West Bancorporation - 10-Q quarterly report FY2024 Q1

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended March 31, 2024

or

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from __________ to __________

Commission File Number: 0-49677

WEST BANCORPORATION, INC.

(Exact Name of Registrant as Specified in its Charter)


Iowa			42-1230603
(State of Incorporation)			(I.R.S. Employer Identification No.)


			3330 Westown Parkway, West Des Moines, Iowa			50266
			(Address of principal executive offices)			(Zip Code)

Registrant's telephone number, including area code: (515) 222-2300

1601 22nd Street, West Des Moines, Iowa 50266

(Former name or former address, if changed since last report)

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
Common stock, no par value	WTBA	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of April 24, 2024, there were 16,813,952 shares of common stock, no par value, outstanding.

WEST BANCORPORATION, INC.

INDEX


		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements	4

	Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023	4

	Consolidated Statements of Income for the three months ended March 31, 2024 and 2023	5

	Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2024 and 2023	6

	Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2024 and 2023	7

	Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023	8

	Notes to Consolidated Financial Statements	9

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	30

	"Safe Harbor" Concerning Forward-Looking Statements	30

	Critical Accounting Policies	30

	Non-GAAP Financial Measures	31

	Overview	32

	Results of Operations	34

	Financial Condition	40

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44

Item 4.	Controls and Procedures	45

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	45

Item 1A.	Risk Factors	45

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45

Item 3.	Defaults Upon Senior Securities	45

Item 4.	Mine Safety Disclosures	45

Item 5.	Other Information	45

Item 6.	Exhibits	45

	Signatures	47

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

West Bancorporation, Inc. and Subsidiary

Consolidated Balance Sheet

(unaudited)


(in thousands, except share and per share data)	March 31, 2024		December 31, 2023
ASSETS
Cash and due from banks	$	27,071	$	33,245
Interest-bearing deposits	120,946		32,112
Cash and cash equivalents	148,017		65,357
Securities available for sale, at fair value	605,735		623,919
Federal Home Loan Bank stock, at cost	26,181		22,957
Loans	2,980,133		2,927,535
Allowance for credit losses	(28,373)		(28,342)
Loans, net	2,951,760		2,899,193
Premises and equipment, net	95,880		86,399
Accrued interest receivable	15,270		13,581
Bank-owned life insurance	44,138		43,864
Deferred tax assets, net	34,552		34,303
Other assets	41,159		36,185
Total assets	$	3,962,692	$	3,825,758

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing demand	$	521,377	$	548,726
Interest-bearing demand	449,946		481,207
Savings and money market	1,435,538		1,440,076
Time	658,169		503,770
Total deposits	3,065,030		2,973,779
Federal funds purchased and other short-term borrowings	198,500		150,270
Subordinated notes, net	79,697		79,631
Federal Home Loan Bank advances	315,000		315,000
Long-term debt	46,486		47,736
Accrued expenses and other liabilities	34,223		34,299
Total liabilities	3,738,936		3,600,715
COMMITMENTS AND CONTINGENCIES (NOTE 8)
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value; authorized 50,000,000 shares; no shares issued and outstanding at March 31, 2024 and December 31, 2023	—		—
Common stock, no par value; authorized 50,000,000 shares; 16,813,952 and 16,725,094 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively	3,000		3,000
Additional paid-in capital	33,685		34,197
Retained earnings	272,997		271,369
Accumulated other comprehensive loss	(85,926)		(83,523)
Total stockholders' equity	223,756		225,043
Total liabilities and stockholders' equity	$	3,962,692	$	3,825,758

See Notes to Consolidated Financial Statements.

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West Bancorporation, Inc. and Subsidiary

Consolidated Statements of Income

(unaudited)


	Three Months Ended March 31,
(in thousands, except per share data)		2024		2023
Interest income:
Loans, including fees		$	40,196	$	32,948
Securities:
Taxable		3,416		3,316
Tax-exempt		810		885
Interest-bearing deposits		148		30
Total interest income		44,570		37,179
Interest expense:
Deposits		21,559		13,339
Federal funds purchased and other short-term borrowings		2,183		2,079
Subordinated notes		1,108		1,106
Federal Home Loan Bank advances		2,325		1,262
Long-term debt		645		698
Total interest expense		27,820		18,484
Net interest income		16,750		18,695
Credit loss expense (benefit)		—		—
Net interest income after credit loss expense (benefit)		16,750		18,695
Noninterest income:
Service charges on deposit accounts		460		462
Debit card usage fees		458		486
Trust services		776		706
Increase in cash value of bank-owned life insurance		274		257
Gain from bank-owned life insurance		—		691


Other income		331		355
Total noninterest income		2,299		2,957
Noninterest expense:
Salaries and employee benefits		6,489		6,867
Occupancy and equipment		1,447		1,327
Data processing		714		635
Technology and software		700		513
FDIC insurance		519		416
Professional fees		257		250
Director fees		199		205
Other expenses		1,543		1,858
Total noninterest expense		11,868		12,071
Income before income taxes		7,181		9,581
Income taxes		1,372		1,737
Net income		$	5,809	$	7,844

Basic earnings per common share		$	0.35	$	0.47
Diluted earnings per common share		$	0.35	$	0.47

See Notes to Consolidated Financial Statements.

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West Bancorporation, Inc. and Subsidiary

Consolidated Statements of Comprehensive Income (Loss)

(unaudited)


	Three Months Ended March 31,
(in thousands)		2024		2023
Net income		$	5,809	$	7,844
Other comprehensive income (loss):
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period		(7,758)		11,667



Income tax (expense) benefit		1,910		(2,911)
Other comprehensive income (loss) on securities		(5,848)		8,756
Unrealized gains on derivatives:
Unrealized holding gains (losses) arising during the period		7,489		(1,634)
Plus: reclassification adjustment for net gains realized in net income		(2,915)		(1,958)

Income tax (expense) benefit		(1,129)		882
Other comprehensive income (loss) on derivatives		3,445		(2,710)
Total other comprehensive income (loss)		(2,403)		6,046
Comprehensive income		$	3,406	$	13,890

See Notes to Consolidated Financial Statements.

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West Bancorporation, Inc. and Subsidiary

Consolidated Statements of Stockholders' Equity

(unaudited)



























































(in thousands, except share and per share data)

	Three Months Ended March 31, 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	—		—	—		—		5,809		—		5,809
Other comprehensive loss, net of tax	—		—	—		—		—		(2,403)		(2,403)
Cash dividends declared, $0.25 per common share	—		—	—		—		(4,181)		—		(4,181)
Stock-based compensation costs	—		—	—		575		—		—		575
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes	—		88,858	—		(1,087)		—		—		(1,087)
Balance, March 31, 2024	$	—	16,813,952	$	3,000	$	33,685	$	272,997	$	(85,926)	$	223,756


	Three Months Ended March 31, 2023
										Accumulated
						Additional				Other
	Preferred		Common Stock			Paid-In		Retained		Comprehensive
	Stock		Shares	Amount		Capital		Earnings		Income (Loss)		Total
Balance, December 31, 2022	$	—	16,640,413	$	3,000	$	32,021	$	267,562	$	(91,471)	$	211,112
Cumulative effect of change in accounting principle(1)	—		—	—		—		(3,626)		—		(3,626)
Net income	—		—	—		—		7,844		—		7,844
Other comprehensive income, net of tax	—		—	—		—		—		6,046		6,046
Cash dividends declared, $0.25 per common share	—		—	—		—		(4,160)		—		(4,160)
Stock-based compensation costs	—		—	—		711		—		—		711
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes	—		71,844	—		(935)		—		—		(935)
Balance, March 31, 2023	$	—	16,712,257	$	3,000	$	31,797	$	267,620	$	(85,425)	$	216,992

(1)Cumulative effect adjustment pursuant to adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. See Note 1 for additional information.

See Notes to Consolidated Financial Statements.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Consolidated Statements of Cash Flows

(unaudited)


	Three Months Ended March 31,
(in thousands)	2024		2023
Cash Flows from Operating Activities:
Net income	$	5,809	$	7,844
Adjustments to reconcile net income to net cash provided by operating activities:

Net amortization and accretion	797		829

Stock-based compensation	575		711
Increase in cash value of bank-owned life insurance	(274)		(257)


Depreciation	525		404
Provision for deferred income taxes	532		635
Change in assets and liabilities:
Increase in accrued interest receivable	(1,689)		(296)
(Increase) decrease in other assets	262		(1,322)
Decrease in accrued expenses and other liabilities	(416)		(6,054)
Net cash provided by operating activities	6,121		2,494
Cash Flows from Investing Activities:

Proceeds from principal paydowns, maturities and calls of securities available for sale	9,695		9,661

Purchases of Federal Home Loan Bank stock	(34,193)		(31,595)
Proceeds from redemption of Federal Home Loan Bank stock	30,969		28,705
Net increase in loans	(52,567)		(13,340)


Purchases of premises and equipment	(10,328)		(7,164)

Net cash used in investing activities	(56,424)		(13,733)
Cash Flows from Financing Activities:
Net increase (decrease) in deposits	91,251		(82,015)
Net increase in federal funds purchased and other short-term borrowings	48,230		29,290

Net increase in Federal Home Loan Bank advances	—		65,000
Principal payments on long-term debt	(1,250)		—
Common stock dividends paid	(4,181)		(4,160)
Restricted stock units withheld for payroll taxes	(1,087)		(935)
Net cash provided by financing activities	132,963		7,180
Net increase (decrease) in cash and cash equivalents	82,660		(4,059)
Cash and Cash Equivalents:
Beginning	65,357		26,539
Ending	$	148,017	$	22,480

Supplemental Disclosures of Cash Flow Information:
Cash payments for:
Interest	$	25,588	$	16,515
Income taxes	—		—

See Notes to Consolidated Financial Statements.

