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What changed in WEST BANCORPORATION INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of WEST BANCORPORATION INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+381 added−379 removedSource: 10-K (2025-02-20) vs 10-K (2024-02-22)

Top changes in WEST BANCORPORATION INC's 2024 10-K

381 paragraphs added · 379 removed · 303 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

109 edited+30 added−17 removed67 unchanged
Biggest changeIn addition, because the total cost of the failures of Silicon Valley Bank and Signature Bank was approximately $16.3 billion, the FDIC adopted a special assessment for banks having deposits above $5 billion, at an annual rate of 13.4 basis points, beginning with the first quarterly assessment period of 2024 (January 1 through March 31, 2024) with an invoice payment date of June 28, 2024, and will continue to collect special assessments for an anticipated total of eight quarterly assessment periods.
Biggest changeIn addition, because the total cost of the failures of Silicon Valley Bank and Signature Bank was approximately $24.1 billion, the FDIC adopted a special assessment applicable to bank organizations with total assets of $5 billion or more.
The Board carefully considers corporate social responsibility when it works with management to determine the Company’s strategic priorities and plans to achieve such priorities. Learn more about our ESG practices on the Corporate Governance section of our website at www.westbankstrong.com under Investor Relations/Overview/Governance documents.
The Board carefully considers corporate social responsibility when it works with management to determine the Company’s strategic priorities and plans to achieve such priorities. Learn more about our ESG practices on the Corporate Governance section of our website at www.westbankstrong.com under Investor Relations/Overview/Corporate Governance documents.
In the third quarter of 2016, we elected to operate as a financial holding company. In order to maintain our status as a financial holding company, both the Company and West Bank must be well-capitalized, well-managed, and have at least a satisfactory CRA rating.
In the third quarter of 2016, we elected to operate as a financial holding company. In order to maintain our status as a financial holding company, both the Company and West Bank must be well-capitalized and well-managed, and West Bank must have at least a satisfactory CRA rating.
The interagency Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices guidance (CRE Guidance) provides supervisory criteria, including the following numerical indicators, to assist bank examiners in identifying banks with potentially significant commercial real estate loan concentrations that may warrant greater supervisory scrutiny: (i) CRE loans exceeding 300 percent of capital and increasing 50 percent or more in the preceding three years; or (ii) construction and land development loans exceeding 100 percent of capital.
The interagency Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices guidance (CRE Guidance) provides supervisory criteria, including the following numerical indicators, to assist bank examiners in identifying banks with potentially significant CRE loan concentrations that may warrant greater supervisory scrutiny: (i) CRE loans exceeding 300 percent of capital and increasing 50 percent or more in the preceding three years; or (ii) construction and land development loans exceeding 100 percent of capital.
The network builds a system of sponsors and mentors to provide more opportunities for women in leadership at West Bank and furthers our impact on the community through support and sponsorship of women’s leadership initiatives. 20 percent of West Bank’s current executive management team and 48 percent of officers and department managers are women.
The network builds a system of sponsors and mentors to provide more opportunities for women in leadership at West Bank and furthers our impact on the community through support and sponsorship of women’s leadership initiatives. 20 percent of West Bank’s current executive management team, 45 percent of West Bank officers and 48 percent of department managers are women.
More specifically, the bank regulatory agencies described the goals of the CRA Rule as follows: (i) to expand access to credit, investment, and basic banking services in low and moderate income communities; (ii) to adapt to changes in the banking industry, including mobile and internet banking by modernizing assessment areas while maintaining a focus on branch based areas; (iii) to provide greater clarity, consistency, and transparency in the application of the regulations through the use of standardized metrics as part of CRA evaluation and clarifying eligible CRA activities focused on low and moderate income communities and underserved rural communities; (iv) to tailor CRA rules and data collection to bank size and business model; and (v) to maintain a unified approach among the regulators.
More specifically, the federal banking agencies described the goals of the CRA Rule as follows: (i) to expand access to credit, investment, and basic banking services in low and moderate income communities; (ii) to adapt to changes in the banking industry, including mobile and internet banking by modernizing assessment areas while maintaining a focus on branch based areas; (iii) to provide greater clarity, consistency, and transparency in the application of the regulations through the use of standardized metrics as part of CRA evaluation and clarifying eligible CRA activities focused on low and moderate income communities and underserved rural communities; (iv) to tailor CRA rules and data collection to bank size and business model; and (v) to maintain a unified approach among the regulators.
