in assets. Our mission is to build strong relationships, build strong communities, and build upon our strong reputation to ensure our clients receive exceptional care, our communities receive outstanding support, and the loyalty of our employees and stockholders is rewarded. Mission Company Profile and Mission • First and foremost a community bank, West Bank has built a strong reputation for being responsive to local needs. West Bank employees place a high priority on community involvement, lending their time and talents to a long list of civic and community projects. • One of the Company’s key competitive advantages is its client-centric approach to delivering strategic financial solutions to businesses, driven by the establishment of deep customer relationships and extensive experience in its markets. • West Bank strives to be the best of all things that are most important to someone running their own business.
5 Experienced Executive Leadership David D. Nelson Director/Chief Executive Officer/President Joined West Bank in 2010 Years in Banking: 39 Prior to joining the Company Mr. Nelson was the President of Southeast Minnesota Business Banking and President of Wells Fargo Bank Rochester in Rochester, Minnesota. Harlee N. Olafson Chief Risk Officer/Executive Vice President Joined West Bank in 2010 Years in Banking: 44 Prior to joining the Company Mr. Olafson was the President of Southwest Minnesota Business Banking and President of Wells Fargo Bank Mankato in Mankato, Minnesota. Bradley P. Peters Executive Vice President West Bank Minnesota Group President Joined West Bank in 2019 Years in Banking: 37 Prior to joining the Company Mr. Peters was the Executive Vice President of Bremer Bank in Minnesota where he was responsible for new market expansion. Jane M. Funk Chief Financial Officer Executive Vice President/Treasurer Joined West Bank in 2014 Years in Banking & Public Accounting: 32 Ms. Funk has extensive experience in the community banking industry and public accounting. Brad L. Winterbottom Executive Vice President West Bank President Joined West Bank in 1992 Years in Banking: 42 Mr. Winterbottom has extensive experience in commercial lending and loan portfolio administration and knowledge of the Iowa business community. Todd A. Mather West Bank Chief Credit Officer Joined West Bank in 2019 Years in Banking: 26 Prior to joining West Bank, Mr. Mather spent 8 years at Bremer Bank in Minnesota as a Senior Credit Director and Group Senior Credit Manager.
6 Conservative Organic Growth with Successful Lift-Out Strategies 2010 2013 2016 2018 2019 2020 2022 2022 Began construction on new corporate headquarters in West Des Moines, Iowa. After being in the same leased space for fifty years, the new building is an opportunity to consolidate our corporate operations under one roof, and provide space for future growth and enhanced business development opportunities. Opened a newly constructed bank office building in St. Cloud, Minnesota and began construction on a bank office building in Mankato, Minnesota. Crossed $3 billion in total assets. Expanded into St. Cloud, Mankato and Owatonna, Minnesota with the same lift out strategy used in Rochester, Minnesota. Crossed $2 billion in total assets. Constructed a bank office building in Rochester, Minnesota. Entered the Rochester, Minnesota market by hiring experienced bankers who had existing strong relationships with local business owners and creating an advisory community board made up of local business owners and leaders. David Nelson joins West Bank as CEO.
7 Company Highlights – Commitment to Excellence West Bancorporation is one of the strongest performing companies in U.S. community banking, well- versed in providing commercial banking services including loans and lines of credit and all types of deposit services, to small and medium-sized businesses in its Iowa and Minnesota markets. Established business model with a 130 year presence in the Des Moines metropolitan area. Industry Recognition. Proven credit culture with a history of strong asset quality results. • Raymond James ranked West Bancorporation, Inc. as the #12 Community Bank in America for 2021 among publicly traded banks with assets between $500 million and $10 billion. West Bancorporation, Inc. has now been an annual member of the Raymond James Community Bankers Cup during 8 of the last 9 years. • S&P Global ranked West Bancorporation, Inc. as the #13 top performing large community bank in America in 2021 among banks with assets between $3 billion and $10 billion. • Five consecutive quarter-ends with no loans greater than 30 days past due. There have been no loans greater than 90 days past due at any quarter end since 2014, with the exception of Q1 2021. • Net charge-offs as a percent of average loan as of September 30, 2022 was 0.02%. Prior to 2022, we have been in a net recovery position since 2017. • Nonperforming assets at September 30, 2022 totaled $329 thousand, or 0.01% of total assets. • West Des Moines’ oldest business of any type. • Long track record of growth and stability coupled with attractive financial returns and dividend yield. • Conservative operating philosophy and expense management.