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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, as amended, for the year ended December 31, 2023, filed with the SEC on February 23, 2024. 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 March 31, 2024 and December 31, 2023, and net income, comprehensive income (loss), changes in stockholders' equity and cash flows for the three months ended March 31, 2024 and 2023. 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.

The accompanying unaudited consolidated financial statements include the accounts of the Company, 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.

Current accounting developments: In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this update provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. They provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update were effective for all entities as of March 12, 2020 through December 31, 2022. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope. The amendments in this update refine the scope for certain optional expedients and exceptions for contract modifications and hedge accounting to apply to derivative contracts and certain hedging relationships affected by the discounting transition. The amendments in this update were effective for all entities as of March 12, 2020 through December 31, 2022. In December 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. The amendment in this update extends the period of time preparers can utilize reference rate reform relief guidance in Topic 848, discussed above. ASU No. 2022-06 defers the sunset date from December 31, 2022 to December 31, 2024. The Company does not expect the updates within Topic 848 to have a material impact on our financial statements.

In March 2023, the FASB issued ASU No. 2023-02, Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using Proportional Amortization Method. The ASU is intended to improve the accounting and disclosures for investments in tax credit structures. It allows reporting entities to elect to adopt for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The ASU does not have a material impact on the Company's financial statements.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

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 CodificationTM.. 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 March 31, 2024.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this ASU are intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of the ASU on the Company’s consolidated financial statements.

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 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 months ended March 31, 2024 and 2023 are presented in the following table.


	Three Months Ended March 31,
(in thousands, except per share data)		2024		2023
Net income		$	5,809	$	7,844

Weighted average common shares outstanding		16,732		16,645
Weighted average effect of restricted stock units outstanding		54		160
Diluted weighted average common shares outstanding		16,786		16,805

Basic earnings per common share		$	0.35	$	0.47
Diluted earnings per common share		$	0.35	$	0.47
Number of anti-dilutive common stock equivalents excluded from diluted earnings per share computation		464		249

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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 March 31, 2024 and December 31, 2023.


	March 31, 2024
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value
Securities available for sale:
State and political subdivisions	$	230,801	$	4	$	(41,452)	$	189,353
Collateralized mortgage obligations (1)	298,786		—		(58,724)		240,062
Mortgage-backed securities (1)	155,222		—		(27,386)		127,836
Collateralized loan obligations	36,721		24		—		36,745
Corporate notes	13,750		—		(2,011)		11,739
	$	735,280	$	28	$	(129,573)	$	605,735


	December 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value
Securities available for sale:
State and political subdivisions	$	231,413	$	19	$	(38,427)	$	193,005
Collateralized mortgage obligations (1)	305,200		—		(55,267)		249,933
Mortgage-backed securities (1)	157,711		—		(25,873)		131,838

Collateralized loan obligations	37,632		—		(96)		37,536
Corporate notes	13,750		—		(2,143)		11,607
	$	745,706	$	19	$	(121,806)	$	623,919

(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 an amortized cost of approximately $442,363 and $447,074 as of March 31, 2024 and December 31, 2023, 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 March 31, 2024, 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.


	March 31, 2024
	Amortized Cost		Fair Value


Due after five years through ten years	$	74,307	$	69,076
Due after ten years	206,965		168,761
	281,272		237,837
Collateralized mortgage obligations and mortgage-backed securities	454,008		367,898
	$	735,280	$	605,735

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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 months ended March 31, 2024 and 2023.

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 March 31, 2024 and December 31, 2023.


	March 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	$	4,059	$	(58)	10	$	184,004	$	(41,394)	95	$	188,063	$	(41,452)
Collateralized mortgage
obligations	—		—		—	240,062		(58,724)		72	240,062		(58,724)
Mortgage-backed securities	—		—		—	127,836		(27,386)		27	127,836		(27,386)

Corporate notes	—		—		—	11,739		(2,011)		8	11,739		(2,011)
	$	4,059	$	(58)	10	$	563,641	$	(129,515)	202	$	567,700	$	(129,573)


	December 31, 2023
	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	$	3,353	$	(89)	5	$	184,522	$	(38,338)	92	$	187,875	$	(38,427)
Collateralized mortgage
obligations	—		—		—	249,933		(55,267)		72	249,933		(55,267)
Mortgage-backed securities	—		—		—	131,838		(25,873)		27	131,838		(25,873)

Collateralized loan obligations	—		—		—	37,536		(96)		6	37,536		(96)
Corporate notes	—		—		—	11,607		(2,143)		8	11,607		(2,143)
	$	3,353	$	(89)	5	$	615,436	$	(121,717)	205	$	618,789	$	(121,806)

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 March 31, 2024 and December 31, 2023, the Company did not have the intent to sell, nor was it more likely than not that we would be required to sell any of the securities in an unrealized loss position prior to recovery. As of March 31, 2024 and December 31, 2023, 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 $3,443 and $3,271 as of March 31, 2024 and December 31, 2023, respectively, and was excluded from the estimate of credit losses.

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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 March 31, 2024 and December 31, 2023.


	March 31, 2024		December 31, 2023
Commercial	$	544,293	$	531,594
Real estate:
Construction, land and land development	465,247		413,477
1-4 family residential first mortgages	108,065		106,688
Home equity	14,020		14,618
Commercial	1,839,580		1,854,510
Consumer and other	12,844		10,930
	2,984,049		2,931,817
Net unamortized fees and costs	(3,916)		(4,282)
	$	2,980,133	$	2,927,535

Real estate loans of approximately $1,460,000 and $1,420,000 were pledged as security for FHLB advances as of March 31, 2024 and December 31, 2023, 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 months ended March 31, 2024 and 2023.


	Three Months Ended March 31, 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	—		—		—		—		—		—		—
Recoveries	26		3		1		1		—		—		31
Provision for credit loss expense(1)	9		374		123		(3)		(529)		26		—
Ending balance	$	5,326	$	4,045	$	828	$	140	$	17,891	$	143	$	28,373

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West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)


	Three Months Ended March 31, 2023










			Real Estate
	Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Beginning balance	$	4,804	$	3,548	$	357	$	101	$	16,575	$	88	$	25,473
Adoption of CECL	677		(234)		121		(8)		1,911		(9)		2,458
Charge-offs	—		—		—		—		—		—		—
Recoveries	8		—		1		1		—		—		10
Provision for credit loss expense(1)	8		(148)		(13)		(6)		159		—		—
Ending balance	$	5,497	$	3,166	$	466	$	88	$	18,645	$	79	$	27,941

(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 March 31, 2024 and December 31, 2023.


	March 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	5,326		4,045		828		140		17,891		143		28,373
Total	$	5,326	$	4,045	$	828	$	140	$	17,891	$	143	$	28,373

	December 31, 2023
			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	5,291		3,668		704		142		18,420		117		28,342
Total	$	5,291	$	3,668	$	704	$	142	$	18,420	$	117	$	28,342

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 March 31, 2024 and December 31, 2023.


	March 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	$	—	$	—	$	289	$	—	$	—	$	—	$	289
Collectively evaluated for credit losses	544,293		465,247		107,776		14,020		1,839,580		12,844		2,983,760
Total	$	544,293	$	465,247	$	108,065	$	14,020	$	1,839,580	$	12,844	$	2,984,049


	December 31, 2023
			Real Estate
	Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Ending balance:
Individually evaluated for credit losses	$	—	$	—	$	296	$	—	$	—	$	—	$	296
Collectively evaluated for credit losses	531,594		413,477		106,392		14,618		1,854,510		10,930		2,931,521
Total	$	531,594	$	413,477	$	106,688	$	14,618	$	1,854,510	$	10,930	$	2,931,817

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 $11,709 and $10,292 at March 31, 2024 and December 31, 2023, respectively, was included in the "Accrued interest receivable" line of the Consolidated Balance Sheets and was excluded from the estimate 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.

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.


	Total Nonaccrual				Nonaccrual with no Allowance for Credit Losses				90 Days or More Past Due and Accruing
	March 31, 2024		December 31, 2023		March 31, 2024		December 31, 2023		March 31, 2024		December 31, 2023
Commercial	$	—	$	—	$	—	$	—	$	—	$	—
Real estate:
Construction, land and land
development	—		—		—		—		—		—
1-4 family residential first
mortgages	289		296		289		296		—		—
Home equity	—		—		—		—		—		—
Commercial	—		—		—		—		—		—
Consumer and other	—		—		—		—		—		—
Total	$	289	$	296	$	289	$	296	$	—	$	—

There was no interest income recognized on loans that were on nonaccrual for the three months ended March 31, 2024 and March 31, 2023.

