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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 September 30, 2022
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)
Iowa42-1230603
(State of Incorporation)(I.R.S. Employer Identification No.)
1601 22nd Street, West Des Moines, Iowa
50266
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code:  (515) 222-2300

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, no par valueWTBAThe 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 October 26, 2022, there were 16,640,413 shares of common stock, no par value, outstanding.



WEST BANCORPORATION, INC.
INDEX
Page
PART I.
Item 1.
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
3


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)September 30, 2022December 31, 2021
ASSETS
Cash and due from banks$58,342 $17,555 
Federal funds sold1,049 175,270 
Cash and cash equivalents59,391 192,825 
Securities available for sale, at fair value671,752 758,822 
Federal Home Loan Bank stock, at cost18,350 9,965 
Loans2,614,145 2,456,196 
Allowance for loan losses(25,418)(28,364)
Loans, net2,588,727 2,427,832 
Premises and equipment, net44,592 34,568 
Accrued interest receivable10,786 8,890 
Bank-owned life insurance44,318 43,609 
Deferred tax assets, net38,327 10,819 
Other assets41,274 12,871 
Total assets$3,517,517 $3,500,201 
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing demand$712,722 $720,136 
Interest-bearing demand469,257 548,242 
Savings and money market1,252,694 1,550,636 
Time388,174 196,991 
Total deposits2,822,847 3,016,005 
Federal funds purchased204,500 2,880 
Subordinated notes, net79,303 20,465 
Federal Home Loan Bank advances125,000 125,000 
Long-term debt51,486 51,521 
Accrued expenses and other liabilities35,617 24,002 
Total liabilities3,318,753 3,239,873 
COMMITMENTS AND CONTINGENCIES (NOTE 8)
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value; authorized 50,000,000 shares; no shares issued and outstanding at September 30, 2022 and December 31, 2021
  
Common stock, no par value; authorized 50,000,000 shares; 16,640,413
    and 16,554,846 shares issued and outstanding at September 30, 2022
    and December 31, 2021, respectively
3,000 3,000 
Additional paid-in capital31,152 30,183 
Retained earnings262,776 237,782 
Accumulated other comprehensive loss(98,164)(10,637)
Total stockholders' equity198,764 260,328 
Total liabilities and stockholders' equity$3,517,517 $3,500,201 

See Notes to Consolidated Financial Statements.
4




West Bancorporation, Inc. and Subsidiary
Consolidated Statements of Income
(unaudited)
 Three Months Ended September 30,Nine Months Ended September 30,
(in thousands, except per share data)2022202120222021
Interest income:
Loans, including fees$28,102 $24,229 $76,236 $71,406 
Securities:
Taxable3,147 2,412 9,126 5,952 
Tax-exempt890 762 2,640 2,032 
Federal funds sold 30 82 179 226 
Total interest income32,169 27,485 88,181 79,616 
Interest expense:  
Deposits6,289 2,021 11,586 5,893 
Federal funds purchased655 2 812 4 
Subordinated notes1,106 254 1,748 754 
Federal Home Loan Bank advances649 656 1,914 2,288 
Long-term debt466 66 1,050 220 
Total interest expense9,165 2,999 17,110 9,159 
Net interest income23,004 24,486 71,071 70,457 
Provision for loan losses  (2,500)(1,500)
Net interest income after provision for loan losses
23,004 24,486 73,571 71,957 
Noninterest income:  
Service charges on deposit accounts553 589 1,718 1,749 
Debit card usage fees498 490 1,477 1,443 
Trust services780 695 2,031 2,038 
Increase in cash value of bank-owned life insurance246 230 709 690 
Loan swap fees835  835 42 
Realized securities gains, net 11  51 
Other income364 386 1,173 1,368 
Total noninterest income3,276 2,401 7,943 7,381 
Noninterest expense:  
Salaries and employee benefits6,578 6,018 19,286 17,298 
Occupancy1,315 1,203 3,643 3,630 
Data processing644 616 1,924 1,835 
FDIC insurance127 528 753 1,358 
Professional fees250 212 669 763 
Director fees209 176 599 581 
Other expenses2,335 1,959 6,512 6,044 
Total noninterest expense11,458 10,712 33,386 31,509 
Income before income taxes14,822 16,175 48,128 47,829 
Income taxes3,220 3,469 10,675 10,132 
Net income$11,602 $12,706 $37,453 $37,697 
 