If an FDIC-insured institution fails to submit an acceptable compliance plan, or fails in any material respect to implement a compliance plan that has been accepted by its primary federal regulator, the regulator is required to issue an order directing the institution to cure the deficiency.
If an FDIC-insured institution fails to submit an acceptable compliance plan, or fails in any material respect to implement a compliance plan that has been accepted by its primary federal regulator, the agency is required to issue an order directing the institution to cure the deficiency.
In approving interstate acquisitions, the Federal Reserve is required to give effect to applicable state law limitations on the aggregate amount of deposits that may be held by the acquiring bank holding company and its FDIC-insured institution affiliates in the state in which the target bank is located (provided that those limits do not discriminate against out-of-state institutions or their holding companies) and state laws that require that the target bank have been in existence for a minimum period of time (not to exceed five years) before being acquired by an out-of-state bank holding company.
In approving interstate acquisitions, the Federal Reserve is required to give effect to applicable state law limitations on the aggregate amount of deposits that may be held by the acquiring bank holding company and its FDIC-insured institution affiliates in the state in which the target bank is located (provided that those limits do not discriminate against out-of-state institutions or their holding companies) and state laws that require that the target bank has been in existence for a minimum period of time (not to exceed five years) before being acquired by an out-of-state bank holding company.
It is possible under the Basel III Rule to be well-capitalized while remaining out of compliance with the capital conservation buffer discussed above. As of December 31, 2023: (i) West Bank was not subject to a directive from Iowa Division of Banking or the FDIC to increase its capital and (ii) West Bank was well-capitalized, as defined by FDIC regulations.
It is possible under the Basel III Rule to be well-capitalized while remaining out of compliance with the capital conservation buffer discussed above. As of December 31, 2024: (i) West Bank was not subject to a directive from Iowa Division of Banking or the FDIC to increase its capital and (ii) West Bank was well-capitalized, as defined by FDIC regulations.
One test, referred to as the Liquidity Coverage Ratio, or LCR, is designed to ensure that the banking entity has an adequate stock of unencumbered high-quality liquid assets that can be converted easily and immediately in private markets into cash to meet liquidity needs for a 30-calendar day liquidity stress scenario.
One test, referred to as the Liquidity Coverage Ratio, or LCR, is designed to ensure that the banking organization has an adequate stock of unencumbered high-quality liquid assets that can be converted easily and immediately in private markets into cash to meet liquidity needs for a 30-calendar day liquidity stress scenario.
As a result, our growth and earnings performance may be affected not only by management decisions and general economic conditions, but also by the requirements of federal and state statutes and by the regulations and policies of various bank regulatory agencies, including the Iowa Division of Banking, the Board of Governors of the Federal Reserve System (Federal Reserve), the FDIC and the Consumer Financial Protection Bureau (CFPB).
As a result, our growth and earnings performance may be affected not only by management decisions and general economic conditions, but also by the requirements of federal and state statutes and by the regulations and policies of various banking agencies, including the Iowa Division of Banking, the Board of Governors of the Federal Reserve System (Federal Reserve), the FDIC and the Consumer Financial Protection Bureau (CFPB).
As described above, West Bank exceeded its capital requirements under applicable guidelines as of December 31, 2023. Notwithstanding the availability of funds for dividends, however, the FDIC and the Iowa Division of Banking may prohibit the payment of dividends by West Bank if either or both determine such payment would constitute an unsafe or unsound practice.
As described above, West Bank exceeded its capital requirements under applicable guidelines as of December 31, 2024. Notwithstanding the availability of funds for dividends, however, the FDIC and the Iowa Division of Banking may prohibit the payment of dividends by West Bank if either or both determine such payment would constitute an unsafe or unsound practice.
The ratios described above are minimum standards in order for banking organizations to be considered “adequately capitalized.” Bank regulatory agencies uniformly encourage banks to hold more capital and be “well-capitalized” and, to that end, federal law and regulations provide various incentives for banking organizations to maintain regulatory capital at levels in excess of minimum regulatory requirements.
The capital ratios described above are minimum standards in order for banking organizations to be considered “adequately capitalized.” Banking agencies uniformly encourage banking organizations to hold more capital and be “well-capitalized” and, to that end, federal law and regulations provide various incentives for banking organizations to maintain regulatory capital at levels in excess of minimum regulatory requirements.