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 March 31, 2024 and December 31, 2023.


	March 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	$	—	$	—	$	—	$	—	$	544,293	$	544,293
Real estate:
Construction, land and
land development	—		—		—		—		465,247		465,247
1-4 family residential
first mortgages	—		—		—		—		108,065		108,065
Home equity	—		—		—		—		14,020		14,020
Commercial	—		—		—		—		1,839,580		1,839,580
Consumer and other	—		—		—		—		12,844		12,844
Total	$	—	$	—	$	—	$	—	$	2,984,049	$	2,984,049


	December 31, 2023
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans
Commercial	$	—	$	—	$	—	$	—	$	531,594	$	531,594
Real estate:
Construction, land and
land development	—		—		—		—		413,477		413,477
1-4 family residential
first mortgages	—		—		—		—		106,688		106,688
Home equity	—		—		—		—		14,618		14,618
Commercial	—		—		—		—		1,854,510		1,854,510
Consumer and other	—		—		—		—		10,930		10,930
Total	$	—	$	—	$	—	$	—	$	2,931,817	$	2,931,817

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 March 31, 2024 and December 31, 2023, 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 months ended March 31, 2024 and 2023. 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.

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 to ten 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.

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 March 31, 2024 and December 31, 2023.


	Term Loans by Origination Year
As of March 31, 2024	2024		2023		2022		2021		2020		Prior		Revolving Loans		Total
Commercial
Pass	$	36,649	$	130,459	$	104,541	$	46,283	$	28,261	$	48,969	$	149,131	$	544,293
Watch	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	36,649	$	130,459	$	104,541	$	46,283	$	28,261	$	48,969	$	149,131	$	544,293
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Real estate:
Construction, land and land development
Pass	$	36,406	$	132,400	$	122,137	$	57,514	$	20,050	$	1,431	$	95,309	$	465,247
Watch	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	36,406	$	132,400	$	122,137	$	57,514	$	20,050	$	1,431	$	95,309	$	465,247
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
1-4 family residential first mortgages
Pass	$	4,262	$	45,845	$	19,797	$	19,472	$	11,318	$	6,372	$	568	$	107,634
Watch	—		142		—		—		—		—		—		142
Substandard	—		—		—		—		—		289		—		289
Doubtful	—		—		—		—		—		—		—		—
Total	$	4,262	$	45,987	$	19,797	$	19,472	$	11,318	$	6,661	$	568	$	108,065
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Home equity
Pass	$	116	$	2,870	$	272	$	497	$	93	$	132	$	10,040	$	14,020
Watch	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	116	$	2,870	$	272	$	497	$	93	$	132	$	10,040	$	14,020
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial
Pass	$	36,911	$	205,983	$	503,555	$	455,058	$	347,805	$	264,512	$	25,756	$	1,839,580
Watch	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	36,911	$	205,983	$	503,555	$	455,058	$	347,805	$	264,512	$	25,756	$	1,839,580
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Consumer and other
Pass	$	383	$	1,599	$	183	$	323	$	38	$	69	$	10,249	$	12,844
Watch	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	383	$	1,599	$	183	$	323	$	38	$	69	$	10,249	$	12,844
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

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, 2023	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total
Commercial
Pass	$	147,971	$	110,228	$	48,291	$	31,423	$	6,510	$	44,146	$	143,025	$	531,594
Watch	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	147,971	$	110,228	$	48,291	$	31,423	$	6,510	$	44,146	$	143,025	$	531,594
Current period gross writeoffs	$	37	$	—	$	—	$	—	$	18	$	—	$	—	$	55
Real estate:
Construction, land and land development
Pass	$	126,608	$	114,176	$	64,797	$	20,210	$	1,458	$	—	$	86,228	$	413,477
Watch	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	126,608	$	114,176	$	64,797	$	20,210	$	1,458	$	—	$	86,228	$	413,477
Current period gross writeoffs	$	—	$	39	$	—	$	—	$	—	$	—	$	—	$	39
1-4 family residential first mortgages
Pass	$	46,766	$	20,531	$	19,670	$	11,779	$	3,663	$	3,176	$	663	$	106,248
Watch	144		—		—		—		—		—		—		144
Substandard	—		—		—		—		296		—		—		296
Doubtful	—		—		—		—		—		—		—		—
Total	$	46,910	$	20,531	$	19,670	$	11,779	$	3,959	$	3,176	$	663	$	106,688
Current period gross writeoffs	$	—	$	40	$	—	$	—	$	—	$	—	$	—	$	40
Home equity
Pass	$	2,804	$	288	$	508	$	98	$	138	$	16	$	10,766	$	14,618
Watch	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	2,804	$	288	$	508	$	98	$	138	$	16	$	10,766	$	14,618
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial
Pass	$	212,772	$	519,783	$	463,750	$	359,032	$	84,995	$	195,967	$	18,211	$	1,854,510
Watch	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	212,772	$	519,783	$	463,750	$	359,032	$	84,995	$	195,967	$	18,211	$	1,854,510
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Consumer and other
Pass	$	1,740	$	211	$	392	$	51	$	17	$	126	$	8,393	$	10,930
Watch	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	1,740	$	211	$	392	$	51	$	17	$	126	$	8,393	$	10,930
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

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 table presents 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 March 31, 2024
	Primary Type of Collateral
	Real Estate		Equipment		Other		Total		ACL Allocation



1-4 family residential first mortgages	$	289	$	—	$	—	$	289	$	—



Total	$	289	$	—	$	—	$	289	$	—


	As of December 31, 2023
	Primary Type of Collateral
	Real Estate		Equipment		Other		Total		ACL Allocation



1-4 family residential first mortgages	$	296	$	—	$	—	$	296	$	—



Total	$	296	$	—	$	—	$	296	$	—

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 $2,544 as of March 31, 2024 and December 31, 2023. 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 were no changes to the allowance for credit losses for off-balance-sheet credit exposures during the three months ended March 31, 2024 and March 31, 2023.

5. Derivatives

The Company has entered into various interest rate swap agreements as part of its interest rate risk management strategy. The Company uses interest rate swaps 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 swaps 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.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

Interest Rate Swaps Designated as a Cash Flow Hedge: The Company had interest rate swaps designated as cash flow hedges with total notional amounts of $515,000 and $445,000 at March 31, 2024 and December 31, 2023, respectively. As of March 31, 2024, the Company had swaps with a total notional amount of $315,000 that hedge the interest payments of rolling one-month funding consisting of FHLB advances or brokered deposits. One of these swaps with a total notional amount of $20,000 is a forward-starting swap with a starting date in August 2024. Also as of March 31, 2024, the Company had 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 $160,000 that hedge the interest payments of certain deposit accounts. Two swaps with a total notional amount of $50,000 are forward-starting swaps with a starting date in July 2024 and will replace $50,000 of the swaps hedging interest payments on deposit accounts upon maturity.

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 March 31, 2024 and December 31, 2023.


	March 31, 2024			December 31, 2023
Cash Flow Hedges:
Gross notional amount	$	515,000		$	445,000
Fair value in other assets	14,942			11,313
Fair value in other liabilities	(43)			(988)
Weighted-average floating rate received	5.63		%	5.64		%
Weighted-average fixed rate paid	3.04		%	3.04		%
Weighted-average maturity in years	2.5			2.6

Non-Hedging Derivatives:
Gross notional amount	$	291,968		$	293,400
Fair value in other assets	15,723			14,114
Fair value in other liabilities	(15,723)			(14,114)

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 months ended March 31, 2024 and 2023.


	Three Months Ended March 31,
		2024		2023
Pre-tax gain (loss) recognized in other comprehensive
income (loss)		$	7,489	$	(1,634)
Decrease in interest expense		(2,915)		(1,958)

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

The Company estimates there will be approximately $11,514 reclassified from accumulated other comprehensive income (loss) to decrease interest expense through the 12 months ending March 31, 2025 related to cash flow hedges.

The Company is exposed to credit risk in the event of nonperformance by interest rate swap counterparties, which is minimized by collateral-pledging provisions in the agreements. Derivative contracts with swap counterparties 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 both March 31, 2024 and December 31, 2023, the Company pledged $0 of collateral to the counterparties in the form of cash on deposit. As of March 31, 2024 and December 31, 2023, the Company's counterparties pledged $29,820 and $22,340, 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 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 March 31, 2024 and December 31, 2023.


	March 31, 2024		December 31, 2023
Deferred tax assets:
Allowance for credit losses	$	7,606	$	7,598
Net unrealized losses on securities available for sale	31,997		30,081

Lease liabilities	758		837
Accrued expenses	236		196
Restricted stock unit compensation	680		1,185
State net operating loss carryforward	1,820		1,763

Other	178		177
	43,275		41,837
Deferred tax liabilities:
Right-of-use assets	717		795
Deferred loan costs	256		258

Net unrealized gains on interest rate swaps	3,676		2,547
Premises and equipment	1,721		1,657
New markets tax credit loan	411		389
Other	122		125
	6,903		5,771
Net deferred tax assets before valuation allowance	36,372		36,066
Valuation allowance	(1,820)		(1,763)
Net deferred tax assets	$	34,552	$	34,303

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 2024 and thereafter.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

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 three months ended March 31, 2024 and 2023.