Basic earnings per common share$0.70 $0.77 $2.25 $2.28 
Diluted earnings per common share$0.69 $0.76 $2.23 $2.25 
See Notes to Consolidated Financial Statements.
5




West Bancorporation, Inc. and Subsidiary
Consolidated Statements of Comprehensive Income (Loss)
(unaudited)
 Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Net income$11,602 $12,706 $37,453 $37,697 
Other comprehensive income (loss):  
Unrealized gains (losses) on securities:
Unrealized holding losses arising during the period(42,621)(6,172)(141,629)(10,462)
Plus: reclassification adjustment for net gains realized in net income (11) (51)
Other(11) (11) 
Income tax benefit10,569 1,558 35,618 2,649 
Other comprehensive loss on securities(32,063)(4,625)(106,022)(7,864)
Unrealized gains (losses) on derivatives:
Unrealized holding gains arising during the period8,637 359 23,239 5,801 
Plus: reclassification adjustment for net (gains) losses realized in net income(259)1,105 1,428 7,173 
Income tax expense(2,051)(369)(6,172)(3,269)
Other comprehensive income on derivatives6,327 1,095 18,495 9,705 
Total other comprehensive income (loss)(25,736)(3,530)(87,527)1,841 
Comprehensive income (loss)$(14,134)$9,176 $(50,074)$39,538 

See Notes to Consolidated Financial Statements.
 
6




West Bancorporation, Inc. and Subsidiary
Consolidated Statements of Stockholders' Equity
(unaudited)
(in thousands, except share and per share data)
Three Months Ended September 30, 2022
Accumulated
AdditionalOther
PreferredCommon StockPaid-InRetainedComprehensive
StockSharesAmountCapitalEarningsIncome (Loss)Total
Balance, June 30, 2022$ 16,640,413 $3,000 $30,283 $255,334 $(72,428)$216,189 
Net income
    11,602  11,602 
Other comprehensive loss, net of tax     (25,736)(25,736)
Cash dividends declared, $0.25 per common share
    (4,160) (4,160)
Stock-based compensation costs
   869   869 
Balance, September 30, 2022$ 16,640,413 $3,000 $31,152 $262,776 $(98,164)$198,764 
Three Months Ended September 30, 2021
Accumulated
AdditionalOther
PreferredCommon StockPaid-InRetainedComprehensive
StockSharesAmountCapitalEarningsIncome (Loss)Total
Balance, June 30, 2021$ 16,554,846 $3,000 $28,888 $221,113 $(6,475)$246,526 
Net income— — — — 12,706 — 12,706 
Other comprehensive loss, net of tax— — — — — (3,530)(3,530)
Cash dividends declared, $0.24 per common share
— — — — (3,974)— (3,974)
Stock-based compensation costs
— — — 648 — — 648 
Balance, September 30, 2021$— 16,554,846 $3,000 $29,536 $229,845 $(10,005)$252,376 
See Notes to Consolidated Financial Statements.
7