8 Company Highlights – Commitment to Excellence West Bank is a commercially-focused financial institution operating in high quality markets in Iowa and Minnesota led by a deep and experienced management team with skills developed internally and with other large regional banking institutions. Risk Management & Credit Culture Philanthropy Community Service Strategy • 30 high quality commercial bankers with an average of 21 years of commercial banking experience. • We live where we lend. We are a local lender to local customers. • We have a centralized committee structure that is agile and responsive to customer needs and an organizational structure that provides deep support of credit and administrative functions. • Business model highlighted by focus on risk management and consistent execution. • Superior talent with business expertise in building relationships. • Disciplined organic growth strategy with track record of successful lift out strategies. • In 2021, our employees touched more than 180 not-for-profit organizations and provided approximately 5,600 hours of community service. • In 2021, the West Bancorporation Foundation and West Bank provided over $1 million in total philanthropic contributions. • Risk management culture with robust processes and experienced credit personnel.
9 Loans & Deposits $2,874 $2,965 $3,067 $3,003 $2,865 $2,842 $2,823 3Q21 4Q21 1Q22 2Q22 3Q22 2Q22 3Q22 Deposits ($ in million) • Savings and money market deposits decreased $107.3 million. • Brokered deposits increased $61.6 million. • Customers utilized excess liquidity primarily for business purposes and alternative investments. • Higher deposit costs were driven by the Federal Reserve’s rate increases, changes in deposit mix, and rate competition in local markets. Period EndAverage Balances Deposit Rate % 0.37% 0.36% 0.37% 0.55% 1.16% $2,337 $2,380 $2,450 $2,537 $2,580 $2,573 $2,614 3Q21 4Q21 1Q22 2Q22 3Q22 2Q22 3Q22 Loans ($ in millions) Period End Loan Yield % Average Balances 4.13% 4.07% 3.88% 3.95% 4.34% Loans increased $41.0 million, or 6.3% annualized, in Q3 2022 Loan yields increased 39 bps in Q3 2022 Deposits decreased $19.6 million, or 2.7% annualized, in Q3 2022 Deposit costs increased 61 bps in Q3 2022 • Rising market interest rates resulted in increasing rates on variable rate loans and higher interest rates on renewed and originated loans. • Loan originations outpaced C&D and CRE loan payoffs during the quarter. • CRE loans increased $34.8 million. • C&D loans decreased $48.6 million. • Commercial loans increased $50.6 million.
10 Credit Quality $(56) $(266) $(9) $439 $16 3Q21 1Q22 2Q22 3Q22 $9.3 $9.1 $8.9 $0.4 $0.4 3Q21 4Q21 1Q22 2Q22 3Q22 $9.1 $8.9 $8.8 $0.3 $0.3 3Q21 4Q21 1Q22 2Q22 3Q22 $28.1 $28.4 $27.6 $25.4 $25.4 3Q21 4Q21 1Q22 2Q22 3Q22 ALLL/Loans % 4Q21 Nonaccrual Loans ($ in millions) Net Charge-Offs (Recoveries) ($ in thousands) Substandard Loans ($ in millions) Allowance for Loan Losses ($ in millions) 1.19% 1.15% 1.11% 0.99% 0.97%
11 Net Interest Income $24.5 $24.6 $23.8 $24.2 $23.0 3Q21 4Q21 1Q22 2Q22 3Q22 Net Interest Income ($ in millions) Net interest income decreased $1.2 million in Q3 2022 • Loan interest income increased $3.3 million. • Deposit interest expense increased $3.2 million. • Borrowed funds interest expense increased $1.4 million. Net interest margin declined • Average balance of borrowed funds increased $108.9 million and the cost of borrowed funds increased 76 bps. • Average balance of deposits decreased $156.6 million and the cost of deposits increased 61 bps. • The changes in deposit and funding mix and rising rates had a negative impact on net interest margin that exceeded the benefits of higher loan yields. Net Interest Margin % (1) 3.06% 3.00% 2.85% 2.93% 2.78% Net interest income decreased $1.2 million in 3 2022 et i terest ar i ecli e 15 bps in Q3 2022 (1) Presented on a fully taxable equivalent basis; see Appendix for “Non-GAAP Financial Measures”