	Unrealized		Unrealized		Accumulated
	Gains		Gains		Other
	(Losses) on		(Losses) on		Comprehensive
	Securities		Derivatives		Income (Loss)
Balance, December 31, 2023	$	(91,233)	$	7,710	$	(83,523)
Other comprehensive income (loss) before reclassifications	(5,842)		5,640		(202)
Amounts reclassified from accumulated other comprehensive income (loss)	(6)		(2,195)		(2,201)
Net current period other comprehensive income (loss)	(5,848)		3,445		(2,403)
Balance, March 31, 2024	$	(97,081)	$	11,155	$	(85,926)

Balance, December 31, 2022	$	(103,680)	$	12,209	$	(91,471)
Other comprehensive income (loss) before reclassifications	8,762		(1,233)		7,529
Amounts reclassified from accumulated other comprehensive income (loss)	(6)		(1,477)		(1,483)
Net current period other comprehensive income (loss)	8,756		(2,710)		6,046
Balance, March 31, 2023	$	(94,924)	$	9,499	$	(85,425)

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 March 31, 2024 and December 31, 2023.


	March 31, 2024		December 31, 2023
Commitments to fund real estate construction loans	$	343,796	$	385,846
Other commitments to extend credit	593,471		641,554
Standby letters of credit	17,766		15,972
	$	955,033	$	1,043,372

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 $19,373 and $20,159 at March 31, 2024 and December 31, 2023, respectively.

Contractual commitments: The Company had remaining commitments to invest in qualified affordable housing projects totaling $1,525 and $1,649 as of March 31, 2024 and December 31, 2023, respectively.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

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 three months ended March 31, 2024.

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.

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 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 March 31, 2024 and December 31, 2023.


	March 31, 2024
	Total		Level 1		Level 2		Level 3
Financial assets:
Securities available for sale:
State and political subdivisions	$	189,353	$	—	$	189,353	$	—
Collateralized mortgage obligations	240,062		—		240,062		—
Mortgage-backed securities	127,836		—		127,836		—
Collateralized loan obligations	36,745		—		36,745		—
Corporate notes	11,739		—		11,739		—
Derivative instruments, interest rate swaps	30,665		—		30,665		—

Financial liabilities:
Derivative instruments, interest rate swaps	$	15,766	$	—	$	15,766	$	—


	December 31, 2023
	Total		Level 1		Level 2		Level 3
Financial assets:
Securities available for sale:
State and political subdivisions	$	193,005	$	—	$	193,005	$	—
Collateralized mortgage obligations	249,933		—		249,933		—
Mortgage-backed securities	131,838		—		131,838		—

Collateralized loan obligations	37,536		—		37,536		—
Corporate notes	11,607		—		11,607		—
Derivative instruments, interest rate swaps	25,427		—		25,427		—

Financial liabilities:
Derivative instruments, interest rate swaps	$	15,102	$	—	$	15,102	$	—

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

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 March 31, 2024 and December 31, 2023, there were no individually evaluated loans with a fair value adjustment.

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 March 31, 2024 and December 31, 2023.


	March 31, 2024
	Carrying Amount		Approximate Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and due from banks	$	27,071	$	27,071	$	27,071	$	—	$	—
Interest-bearing deposits	120,946		120,946		120,946		—		—
Securities available for sale	605,735		605,735		—		605,735		—
Federal Home Loan Bank stock	26,181		26,181		26,181		—		—
Loans, net	2,951,760		2,845,995		—		2,845,995		—
Accrued interest receivable	15,270		15,270		15,270		—		—
Interest rate swaps	30,665		30,665		—		30,665		—
Financial liabilities:
Deposits	$	3,065,030	$	3,062,200	$	—	$	3,062,200	$	—
Federal funds purchased and other short-term borrowings	198,500		198,500		198,500		—		—
Subordinated notes, net	79,697		64,836		—		64,836		—
Federal Home Loan Bank advances	315,000		315,000		—		315,000		—
Long-term debt	46,486		46,486		—		46,486		—
Accrued interest payable	8,921		8,921		8,921		—		—
Interest rate swaps	15,766		15,766		—		15,766		—

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)


	December 31, 2023
	Carrying Amount		Approximate Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and due from banks	$	33,245	$	33,245	$	33,245	$	—	$	—
Interest-bearing deposits	32,112		32,112		32,112		—		—
Securities available for sale	623,919		623,919		—		623,919		—
Federal Home Loan Bank stock	22,957		22,957		22,957		—		—
Loans, net	2,899,193		2,813,188		—		2,813,188		—
Accrued interest receivable	13,581		13,581		13,581		—		—
Interest rate swaps	25,427		25,427		—		25,427		—
Financial liabilities:
Deposits	$	2,973,779	$	2,971,562	$	—	$	2,971,562	$	—
Federal funds purchased and other short-term borrowings	150,270		150,270		150,270		—		—
Subordinated notes, net	79,631		65,039		—		65,039		—
Federal Home Loan Bank advances	315,000		315,000		—		315,000		—
Long-term debt	47,736		47,736		—		47,736		—
Accrued interest payable	6,688		6,688		6,688		—		—
Interest rate swaps	15,102		15,102		—		15,102		—

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

"SAFE HARBOR" CONCERNING FORWARD-LOOKING STATEMENTS

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 (the Exchange Act). 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 and digital asset service providers; pricing pressures on loans and deposits; our ability to successfully manage liquidity risk; changes in credit and other risks posed by the Company’s loan portfolio, including declines in commercial or residential real estate values or changes in the allowance for credit losses dictated by new market conditions, accounting standards or regulatory requirements; the concentration of large deposits from certain clients, who have balances above current FDIC insurance limits; changes in local, national and international economic conditions, including high rates of inflation and possible recession; the effects of recent developments and events in the financial services industry, including the large-scale deposit withdrawals over a short period of time that resulted in recent bank failures; changes in legal and regulatory requirements, limitations and costs, including in response to the recent bank failures; changes in customers’ acceptance of the Company’s products and services; the occurrence of fraudulent activity, breaches or failures of our or our third-party partners' information security controls or cyber-security related incidents, including as a result of sophisticated attacks using artificial intelligence and similar tools; 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 ongoing Israeli-Palestinian conflict and the Russian invasion of Ukraine, widespread disease or pandemics, or other adverse external events; risks related to climate change and the negative impact it may have on our customers and their business; changes to U.S. tax laws, regulations and guidance; potential changes in federal policy and at regulatory agencies as a result of the upcoming 2024 presidential election; talent and labor shortages; the 1 percent excise tax on stock buybacks by publicly traded companies; and any other risks described in the “Risk Factors” sections of this and other reports filed by the Company with the SEC. 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.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of the Company's financial condition and results of operations are based upon the Company's consolidated financial statements that have been prepared in accordance with GAAP. The preparation of the Company's financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, income and expenses. These estimates are based upon historical experience and on various other assumptions that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The estimates and judgments that management believes involve the most complex and subjective estimates and judgments and have the most effect on the Company's reported financial position and results of operations are described as critical accounting policies in the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2023, as filed with the SEC on February 23, 2024. There have been no significant changes in the critical accounting policies or the assumptions and judgments utilized in applying these policies since December 31, 2023.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

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 FTE basis and efficiency ratio on an adjusted and FTE basis to their most directly comparable measures under GAAP.


	Three Months Ended March 31,
		2024			2023
Reconciliation of net interest income and net interest margin on a FTE basis to GAAP:
Net interest income (GAAP)		$	16,750		$	18,695
Tax-equivalent adjustment (1)		82			161
Net interest income on a FTE basis (non-GAAP)		16,832			18,856
Average interest-earning assets		3,595,954			3,435,988
Net interest margin on a FTE basis (non-GAAP)		1.88		%	2.23		%

Reconciliation of efficiency ratio on an adjusted and FTE basis to GAAP:
Net interest income on a FTE basis (non-GAAP)		$	16,832		$	18,856
Noninterest income		2,299			2,957


Adjusted income		19,131			21,813
Noninterest expense		11,868			12,071
Efficiency ratio on an adjusted and FTE basis (non-GAAP) (2)		62.04		%	55.34		%

(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.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

OVERVIEW

The following discussion describes the consolidated operations and financial condition of the Company, West Bank and West Bank's special purpose subsidiaries (which are invested in new markets tax credit activities). Results of operations for the three months ended March 31, 2024 are compared to the results for the same period in 2023, and the consolidated financial condition of the Company as of March 31, 2024 is compared to that as of December 31, 2023. This discussion and analysis should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2023, filed with the SEC on February 23, 2024.