West Bancorporation, Inc. and Subsidiary
Consolidated Statements of Stockholders' Equity
(unaudited)
(in thousands, except share and per share data)
Nine Months Ended September 30, 2022
Accumulated
AdditionalOther
PreferredCommon StockPaid-InRetainedComprehensive
StockSharesAmountCapitalEarningsIncome (Loss)Total
Balance, December 31, 2021$ 16,554,846 $3,000 $30,183 $237,782 $(10,637)$260,328 
Net income
    37,453  37,453 
Other comprehensive loss,
   net of tax
     (87,527)(87,527)
Cash dividends declared, $0.75 per common share
    (12,459) (12,459)
Stock-based compensation costs
   2,488   2,488 
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes 85,567  (1,519)  (1,519)
Balance, September 30, 2022$ 16,640,413 $3,000 $31,152 $262,776 $(98,164)$198,764 
Nine Months Ended September 30, 2021
Accumulated
AdditionalOther
PreferredCommon StockPaid-InRetainedComprehensive
StockSharesAmountCapitalEarningsIncome (Loss)Total
Balance, December 31, 2020$ 16,469,272 $3,000 $28,823 $203,718 $(11,846)$223,695 
Net income
— — — — 37,697 — 37,697 
Other comprehensive income, net of tax— — — — — 1,841 1,841 
Cash dividends declared, $0.70 per common share
— — — — (11,570)— (11,570)
Stock-based compensation costs
— — — 1,926 — — 1,926 
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes
 85,574  (1,213)  (1,213)
Balance, September 30, 2021$— 16,554,846 $3,000 $29,536 $229,845 $(10,005)$252,376 

See Notes to Consolidated Financial Statements.

8




West Bancorporation, Inc. and Subsidiary
Consolidated Statements of Cash Flows
(unaudited)
Nine Months Ended September 30,
(in thousands)20222021
Cash Flows from Operating Activities:
Net income$37,453 $37,697 
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses(2,500)(1,500)
Net amortization and accretion2,247 1,459 
Securities gains, net (51)
Stock-based compensation2,488 1,926 
Increase in cash value of bank-owned life insurance(709)(690)
Depreciation1,091 1,143 
Provision for deferred income taxes1,928 380 
Change in assets and liabilities:
Increase in accrued interest receivable(1,896)(541)
Decrease in other assets930 2,299 
Increase in accrued expenses and other liabilities7,889 312 
Net cash provided by operating activities48,921 42,434 
Cash Flows from Investing Activities:  
Proceeds from sales of securities available for sale 30,374 
Proceeds from maturities and calls of securities available for sale63,353 65,784 
Purchases of securities available for sale(120,077)(420,744)
Purchases of Federal Home Loan Bank stock(46,884)(2,325)
Proceeds from redemption of Federal Home Loan Bank stock38,499 2,504 
Net increase in loans(158,395)(78,830)
Purchases of premises and equipment(12,056)(6,410)
Net cash used in investing activities(235,560)(409,647)
Cash Flows from Financing Activities:  
Net increase (decrease) in deposits(193,158)35,929 
Net increase in federal funds purchased201,620 34,005 
Proceeds from issuance of subordinated debt, net of issuance costs58,756  
Net decrease in Federal Home Loan Bank advances (50,000)
Principal payments on long-term debt(35)(3,904)
Common stock dividends paid(12,459)(11,570)
Restricted stock units withheld for payroll taxes (1,519)(1,213)
Net cash provided by financing activities53,205 3,247 
Net decrease in cash and cash equivalents(133,434)(363,966)
Cash and Cash Equivalents:
Beginning192,825 396,435 
Ending$59,391 $32,469 
Supplemental Disclosures of Cash Flow Information:
Cash payments for:
Interest$15,259 $9,596 
Income taxes7,490 9,220 
Supplemental Disclosure of Noncash Investing and Financing Activities:
Purchase of securities available for sale, pending settlement$ $30,151 
See Notes to Consolidated Financial Statements.

9



West Bancorporation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(dollars in thousands, except per share data)

1.  Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared by West Bancorporation, Inc. (the Company) pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to such rules and regulations. Although management believes that the disclosures are adequate to make the information presented understandable, it is suggested that these interim consolidated financial statements be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 24, 2022. 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 September 30, 2022 and December 31, 2021, net income, comprehensive income (loss) and changes in stockholders' equity for the three and nine months ended September 30, 2022 and 2021, and cash flows for the nine months ended September 30, 2022 and 2021. 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 loan 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 June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326). The amendments in this update require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net carrying value at the amount expected to be collected on the financial assets. Under the update, the income statement will reflect the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount of financial assets. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. The allowance for credit losses for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination that are measured at amortized cost basis is determined in a similar manner to other financial assets measured at amortized cost basis; however, the initial allowance for credit losses is added to the purchase price rather than being reported as a credit loss expense. Only subsequent changes in the allowance for credit losses are recorded as a credit loss expense for these assets. Off-balance-sheet arrangements such as commitments to extend credit, guarantees, and standby letters of credit that are not considered derivatives under ASC 815 and are not unconditionally cancellable are also within the scope of this update. Credit losses relating to available for sale debt securities should be recorded through an allowance for credit losses. The FASB has also issued multiple updates to ASU No. 2016-13 as codified in Topic 326, including ASU No. 2019-04, ASU No. 2019-05, ASU No. 2019-11, ASU No. 2020-02, and ASU No. 2020-03. These ASUs have provided for various minor technical corrections and improvements to the codification as well as other transition matters.