The Company is subject to complex consolidated capital requirements of the Basel III rule, see “—the Basel III Rule” below. Dividend Payments . Our ability to pay dividends to our stockholders may be affected by both general corporate law considerations and policies of the Federal Reserve applicable to bank holding companies.
The Company is subject to complex consolidated capital requirements of the Basel III Rule (as defined below), see “—the Basel III Rule” below. Dividend Payments . Our ability to pay dividends to our stockholders may be affected by both general corporate law considerations and policies and capital requirements of the Federal Reserve applicable to bank holding companies.
The Federal Reserve also possesses enforcement powers over bank holding companies and their nonbank subsidiaries to prevent or remedy actions that represent unsafe or unsound practices or violations of applicable statutes and regulations. Among these powers is the ability to proscribe the payment of dividends by banks and bank holding companies. Monetary Policy .
The Federal Reserve also possesses enforcement powers over bank holding companies and their nonbank subsidiaries to prevent or remedy actions that represent unsafe or unsound practices or violations of applicable statutes and regulations. Among these powers is the ability to proscribe the payment of dividends by banks and bank holding companies.
The regulatory agencies generally have broad discretion to impose restrictions and limitations on the operations of a regulated entity where the agencies determine, among other things, that such operations are unsafe or unsound, fail to comply with applicable law or are otherwise inconsistent with laws and regulations.
The banking agencies generally have broad discretion to impose restrictions and limitations on the operations of a regulated entity where the agencies determine, among other things, that such operations are unsafe or unsound, fail to comply with applicable law or are otherwise inconsistent with laws and regulations.
The federal bank agencies reminded FDIC-insured institutions to maintain underwriting discipline and exercise prudent risk-management practices to identify, measure, monitor and manage the risks arising from CRE lending. In addition, FDIC-insured institutions must maintain capital commensurate with the level and nature of their CRE concentration risk.
The federal banking agencies reminded FDIC-insured institutions to maintain underwriting discipline and exercise prudent risk-management practices to identify, measure, monitor and manage the risks arising from CRE lending. In addition, FDIC-insured institutions must maintain capital commensurate with the level and nature of their CRE concentration risk.
We believe that diversity encourages innovation and inclusion, and our team’s differences give us a competitive advantage. Our goal is to foster a culture in which those differences are valued and respected. Our team is made up of 181 full-time employees and 9 part-time employees.
We believe that diversity encourages innovation and inclusion, and our team’s differences give us a competitive advantage. Our goal is to foster a culture in which those differences are valued and respected. Our team is made up of 180 full-time employees and 9 part-time employees.
Currently, women comprise 25 percent of the directors on our Board of Directors. As part of our compensation philosophy, we believe that we must offer and maintain market competitive compensation and benefit programs for our employees in order to attract and retain talent.
Currently, women comprise 27 percent of the directors on our Board of Directors. As part of our compensation philosophy, we believe that we must offer and maintain market competitive compensation and benefit programs for our employees in order to attract and retain talent.
Depending upon the capital category to which an institution is assigned, the regulators’ corrective powers include: (i) requiring the institution to submit a capital restoration plan; (ii) limiting the institution’s asset growth and restricting its activities; (iii) requiring the institution to issue additional capital stock (including additional voting stock) or to sell itself; (iv) restricting transactions between the institution and its affiliates; (v) restricting the interest rate that the institution may pay on deposits; (vi) ordering a new election of directors of the institution; (vii) requiring that senior executive officers or directors be dismissed; (viii) prohibiting the institution from accepting deposits from correspondent banks; (ix) requiring the institution to divest certain subsidiaries; (x) prohibiting the payment of principal or interest on subordinated debt; and (xi) ultimately, appointing a receiver for the institution.
Depending upon the capital category to which a banking organization is assigned, the banking agencies’ corrective powers include: (i) requiring the institution to submit a capital restoration plan; (ii) limiting the institution’s asset growth and restricting its activities; (iii) requiring the institution to issue additional capital stock (including additional voting stock) or to sell itself; (iv) restricting transactions between the institution and its affiliates; (v) restricting the interest rate that the institution may pay on deposits; (vi) ordering a new election of directors of the institution; (vii) requiring that senior executive officers or directors be dismissed; (viii) prohibiting the institution from accepting deposits from correspondent banks; (ix) requiring the institution to divest certain subsidiaries; (x) prohibiting the payment of principal or interest on subordinated debt; and (xi) ultimately, appointing a receiver for the institution.
West Bank offers a full range of deposit services, including checking, savings and money market accounts and time certificates of deposit. West Bank also offers online banking, mobile banking and treasury management services, which help to meet the banking needs of its customers.