The Company conducts business from its main office in West Des Moines, Iowa and through its branch offices in central Iowa, which is generally the greater Des Moines metropolitan area; eastern Iowa, which is the area including and surrounding Iowa City and Coralville; and southern Minnesota, which includes the cities of Rochester, Owatonna, Mankato and St. Cloud.

Net income for the three months ended March 31, 2024 was $5,809, or $0.35 per diluted common share, compared to $7,844, or $0.47 per diluted common share, for the three months ended March 31, 2023. The Company's annualized return on average assets and return on average equity for the three months ended March 31, 2024 were 0.61 percent and 10.63 percent, respectively, compared to 0.88 percent and 14.77 percent, respectively, for the three months ended March 31, 2023.

The decrease in net income for the three months ended March 31, 2024 compared to the same period in 2023 was primarily due to decreases in net interest income and gain from bank-owned life insurance and an increase in technology and software costs, partially offset by a decrease in salaries and employee benefits.

Net interest income for the three months ended March 31, 2024 declined $1,945, or 10.4 percent, compared to the three months ended March 31, 2023. The decrease in net interest income was primarily due to the increase in interest expense on deposits and other borrowings, resulting from rapidly rising short-term interest rates and an inverted yield curve, and changes in funding mix, partially offset by an increase in interest income on loans.

Noninterest income decreased $658 for the three months ended March 31, 2024 compared to the same period in 2023 primarily due to a gain from bank-owned life insurance in 2023, partially offset by an increase in trust services revenue in 2024. Noninterest expense decreased $203 during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to a decrease in salaries and employee benefits and business development expenses, partially offset by increases in occupancy and equipment, technology and software expense and FDIC insurance.

Total loans outstanding increased $52,598, or 1.8 percent, during the first three months of 2024. The credit quality of the loan portfolio remained strong, as evidenced by the Company's ratio of nonperforming loans to total assets of 0.01 percent as of both March 31, 2024 and December 31, 2023. As of March 31, 2024, the allowance for credit losses was 0.95 percent of total outstanding loans, compared to 0.97 percent as of December 31, 2023. Management believed the allowance for credit losses at March 31, 2024 was adequate to absorb expected losses in the loan portfolio as of that date.

On a quarterly basis, the Company compares three key performance metrics to those of our identified peer group. The peer group for 2024 consists of 22 Midwestern, publicly traded financial institutions, including Bank First Corporation, Bridgewater Bancshares Inc., ChoiceOne Financial Services, Inc., Civista Bancshares, Inc., CrossFirst Bankshares, Inc., Equity Bancshares, Inc., Farmers National Banc Corp., Farmers & Merchants Bancorp., First Business Financial Services, Inc., First Financial Corp., First Mid Bancshares, Inc., German American Bancorp, Inc., HBT Financial Inc., Hills Bancorporation, Isabella Bank Corporation, LCNB Corp., Macatawa Bank Corporation, Mercantile Bank Corporation, MidWestOne Financial Group, Inc., Nicolet Bankshares, Inc., Peoples Bancorp, Inc., and Southern Missouri Bancorp, Inc. The Company is in the middle of the group in terms of asset size. The Company's goal is to perform at or near the top of this peer group relative to what we consider to be three key metrics: return on average equity, efficiency ratio and nonperforming assets to total assets. We believe these measures encompass the factors that define the performance of a community bank. Company and peer results for the key financial performance measures are summarized below.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)


	West Bancorporation, Inc.		Peer Group Range(2)
	As of and for the three months ended March 31, 2024	As of and for the year ended December 31, 2023	As of and for the year ended December 31, 2023
Return on average equity	10.63%	11.42%	1.85% - 17.24%
Efficiency ratio(1)	62.04%	60.73%	45.85% - 70.02%
Nonperforming assets to total assets	0.01%	0.01%	0.00% - 0.73%

(1) The efficiency ratio is a non-GAAP financial measure. For further information, refer to the Non-GAAP Financial Measures section of this report.

(2) Latest data available.

At its meeting on April 24, 2024, the Company's Board of Directors declared a regular quarterly cash dividend of $0.25 per common share. The dividend is payable on May 22, 2024, to stockholders of record on May 8, 2024.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

RESULTS OF OPERATIONS

The following table shows selected financial results and measures for the three months ended March 31, 2024 compared with the same period in 2023.


	Three Months Ended March 31,
				2024					2023					Change			Change %
Net income				$	5,809				$	7,844				$	(2,035)		(25.94)	%
Average assets				3,812,199					3,617,458					194,741			5.38	%
Average stockholders' equity				219,835					215,391					4,444			2.06	%

Return on average assets				0.61		%			0.88		%			(0.27)		%
Return on average equity				10.63		%			14.77		%			(4.14)		%
Net interest margin (1)				1.88		%			2.23		%			(0.35)		%
Efficiency ratio (1) (2)				62.04		%			55.34		%			6.70		%
Dividend payout ratio				71.59		%			52.31		%			19.28		%
Average equity to average assets ratio				5.77		%			5.95		%			(0.18)		%

				As of March 31,
				2024					2023					Change
Nonperforming assets to total assets (2)		0.01	%				0.01	%				—	%
Equity to assets ratio				5.65		%			5.99		%			(0.34)		%
Tangible common equity ratio		5.65	%				5.99	%				(0.34)	%

(1) Amounts are presented on a FTE basis. These are non-GAAP financial measures. For further information, refer to the Non-GAAP Financial Measures section of this report.

(2) A lower ratio is more desirable.

Definitions of ratios:

•Return on average assets - annualized net income divided by average assets.

•Return on average equity - annualized net income divided by average stockholders' equity.

•Net interest margin - annualized tax-equivalent net interest income divided by average interest-earning assets.

•Efficiency ratio - 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.

•Dividend payout ratio - dividends paid to common stockholders divided by net income.

•Average equity to average assets ratio - average equity divided by average assets.

•Nonperforming assets to total assets - total nonperforming assets divided by total assets.

•Equity to assets ratio - equity divided by assets.

•Tangible common equity ratio - common equity less intangible assets (none held) divided by tangible assets.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Net Interest Income

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

are shown on a FTE basis.

Data for the three months ended March 31:




	Average Balance								Interest Income/Expense								Yield/Rate
	2024		2023		Change		Change- %		2024		2023		Change		Change- %		2024		2023		Change
Interest-earning assets:
Loans: (1) (2)
Commercial	$	534,000	$	522,034	$	11,966	2.29	%	$	8,781	$	7,567	$	1,214	16.04	%	6.61	%	5.88	%	0.73	%
Real estate (3)	2,403,536		2,215,355		188,181		8.49	%	31,231		25,333		5,898		23.28	%	5.23	%	4.64	%	0.59	%
Consumer and other	12,136		7,992		4,144		51.85	%	229		125		104		83.20	%	7.60	%	6.35	%	1.25	%
Total loans	2,949,672		2,745,381		204,291		7.44	%	40,241		33,025		7,216		21.85	%	5.49	%	4.88	%	0.61	%

Securities:
Taxable	492,689		538,158		(45,469)		(8.45)	%	3,416		3,316		100		3.02	%	2.77	%	2.46	%	0.31	%
Tax-exempt (3)	143,009		150,311		(7,302)		(4.86)	%	847		974		(127)		(13.04)	%	2.37	%	2.59	%	(0.22)	%
Total securities	635,698		688,469		(52,771)		(7.66)	%	4,263		4,290		(27)		(0.63)	%	2.68	%	2.49	%	0.19	%

Interest-bearing deposits	10,584		2,138		8,446		395.04	%	148		25		123		492.00	%	5.64	%	4.81	%	0.83	%
Total interest-earning assets (3)	$	3,595,954	$	3,435,988	$	159,966	4.66	%	44,652		37,340		7,312		19.58	%	4.99	%	4.41	%	0.58	%

Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	457,605	$	500,392	$	(42,787)	(8.55)	%	2,188		1,570		618		39.36	%	1.92	%	1.27	%	0.65	%
Savings and money market	1,428,609		1,277,676		150,933		11.81	%	12,849		8,655		4,194		48.46	%	3.62	%	2.75	%	0.87	%
Time	540,824		417,427		123,397		29.56	%	6,522		3,114		3,408		109.44	%	4.85	%	3.03	%	1.82	%
Total deposits	2,427,038		2,195,495		231,543		10.55	%	21,559		13,339		8,220		61.62	%	3.57	%	2.46	%	1.11	%
Borrowed funds:
Federal funds purchased and
other short-term borrowings	156,534		186,333		(29,799)		(15.99)	%	2,183		2,079		104		5.00	%	5.61	%	4.53	%	1.08	%
Subordinated notes, net	79,659		79,400		259		0.33	%	1,108		1,106		2		0.18	%	5.60	%	5.65	%	(0.05)	%
Federal Home Loan Bank
advances	315,000		203,722		111,278		54.62	%	2,325		1,262		1,063		84.23	%	2.97	%	2.51	%	0.46	%
Long-term debt	46,967		51,486		(4,519)		(8.78)	%	645		698		(53)		(7.59)	%	5.52	%	5.50	%	0.02	%
Total borrowed funds	598,160		520,941		77,219		14.82	%	6,261		5,145		1,116		21.69	%	4.21	%	4.01	%	0.20	%
Total interest-bearing
liabilities	$	3,025,198	$	2,716,436	$	308,762	11.37	%	27,820		18,484		9,336		50.51	%	3.70	%	2.76	%	0.94	%

Net interest income (FTE) (4)									$	16,832	$	18,856	$	(2,024)	(10.73)	%
Net interest spread (FTE)																	1.29	%	1.65	%	(0.36)	%
Net interest margin (FTE) (4)																	1.88	%	2.23	%	(0.35)	%

(1)Average loan balances include nonaccrual loans. Interest income recognized on nonaccrual loans has been included.