12 Noninterest Expense ($ in thousands) Noninterest Income & Expense $10,712 $11,871 $10,662 $11,266 $11,458 3Q21 4Q21 1Q22 2Q22 3Q22 Noninterest expense increased $192 thousand in Q3 2022 • Salaries and employee benefits increased $168 thousand. • Occupancy increased $73 thousand. Efficiency Ratio% (1) 39.41% 43.32% 40.14% 41.96% 43.16% • Loan swap fees totaled $835 thousand, compared to none in Q2 2022. • Trust services revenue increased primarily due to one-time estate fees earned in Q3 2022. $2,401 $2,348 $2,389 $2,278 $3,276 3Q21 4Q21 1Q22 2Q22 3Q22 Noninterest Income ($ in thousands) Noninterest income increased $1.0 million in Q3 2022 Noninterest expense increased $192 thousand in Q3 2022 Efficiency ratio (1) increased 120 bps in Q3 2022 (1) Presented on a fully taxable equivalent basis; see Appendix for “Non-GAAP Financial Measures” A lower ratio is more desirable.
13 Consolidated Regulatory Capital Ratios 11.1% 10.9% 10.7% 12.5% 12.3% 3Q21 4Q21 1Q22 2Q22 3Q22 10.1% 9.9% 9.8% 9.8% 9.7% 3Q21 4Q21 1Q22 2Q22 3Q22 9.4% 9.2% 9.2% 9.2% 9.1% 3Q21 4Q21 1Q22 2Q22 3Q22 8.5% 8.5% 8.4% 8.6% 8.9% 3Q21 4Q21 1Q22 2Q22 3Q22 Total Risk Based Capital Ratio Tier 1 Capital Ratio Tier 1 Leverage RatioCommon Equity Tier 1 Ratio
14Appendix Appendix Non-GAAP Financial Measures (in thousands) September 30, June 30, March 31, December 31, September 30 2022 2022 2022 2021 2021 Reconciliation of net interest income and net interest margin on a FTE basis to GAAP: Net interest income (GAAP) $23,004 $24,239 $23,828 $24,602 $24,486 Tax-equivalent adjustment (1) 270 326 329 397 306 Net interest income on a FTE basis (non-GAAP) 23,274 24,565 24,157 24,999 24,792 Average interest-earning assets 3,322,522 3,362,313 3,432,114 3,309,625 3,212,283 Net interest margin on a FTE basis (non-GAAP) 2.78% 2.93% 2.85% 3.00% 3.06% Reconciliation of efficiency ratio on an adjusted and FTE basis to GAAP: Net interest income on a FTE basis (non-GAAP) $23,274 $24,565 $24,157 $24,999 $24,792 Noninterest income 3,276 2,278 2,389 2,348 2,401 Adjustment for realized securities gains, net - - - - (11) Adjustment for losses on disposal of premises and equipment, net - 9 18 55 - Adjusted income 26,550 26,852 26,564 27,402 27,182 Noninterest expense 11,458 11,266 10,662 11,871 10,712 Efficiency ratio on an adjusted and FTE basis (non-GAAP) (2) 43.16% 41.96% 40.14% 43.32% 39.41% As of and for the Quarter Ended (1) Computed on a tax-equivalent basis using a federal income tax rate of 21 percent, adjusted to reflect the effect of the nondeductible interest expense associated with owning tax-exempt securities and loans. Management believes the presentation of this non-GAAP measure provides supplemental useful information for proper understanding of the financial results, as it enhances the comparability of income arising from taxable and nontaxable sources. (2) The efficiency ratio expresses noninterest expense as a percent of fully taxable equivalent net interest income and noninterest income, excluding specific noninterest income and expenses. Management believes the presentation of this non-GAAP measure provides supplemental useful information for proper understanding of the Company's financial performance. It is a standard measure of comparison within the banking industry. A lower ratio is more desirable.