West Bank offers a full range of commercial and consumer deposit services, including checking, savings and money market accounts and time certificates of deposit. West Bank also offers online banking, mobile banking and treasury management services, which help to meet the banking needs of its customers.
The Basel III Rule also constrained the inclusion of minority interests, mortgage-servicing assets, and deferred tax assets in capital and required deductions from Common Equity Tier 1 Capital if such assets exceeded a percentage of a banking institution’s Common Equity Tier 1 Capital.
The Basel III Rule also constrained the inclusion of minority interests, mortgage-servicing assets, and deferred tax assets in capital and required deductions from Common Equity Tier 1 Capital if such assets exceeded a percentage of a banking organization’s Common Equity Tier 1 Capital.
West Bank is a business-focused community bank that was organized in 1893. The Company’s primary activity during 2023 was the ownership of West Bank. The Company’s and West Bank’s only business is banking, and therefore, no segment information is presented in this report.
West Bank is a business-focused community bank that was organized in 1893. The Company’s primary activity during 2024 was the ownership of West Bank. The Company’s and West Bank’s only business is banking, and therefore, no segment information is presented in this report.
In particular, West Bank competes for loans primarily by offering competitive interest rates, experienced lending personnel with local decision-making authority, flexible loan arrangements, quality products and services, and proactive relationship management. West Bank competes for deposits principally by offering depositors a variety of straight-forward deposit products along with electronic access and other personalized services.
In particular, West Bank competes for loans primarily by offering competitive interest rates, experienced lending personnel with local decision-making authority, flexible loan arrangements, quality products and services, and proactive relationship management. West Bank competes for deposits principally by offering depositors a variety of straight-forward deposit products along with online and mobile access and other personalized services.
Treasury management services offered to business customers include cash management, client-generated automated clearing house transactions, remote deposit and fraud protection services. Also offered are merchant credit card processing and corporate credit cards.
Treasury management services offered to business customers include cash management, client-generated automated clearing house transactions, remote deposit, lock box and fraud protection services. Also offered are merchant credit card processing and corporate credit cards.
The Bank Secrecy Act (BSA) is the common name for a series of laws and regulations enacted in the United States to combat money laundering and the financing of terrorism.
Anti-Money Laundering/Sanctions . The Bank Secrecy Act (BSA) is the common name for a series of laws and regulations enacted in the United States to combat money laundering and the financing of terrorism.
These federal and state laws, and the regulations of the bank regulatory agencies issued under them, affect, among other things, the scope of our business; the kinds and amounts of investments we may make; required capital levels relative to our assets; the nature and amount of collateral for loans; the establishment of branches; our ability to merge, consolidate and acquire; dealings with our insiders and affiliates; and our payment of dividends.
These federal and state laws, and the regulations of the banking agencies issued under them, affect, among other things, the scope of our business; the kinds and amounts of investments that we may make; required capital levels relative to our assets; the nature and amount of collateral for loans; the establishment of branches; our ability to merge, consolidate and acquire; dealings with our insiders and affiliates; and our payment of dividends.
West Bank is expected to have active board and senior management oversight; adequate policies, procedures and limits; adequate risk measurement, monitoring and management information systems; and comprehensive internal controls. Privacy and Cybersecurity .
West Bank is expected to have active board and senior management oversight; adequate policies, procedures and limits; adequate risk measurement, monitoring and management information systems; and comprehensive internal controls.
Copies of the Company’s filings with the SEC are also available from the SEC’s website (www.sec.gov) free of charge. 16 Table of Contents West Bancorporation, Inc. and Subsidiary
Copies of the Company’s filings with the SEC are also available from the SEC’s website (www.sec.gov) free of charge. 17 Table of Contents West Bancorporation, Inc. and Subsidiary
The capital guidelines for U.S. banks beginning in 1989 have been based upon international capital accords (known as “Basel” rules) adopted by the Basel Committee on Banking Supervision, a committee of central banks and bank supervisors that acts as the primary global standard-setter for prudential regulation, as implemented by the U.S. bank regulatory agencies on an interagency basis.
The capital guidelines for U.S. banking organizations beginning in 1989 have been based upon international capital accords (known as “Basel” accords) adopted by the Basel Committee on Banking Supervision, a committee of central banks and bank supervisors that acts as the primary global standard-setter for prudential regulation, as implemented by the U.S. federal banking agencies on an interagency basis.