(2)Interest income on loans includes amortization of loan fees and costs and prepayment penalties collected, which are not material.

(3)Tax-exempt income has been adjusted to a tax-equivalent basis using a federal income tax rate of 21 percent and is adjusted to reflect the effect of the nondeductible interest expense associated with owning tax-exempt securities and loans.

(4)Net interest income (FTE) and net interest margin (FTE) are non-GAAP financial measures. For further information, refer to the Non-GAAP Financial Measures section of this report.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

The Company's largest component of net income is net interest income, which is the difference between interest earned on interest-earning assets, consisting primarily of loans and securities, and interest paid on interest-bearing liabilities, consisting of deposits and borrowings. Fluctuations in net interest income can result from the combination of changes in the average balances of asset and liability categories and changes in interest rates. Interest rates earned and paid are also affected by general economic conditions, particularly changes in market interest rates, and by competitive factors, government policies and actions of regulatory authorities. The Federal Reserve increased the target federal funds interest rate by a total of 425 basis points in 2022 and an additional 100 basis points in 2023. The Federal Reserve has signaled that it is at the end of this rate hiking cycle. However, at this time the extent to which target federal funds interest rate changes may occur during 2024 is unknown.

Net interest margin on a FTE basis, a non-GAAP financial measure, is a measure of the net return on interest-earning assets and is computed by dividing annualized tax-equivalent net interest income by total average interest-earning assets for the period. The net interest margin for the three months ended March 31, 2024 decreased by 35 basis points compared to the three months ended March 31, 2023. The primary driver of the decrease in the net interest margin was an increase in rates paid on deposits and borrowed funds, which have repriced faster than loans and securities. The increases in deposit rates have outpaced the benefits of loan repricings and growth in average loan balances when comparing the three months ended March 31, 2024 to the three months ended March 31, 2023. Tax-equivalent net interest income for the three months ended March 31, 2024 decreased $2,024 compared to the same time period in 2023.

Tax-equivalent interest income on loans increased $7,216 for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This increase in interest income on loans was driven by a combination of an increase in the average balance of loans and an increase in loan yields. The average balance of loans for the three months ended March 31, 2024 increased $204,291 compared to the three months ended March 31, 2023, while loan yields increased 61 basis points. Rising market interest rates have resulted in increasing rates on variable-rate loans in the portfolio and loan originations and renewals priced at higher prevailing market rates compared to current portfolio rates. The yield on the Company's loan portfolio is affected by the portfolio's loan mix, the interest rate environment, the effects of competition, the level of nonaccrual loans and reversals of previously accrued interest on charged-off loans. The yield on the loan portfolio is expected to increase in flat and rising rate environments as variable-rate loans reprice at higher rates and renewals and new originations are priced at prevailing market rates, which exceed the roll-off rate of principal repayments on existing loans. The political and economic environments can also influence the volume of new loan originations and the mix of variable-rate versus fixed-rate loans.

The average balance of deposits increased $231,543 for the three months ended March 31, 2024 compared to the same period in 2023. The rate paid on deposits increased 111 basis points for the three months ended March 31, 2024 compared to the same period in 2023. The increase in the cost of deposits was primarily due to increases in deposit interest rates in response to increases in the target federal funds rate that occurred throughout 2022 and 2023, increased competition for deposit balances, and changes in deposit mix. The Federal Reserve increases of the target federal funds rate in 2022 and 2023 have had an adverse impact on the cost of deposits and have increased market competition.

Interest expense on borrowed funds increased $1,116 for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The average balance of borrowed funds increased $77,219 for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The average balance of federal funds purchased and other short-term borrowings decreased $29,799 for the three months ended March 31, 2024 compared to the same period in 2023. The average rate on federal funds purchased and other short-term borrowings increased by 108 basis points in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This increase in average rates paid on federal funds purchased and other short-term borrowings was driven by the increases in the target federal funds rate by the Federal Reserve. The average balance of FHLB advances increased by $111,278 for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This increase in the average balance was primarily due to additional rolling one-month FHLB advances added throughout 2023 that are hedged with long-term interest rate swap agreements to provide fixed cost wholesale funding.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Credit Loss Expense and the Related Allowance for Credit Losses

The credit loss expense recorded on the income statement represents a charge made to earnings to maintain an adequate allowance for credit losses. The adequacy of the allowance for credit losses is evaluated quarterly by management and reviewed by the Board of Directors. The allowance for credit losses is management's estimate of expected lifetime losses in the loan portfolio as of the balance sheet date. The Company recorded no credit loss expense for both the three months ended March 31, 2024 and March 31, 2023. Management believed the allowance for credit losses at March 31, 2024 was adequate to absorb expected losses in the loan portfolio as of that date.

Factors management considers in establishing an appropriate allowance include: the borrower's financial condition; the value and adequacy of loan collateral; the condition of the local economy and the borrower's specific industry; the levels and trends of loans by segment; and a review of delinquent and classified loans. The quarterly evaluation of the allowance focuses on factors such as specific loan reviews, changes in the components of the loan portfolio given the current and forecasted economic conditions, and historical loss experience. Any one of the following conditions may result in the review of a specific loan: concern about whether the customer's cash flow or net worth is sufficient to repay the loan; delinquency status; criticism of the loan in a regulatory examination; the suspension of interest accrual; or other factors, including whether the loan has other special or unusual characteristics that suggest special monitoring is warranted. The Company's concentration risks include geographic concentrations in central and eastern Iowa and southern Minnesota. The local economies in those markets are composed primarily of major financial service companies, healthcare providers, educational institutions, technology and agribusiness companies, and state and local governments.

West Bank has a significant portion of its loan portfolio in commercial real estate loans, commercial lines of credit, commercial term loans, and construction and land development loans. West Bank's typical commercial borrower is a small- or medium-sized, privately owned business entity. Compared to residential mortgages or consumer loans, commercial loans typically have larger balances and repayment usually depends on the borrowers' successful business operations. Commercial loans generally are not fully repaid over the loan period and may require refinancing or a large payoff at maturity. When the economy turns downward, commercial borrowers may not be able to repay their loans, and the value of their assets, which are usually pledged as collateral, may decrease rapidly and significantly.

While management uses available information to recognize losses on loans, further reduction in the carrying amounts of loans may be necessary based on changes in circumstances, changes in the overall economy in the markets we currently serve, or later acquired information. Identifiable sectors within the general economy are subject to additional volatility, which at any time may have a substantial impact on the loan portfolio. In addition, regulatory agencies, as integral parts of their examination processes, periodically review the credit quality of the loan portfolio and the level of the allowance for credit losses. Such agencies may require West Bank to recognize additional charge-offs or provision for credit losses based on such agencies' review of information available to them at the time of their examinations.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

West Bank's policy is to charge off loans when, in management's opinion, a loan or a portion of a loan is deemed uncollectible. Commercially reasonable efforts are made to maximize subsequent recoveries. The following table summarizes the activity in the Company's allowance for credit losses on loans for the three months ended March 31, 2024 and 2023 and related ratios.


	Three Months Ended March 31,
		2024			2023			Change
Balance at beginning of period		$	28,342		$	25,473		$	2,869
Adoption of CECL		—			2,458			(2,458)
Charge-offs		—			—			—
Recoveries		31			10			21
Net (charge-offs) recoveries		31			10			21
Provision for credit losses charged (credited) to operations		—			—			—
Balance at end of period		$	28,373		$	27,941		$	432

Average loans outstanding		$	2,949,672		$	2,745,381

Ratio of annualized net (charge-offs) recoveries during the period to average
loans outstanding		0.00		%	0.00		%

Ratio of allowance for credit losses for loans to average loans outstanding		0.96		%	1.02		%

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

Noninterest Income

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














	Three Months Ended March 31,
Noninterest income:	2024		2023		Change		Change %
Service charges on deposit accounts	$	460	$	462	$	(2)	(0.43)	%
Debit card usage fees	458		486		(28)		(5.76)	%
Trust services	776		706		70		9.92	%
Increase in cash value of bank-owned life insurance	274		257		17		6.61	%
Gain from bank-owned life insurance	—		691		(691)		(100.00)	%

Other income	331		355		(24)		(6.76)	%
Total noninterest income	$	2,299	$	2,957	$	(658)	(22.25)	%

Revenue from trust services was higher for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to increases in one-time estate fees. The gain from bank-owned life insurance that occurred in the three months ended March 31, 2023 was the result of a death benefit claim.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Noninterest Expense

The following table shows the variance from the prior year periods in the noninterest expense categories shown in the Consolidated Statements of Income. In addition, accounts within the “other expenses” category that represent a significant portion of the total or a significant variance are shown below.
