10



West Bancorporation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(dollars in thousands, except per share data)

In December 2019, the FASB issued ASU No. 2019-10, Financial Instruments-Credit Losses (Topic 326). This update amends the effective date of ASU No. 2016-13 for certain entities, including smaller reporting companies until fiscal years beginning after December 15, 2022, including interim periods within those fiscal periods. Early adoption is permitted. The one-time determination date for identifying as a smaller reporting company was November 15, 2019. The Company met the definition of a smaller reporting company as of that date and plans to adopt the standard with the amended effective date. The Company continues to develop it's methodology and work through model validation and implementation considerations. While we currently cannot reasonably estimate the impact of adopting this standard, we expect the impact will be influenced by the composition, characteristics and quality of our loan and securities portfolios, as well as the general economic conditions and forecasts as of the adoption date.

In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments - Credit Losses (ASC 326): Troubled Debt Restructurings and Vintage Disclosures. The amendments in this ASU improve the usefulness of information provided to investors about certain loan refinancings, restructurings, and write-offs. The amendments eliminate the accounting guidance for troubled debt restructurings (TDRs) by creditors that have adopted ASU No. 2016-13. It also enhances disclosure requirements for certain loan refinancings and restructurings by creditors made to borrowers experiencing financial difficulty. Lastly, the amendments require that a public business entity disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases. The Company is currently evaluating the impact of the ASU on the Company's consolidated financial statements.
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 are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact of the reference rate reform on the Company’s consolidated financial statements.
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 are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact of the reference rate reform on the Company's consolidated financial statements.


11



West Bancorporation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(dollars in thousands, except per share data)

2.  Earnings per Common Share

Basic earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per common share reflect the potential dilution that could occur if the Company's outstanding restricted stock units were vested. The dilutive effect was computed using the treasury stock method, which assumes all stock-based awards were exercised and the hypothetical proceeds from exercise were used by the Company to purchase common stock at the average market price during the period. The incremental shares, to the extent they would have been dilutive, were included in the denominator of the diluted earnings per common share calculation. The calculations of earnings per common share and diluted earnings per common share for the three and nine months ended September 30, 2022 and 2021 are presented in the following table.

Three Months Ended September 30,Nine Months Ended September 30,
(in thousands, except per share data)2022202120222021
Net income$11,602 $12,706 $37,453 $37,697 
 
Weighted average common shares outstanding16,640 16,555 16,613 16,527 
Weighted average effect of restricted stock units outstanding
154 248 200 245 
Diluted weighted average common shares outstanding16,794 16,803 16,813 16,772 
     
Basic earnings per common share$0.70 $0.77 $2.25 $2.28 
Diluted earnings per common share$0.69 $0.76 $2.23 $2.25 
Number of anti-dilutive common stock equivalents excluded from diluted earnings per share computation183  112  
12



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 September 30, 2022 and December 31, 2021.
 September 30, 2022
 Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
(Losses)
Fair
Value
Securities available for sale:
State and political subdivisions$243,440 $ $(58,322)$185,118 
Collateralized mortgage obligations (1)
352,414  (55,462)296,952 
Mortgage-backed securities (1)
172,553  (31,319)141,234 
Collateralized loan obligations37,948  (1,564)36,384 
Corporate notes13,750  (1,686)12,064 
 $