The Basel III Rule is applicable to all banking organizations that are subject to minimum capital requirements, including federal and state banks and savings and loan associations, as well as to most bank and savings and loan holding companies. Thus, West Bank is subject to the Basel III Rule as described below.
The Basel III Rule is applicable to all banking organizations that are subject to minimum capital requirements, including national and state banks and savings and loan associations, as well as to most bank and savings and loan holding companies. Thus, West Bank and the Company are subject to the Basel III Rule as described below.
Properly managing risks has been identified as critical to the conduct of safe and sound banking activities and has become even more important as new technologies, product innovation, and the size and speed of financial transactions have changed the nature of banking markets.
Properly managing risks has been identified as critical to the conduct of safe and sound banking activities and has become even more important as new technologies, product innovation, third-party relationships, and the size and speed of financial transactions have changed the nature of banking markets.
The CRE Guidance does not limit banks’ levels of CRE lending activities, but rather guides institutions in developing risk management practices and levels of capital that are commensurate with the level and nature of their commercial real estate concentrations.
The CRE Guidance does not limit banks’ levels of CRE lending activities, but rather guides institutions in developing risk management practices and levels of capital that are commensurate with the level and nature of their CRE concentrations.
If the Federal Reserve determines that either the Company or West Bank is not well-capitalized or well-managed, the Federal Reserve will provide a period of time in which to achieve compliance, but during the period of noncompliance, the Federal Reserve may place any limitations on us that it deems appropriate.
If the Federal Reserve determines that either the Company or West Bank is not well-capitalized or well-managed, the Federal Reserve will provide a period of time in which to re-achieve compliance with those requirements, but, during the period of noncompliance, the Federal Reserve may place any limitations on us that it deems appropriate.
The accords recognized that bank assets for the purpose of the capital ratio calculations needed to be risk weighted (the theory being that riskier assets should require more capital) and that off-balance sheet exposures needed to be factored in the calculations.
These accords recognized that bank assets for the purpose of the capital ratio calculations needed to be risk weighted (the theory being that riskier assets should require more capital) and that off-balance sheet exposures needed to be factored into the calculations.
Operating in an unsafe or unsound manner will also constitute grounds for other enforcement action by the federal bank regulatory agencies, including cease and desist orders and civil money penalty assessments.
Operating in an unsafe or unsound manner will also constitute grounds for other enforcement action by the federal banking agencies, including cease and desist orders and civil money penalty assessments.
Furthermore, taxation laws administered by the Internal Revenue Service and state taxing authorities, accounting rules developed by the Financial Accounting Standards Board (FASB), securities laws administered by the SEC and state securities authorities, and anti-money laundering laws enforced by the U.S. Department of the Treasury (Treasury) have an impact on our business.
Furthermore, taxation laws administered by the Internal Revenue Service (IRS) and state taxing authorities, accounting rules developed by the Financial Accounting Standards Board (FASB), securities laws administered by the U.S. Securities and Exchange Commission (SEC) and state securities authorities, and anti-money laundering and sanctions laws enforced by the U.S. Department of the Treasury (Treasury) have an impact on our business.
During the past decade, the bank regulatory agencies have increasingly emphasized the importance of sound risk management processes and strong internal controls when evaluating the activities of the FDIC-insured institutions that they supervise.
During the past decade, the banking agencies have increasingly emphasized the importance of sound risk management processes and strong internal controls when evaluating the activities of the FDIC-insured institutions that they supervise.
The laws mandate financial services companies to have policies and procedures with respect to measures designed to address: (i) customer identification programs; (ii) money laundering; (iii) terrorist financing; (iv) identifying and reporting suspicious activities and currency transactions; (v) currency crimes; and (vi) cooperation between FDIC-insured institutions and law enforcement authorities. Concentrations in Commercial Real Estate .
The laws mandate financial services companies to have policies and procedures with respect to measures designed to address: (i) customer identification programs; (ii) money laundering; (iii) terrorist financing; (iv) identifying and reporting suspicious activities and currency transactions; (v) currency crimes; and (vi) cooperation between FDIC-insured institutions and law enforcement authorities.
In the opinion of management, the capital position of the Company is strong. At December 31, 2023, the Company’s tangible common equity ratio was 5.88 percent compared to 5.84 percent at December 31, 2022. As of December 31, 2023 and 2022, the Company had no intangible assets or preferred stock outstanding.