	Three Months Ended March 31,
Noninterest expense:	2024		2023		Change		Change %
Salaries and employee benefits	$	6,489	$	6,867	$	(378)	(5.50)	%
Occupancy and equipment	1,447		1,327		120		9.04	%
Data processing	714		635		79		12.44	%
Technology and software	700		513		187		36.45	%
FDIC insurance	519		416		103		24.76	%
Professional fees	257		250		7		2.80	%
Director fees	199		205		(6)		(2.93)	%
Other expenses:
Business development	209		333		(124)		(37.24)	%
Insurance expense	192		215		(23)		(10.70)	%
Trust	170		165		5		3.03	%
Consulting fees	61		49		12		24.49	%
Marketing	36		41		(5)		(12.20)	%
Charitable contributions	—		60		(60)		(100.00)	%
Low income housing projects amortization	165		161		4		2.48	%
New markets tax credit project amortization and management fees	230		230		—		—	%
All other	480		604		(124)		(20.53)	%
Total other	1,543		1,858		(315)		(16.95)	%
Total noninterest expense	$	11,868	$	12,071	$	(203)	(1.68)	%

Salaries and employee benefits decreased for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 due to a reduction in incentive compensation. Occupancy and equipment expense increased for the three months ended March 31, 2024 compared to the same period in 2023 primarily due to an increase in depreciation expense related to new bank buildings and scheduled increases in rent expense on existing leases. Technology and software expenses increased for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 due to the addition of new technology, product updates and information security solutions.

Income Tax Expense

The Company recorded income tax expense of $1,372 (19.1 percent of pre-tax income) for the three months ended March 31, 2024, compared with $1,737 (18.1 percent of pre-tax income) for the three months ended March 31, 2023. The Company's consolidated income tax rate differs from the federal statutory income tax rate in each period, primarily due to tax-exempt interest income, the tax-exempt increase in cash value of bank-owned life insurance, tax-exempt gain from bank-owned life insurance, disallowed interest expense, and state income taxes. Additionally, for the three months ended March 31, 2024 a tax expense of $5 was recorded as a result of the decrease in fair value of restricted stock over the vesting period. For the three months ended March 31, 2023, a tax benefit of $11 was recorded as a result of the increase in fair value of restricted stock over the vesting period. The tax rates for the first three months of 2024 and 2023 were also impacted by year-to-date federal low income housing tax credits and a new markets tax credit of approximately $377 and $375, respectively.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

FINANCIAL CONDITION

The Company had total assets of $3,962,692 as of March 31, 2024, compared to total assets of $3,825,758 as of December 31, 2023. Changes in the balance sheet included increases in interest-bearing deposits, loans, premises and equipment and deposits and a decrease in securities available for sale.

Securities

Securities available for sale decreased by $18,184 during the three months ended March 31, 2024. This decrease was due to principal paydowns on securities and the decline in fair value of the securities available for sale resulting from the increase in market interest rates since December 31, 2023. Management concluded the unrealized losses are the result of increases in risk-free market interest rates since the securities were purchased and are not an indication of declining credit quality. Unrealized losses are recorded in accumulated other comprehensive loss, net of tax. The Company expects the securities portfolio as a percentage of total assets to decrease over time as the proceeds from paydowns and maturities may be used for loan growth or repayment of borrowed funds.

As of March 31, 2024, approximately 61 percent of the available for sale securities portfolio consisted of government agency guaranteed collateralized mortgage obligations and mortgage-backed securities. Management believes these securities have little to no credit risk and provide cash flows for liquidity and repricing opportunities.

Loans and Nonperforming Assets

Loans outstanding increased $52,598 from $2,927,535 as of December 31, 2023 to $2,980,133 as of March 31, 2024. Changes in the loan portfolio during the first three months of 2024 included increases of $51,770 in construction, land and land development loans and $12,699 in commercial loans and a decrease of $14,930 in commercial real estate loans.

In accordance with regulatory guidelines, the Company exercises heightened risk management practices when non-owner occupied commercial real estate lending exceeds 300 percent of total risk-based capital or construction, land development, and other land loans exceed 100 percent of total risk-based capital. Although the commercial real estate portfolio exceeded these regulatory guidelines as of March 31, 2024, they were within the Company's established policy limits and management believes that the Company has appropriate risk management policies and procedures to regularly monitor the commercial real estate portfolio. An analysis of the Company's non-owner occupied commercial real estate portfolio as of December 31, 2023 was presented in the Company's Form 10-K, as amended, filed with the SEC on February 23, 2024, and the Company has not experienced any material changes to that portfolio since December 31, 2023.

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


	March 31, 2024			December 31, 2023			Change
Nonaccrual loans	$	289		$	296		$	(7)
Loans past due 90 days and still accruing interest	—			—			—
Loan restructurings (1)	—			—			—
Total nonperforming loans	289			296			(7)
Other real estate owned	—			—			—
Total nonperforming assets	$	289		$	296		$	(7)

Nonperforming loans to total loans	0.01		%	0.01		%	—		%
Nonperforming assets to total assets	0.01		%	0.01		%	—		%

(1)While loan restructurings made to borrowers experiencing financial difficulty (loan restructurings) are commonly reported by the industry as nonperforming, those not classified in the nonaccrual category are accruing interest due to payment performance. Loan restructurings on nonaccrual status are categorized as nonaccrual. There were no loan restructurings categorized as nonaccrual as of March 31, 2024 or December 31, 2023.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Deposits

Deposits increased $91,251, or 3.1 percent, during the first three months of 2024. Brokered deposits increased to $396,363 at March 31, 2024, from $305,411 at December 31, 2023. Deposit inflows and outflows are influenced by prevailing market interest rates, competition, local and national economic conditions and fluctuations in our business customers' own liquidity needs. In particular, significant competition for deposits driven by high interest rate alternatives for depositors is currently impacting deposit fluctuations and increasing our cost of deposits.

West Bank participates in the IntraFi® ICS and CDARS reciprocal deposit network which enables depositors to receive FDIC insurance coverage on deposits otherwise exceeding the maximum insurable amount. As of March 31, 2024, estimated uninsured deposits, which excludes deposits in the IntraFi® reciprocal network, brokered deposits and public funds protected by state programs, were approximately 27.2 percent of total deposits.

Borrowed Funds

Federal funds purchased and other short-term borrowings increased from $150,270 at December 31, 2023 to $198,500 as of March 31, 2024. The fluctuations in the balances of federal funds purchased and other short-term borrowings is based on customer loan and deposit activity and the Company's balance sheet management objectives, which from time to time may require the Company to draw on the federal funds purchased lines with our correspondent banks, FHLB advances or other liquidity sources.

The Company had $315,000 of FHLB advances outstanding at March 31, 2024, $295,000 of which are one-month rolling advances hedged with long-term interest rate swaps. The interest rate swaps that hedge the interest rates on these FHLB advances have maturity dates ranging from August 2024 through June 2029 and fixed rates ranging from 1.69 percent to 4.65 percent. Additionally, the Company has one interest rate swap with a total notional amount of $20,000 that is a forward-starting interest rate swap with a starting date of August 2024. This strategy of hedging short-term rolling funding effectively provides fixed cost wholesale funding through the maturity dates of the various interest rate swaps.

Liquidity

The objectives of liquidity management are to ensure the availability of sufficient cash flows to meet all financial commitments and to capitalize on opportunities for profitable business expansion. The Company's principal source of funds is deposits. Other sources include loan principal repayments, proceeds from the maturity and sale of securities, principal payments on amortizing securities, federal funds purchased, advances from the FHLB, other wholesale funding and funds provided by operations. Liquidity management is conducted on both a daily and a long-term basis. Investments in liquid assets are adjusted based on expected loan demand, projected loan and securities maturities and payments, expected deposit flows and the objectives set by the Company's asset-liability management policy. The Company had liquid assets (cash and cash equivalents) of $148,017 as of March 31, 2024 compared with $65,357 as of December 31, 2023.

Our deposit growth strategy emphasizes core deposit growth. Deposit inflows and outflows can vary widely and are influenced by prevailing market interest rates, competition, local and national economic conditions and fluctuations in our business customers' own liquidity needs. The Company utilizes brokered deposits and other wholesale funding to supplement core deposit fluctuations and loan growth. Brokered deposits are obtained through various programs administered by IntraFi®, including IntraFi® Network Deposits and IntraFi® Funding, and through other third party brokers. At March 31, 2024, the Company had $396,363 in brokered deposits, which included fixed-rate deposits with terms through February 2029 and variable-rate deposits with terms through February 2025.

As of March 31, 2024, West Bank had additional borrowing capacity available from the FHLB of approximately $479,000, as well as approximately $73,000 through the Federal Reserve discount window and $75,000 through unsecured federal funds lines of credit with correspondent banks. No funds were borrowed from the Federal Reserve discount window during the three months ended March 31, 2024. Net cash from operating activities contributed $6,121 to liquidity for the three months ended March 31, 2024. Management believed that the combination of high levels of potentially liquid assets, unencumbered securities, cash flows from operations, and additional borrowing capacity are sufficient to meet our liquidity and capital needs.

The Company had remaining commitments to invest in qualified affordable housing projects totaling $1,525 and $1,649 as of March 31, 2024 and December 31, 2023, respectively.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Capital

The Company's total stockholders' equity decreased to $223,756 at March 31, 2024 from $225,043 at December 31, 2023. The decrease was primarily the result of the increase in accumulated other comprehensive loss, which was primarily the result of the negative effect that rising interest rates have had on the unrealized market value adjustment of our available for sale investment portfolio. While accumulated other comprehensive losses reduce tangible common equity, they have no impact on regulatory capital. At March 31, 2024, the Company's tangible common equity as a percent of tangible assets was 5.65 percent compared to 5.88 percent as of December 31, 2023.

The Company and West Bank are subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements (as shown in the following table) can result in certain mandatory and possibly additional discretionary actions by regulators, which, if undertaken, could have a direct material effect on the Company's consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and West Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Company's and West Bank's capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Management believed the Company and West Bank met all capital adequacy requirements to which they were subject as of March 31, 2024.

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West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

The Company's and West Bank's capital amounts and ratios are presented in the following table.


	Actual				For Capital Adequacy Purposes				For Capital Adequacy Purposes With Capital Conservation Buffer				To Be Well-Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
As of March 31, 2024
Total Capital (to Risk-Weighted Assets)
Consolidated	$	420,599	11.78	%	$	285,615	8.00	%	$	374,870	10.50	%	$	357,019	10.00	%
West Bank	450,518		12.63	%	285,443		8.00	%	374,645		10.50	%	356,804		10.00	%

Tier 1 Capital (to Risk-Weighted Assets)
Consolidated	329,682		9.23	%	214,211		6.00	%	303,466		8.50	%	285,615		8.00	%
West Bank	419,601		11.76	%	214,083		6.00	%	303,284		8.50	%	285,443		8.00	%

Common Equity Tier 1 Capital (to Risk-Weighted Assets)
Consolidated	309,682		8.67	%	160,658		4.50	%	249,913		7.00	%	232,062		6.50	%
West Bank	419,601		11.76	%	160,562		4.50	%	249,763		7.00	%	231,923		6.50	%

Tier 1 Capital (to Average Assets)
Consolidated	329,682		8.36	%	157,657		4.00	%	157,657		4.00	%	197,071		5.00	%
West Bank	419,601		10.65	%	157,599		4.00	%	157,599		4.00	%	196,999		5.00	%

As of December 31, 2023
Total Capital (to Risk-Weighted Assets)
Consolidated	$	419,452	11.88	%	$	282,508	8.00	%	$	370,791	10.50	%	$	353,135	10.00	%
West Bank	450,444		12.76	%	282,307		8.00	%	370,527		10.50	%	352,883		10.00	%

Tier 1 Capital (to Risk-Weighted Assets)
Consolidated	328,566		9.30	%	211,881		6.00	%	300,164		8.50	%	282,508		8.00	%
West Bank	419,558		11.89	%	211,730		6.00	%	299,951		8.50	%	282,307		8.00	%

Common Equity Tier 1 Capital (to Risk-Weighted Assets)
Consolidated	308,566		8.74	%	158,911		4.50	%	247,194		7.00	%	229,537		6.50	%
West Bank	419,558		11.89	%	158,797		4.50	%	247,018		7.00	%	229,374		6.50	%

Tier 1 Capital (to Average Assets)
Consolidated	328,566		8.50	%	154,628		4.00	%	154,628		4.00	%	193,285		5.00	%
West Bank	419,558		10.86	%	154,571		4.00	%	154,571		4.00	%	193,213		5.00	%

The Company and West Bank are subject to a 2.5 percent capital conservation buffer that is added to the minimum requirements for capital adequacy purposes. A banking organization with a capital conservation buffer of less than the required amount will be subject to limitations on capital distributions, including dividend payments, and certain discretionary bonus payments to executive officers. At March 31, 2024, the capital ratios for the Company and West Bank were sufficient to meet the conservation buffer.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company’s market risk is composed primarily of interest rate risk arising from its core banking activities of lending and deposit taking. Interest rate risk refers to the exposure arising from changes in interest rates. Fluctuations in interest rates have a significant impact not only upon net income, but also upon the cash flows and market values of assets and liabilities. Our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our interest-earning assets and interest-bearing liabilities. Management continually develops and applies strategies to mitigate this risk.

The Company’s objectives are to manage interest rate risk to foster consistent growth of earnings and capital. It is our policy to maintain an acceptable level of interest rate risk over a range of possible changes in interest rates while remaining responsive to market demand for loan and deposit products. To measure that risk, the Company uses an earnings simulation approach.

The Company has an Asset Liability Committee which meets quarterly to review the interest rate sensitivity position and to review and develop various strategies for managing interest rate risk. Measuring and maintaining interest rate risk is a dynamic process that management performs with the objective of maximizing net interest margin while maintaining interest rate risk within acceptable tolerances. This process relies primarily on the simulation of net interest income over multiple interest rate scenarios. The Company engages a third party that utilizes a modeling program to measure the Company’s exposure to potential interest rate changes. For various assumed hypothetical changes in market interest rates, this analysis measures the estimated change in net interest income. The simulations allow for ongoing assessment of interest rate sensitivity and can include the impact of potential new business strategies. The modeled scenarios begin with a base case in which rates are unchanged and include parallel and nonparallel rate shocks. The model includes deposit beta assumptions which are estimates of changes in interest-bearing deposit pricing for a given change in market interest rates. In the current model scenario, deposit betas in falling rate scenarios are significantly lower than the deposit betas in rising rate scenarios. This results in a smaller deposit repricing benefit in falling rate scenarios. The results of the rate shocks are measured in two forms: first, the impact on the net interest margin and earnings over one and two year time frames; and second, the impact on the market value of equity. The results of the simulation are compared against approved policy limits.

The following table presents the estimated change in net interest income over a one year time horizon under several scenarios of assumed interest rate changes for the rate shock levels shown. The changes in each interest rate scenario represents the difference between estimated net interest income in the unchanged interest rate scenario, or the base case, and the estimated net interest income in each of the alternative interest rate scenarios. The net interest income in each scenario is based on immediate parallel yield curve changes in the interest rates applied to a static balance sheet. This analysis does not represent a forecast and should not be relied upon as being indicative of expected operating results.


	At March 31, 2024
	Sensitivity of Net Interest Income Over One Year Horizon
Change in Interest Rates	$ Change	% Change
300 basis points rising	$(13,158)	(16.94)%
200 basis points rising	(8,808)	(11.34)
100 basis points rising	(4,552)	(5.86)
100 basis points falling	1,220	1.57
200 basis points falling	1,267	1.63

Computations of the prospective effects of hypothetical interest rate changes are based on numerous assumptions. The assumptions used in our interest rate sensitivity simulation discussed above are inherently uncertain and, as a result, the simulations cannot precisely measure net interest income or precisely predict the impact of changes in interest rates on net interest income. Actual results may differ from those projections set forth above due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions and customer behavior. Further, the computations do not contemplate any actions the Company may undertake in response to changes in interest rates.

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Item 4. Controls and Procedures

a. Evaluation of disclosure controls and procedures. As of the end of the period covered by this report, an evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) was performed under the supervision, and with the participation, of the Company's Chief Executive Officer and Chief Financial Officer. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.

b. Changes in internal control over financial reporting. There were no changes in the Company's internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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.

Item 1A. Risk Factors

Management does not believe there have been any material changes in the risk factors that were disclosed in the Company's Form 10-K, as amended, filed with the Securities and Exchange Commission on February 23, 2024.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the fiscal quarter ended March 31, 2024, none of the Company's directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any "non-Rule 10b5-1 trading arrangement."

Item 6. Exhibits

The following exhibits are filed as part of this report:

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Exhibits			Description
3.1			Restatement of the Restated Articles of Incorporation of West Bancorporation, Inc. (incorporated herein by reference to Exhibit 3.1 filed with the Form 10-K on March 1, 2017)
3.2			Amended and Restated Bylaws of West Bancorporation, Inc. as of January 23, 2019 (incorporated herein by reference to Exhibit 3.1 filed with the Form 8-K on January 24, 2019)
31.1			Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002
31.2			Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002
32.1			Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2			Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS			Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH			Inline XBRL Taxonomy Extension Schema Document
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document
104			Cover Page Interactive Data File (formatted as Inline XBRL and combined in Exhibit 101)

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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, thereunto duly authorized.


West Bancorporation, Inc.
(Registrant)


April 25, 2024	By:	/s/ David D. Nelson
Date		David D. Nelson
		Chief Executive Officer and President
		(Principal Executive Officer)

April 25, 2024	By:	/s/ Jane M. Funk
Date		Jane M. Funk
		Executive Vice President, Treasurer and Chief Financial Officer
		(Principal Financial and Accounting Officer)

West Bancorporation - 10-Q quarterly report FY2024 Q1

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