In the opinion of management, the capital position of the Company is strong. At December 31, 2024, the Company’s tangible common equity ratio was 5.68 percent compared to 5.88 percent at December 31, 2023. As of December 31, 2024 and 2023, the Company had no intangible assets or preferred stock outstanding.
In addition, under the Basel III Rule, institutions that want to pay dividends will have to maintain 2.5 percent in Common Equity Tier 1 Capital attributable to the capital conservation buffer. See “—Bank Capital Requirements” above. State Bank Investments and Activities .
In addition, under the Basel III Rule, banking organizations that want to pay dividends will have to maintain 2.5 percent in Common Equity Tier 1 Capital attributable to the capital conservation buffer. See “—Bank Capital Requirements” above. State Bank Investments, Activities and Acquisitions .
Federal law permits state and national banks to merge with banks in other states subject to: (i) regulatory approval; (ii) federal and state deposit concentration limits; and (iii) state law limitations requiring the merging bank to have been in existence for a minimum period of time (not to exceed five years) prior to the merger. Community Reinvestment Act Requirements .
In addition, federal law permits state and national banks to merge with banks in other states subject to: (i) regulatory approval; (ii) federal and state deposit concentration limits; and (iii) state law limitations requiring the merging bank to have been in existence for a minimum period of time (not to exceed five years) prior to the merger.
As of December 31, 2023, we retained our election as a financial holding company, but we have not engaged in any activity and do not own any assets for which a financial holding company designation was required. The election affords the ability to respond more quickly to market developments and opportunities. Change in Control .
As of December 31, 2024, we retained our election as a financial holding company, but we have not engaged in any activity, and do not own any assets, for which financial holding company designation is required. The election affords us the ability to respond more quickly to market developments and opportunities. Change in Control .
Section 201 of the Regulatory Relief Act instructed the federal banking regulators to establish a single “Community Bank Leverage Ratio” (CBLR) of between 8 and 10%.
Section 201 of the Regulatory Relief Act specifically instructed the federal banking agencies to establish a single “Community Bank Leverage Ratio” (CBLR) of between 8 and 10%.
The agencies have identified a spectrum of risks facing a banking institution including, but not limited to, credit, market, liquidity, operational, legal and reputational risk. The key risk themes identified for 2023 are discussed under Risk Factors.
The agencies have identified a spectrum of risks facing a banking organization including, but not limited to, credit, market, liquidity, operational, legal and reputational risk. The key risk themes identified for 2024 are discussed under Risk Factors.
The deposit accounts of West Bank are insured by the FDIC’s Deposit Insurance Fund (DIF) to the maximum extent provided under federal law and FDIC regulations, currently $250,000 per insured depositor category.
West Bank is an Iowa-chartered bank. The deposit accounts of West Bank are insured by the FDIC’s Deposit Insurance Fund (DIF) to the maximum extent provided under federal law and FDIC regulations, currently $250,000 per insured depositor category.
Until the deficiency cited in the regulator’s order is cured, the regulator may restrict the FDIC-insured institution’s rate of growth, require the FDIC-insured institution to increase its capital, restrict the rates that the institution pays on deposits or require the institution to take any action that the regulator deems appropriate under the circumstances.
Until the deficiency cited in the banking agency’s order is cured, the agency may restrict the FDIC-insured institution’s rate of growth, require the FDIC-insured institution to increase its capital, restrict the rates that the institution pays on deposits, or require the institution to take any action that the agency deems appropriate under the circumstances.
West Bank has historically exceeded, and continues to exceed, the 300 percent guideline for commercial real estate loans. Additional monitoring processes have been implemented to manage this increased risk. Consumer Financial Services .
West Bank has historically exceeded, and continues to exceed, the 300 percent guideline for CRE loans. Additional monitoring processes have been implemented to manage this increased risk. Consumer Financial Services .
FDIC-insured institutions with $10 billion or less in assets, like West Bank, continue to be examined by their applicable bank regulators.
FDIC-insured institutions with $10 billion or less in assets, like West Bank, continue to be examined by their applicable primary federal banking regulators.
Certain limitations and reporting requirements are also placed on extensions of credit by West Bank to its directors and officers, to directors and officers of the Company and its subsidiaries, to principal stockholders of the Company and to “related interests” of such directors, officers and principal stockholders.
Certain limitations and reporting requirements are also placed on extensions of credit by West Bank to its directors and officers, to directors and officers of the Company and its subsidiaries, to principal stockholders of the Company and to “related interests” of such directors, officers and principal stockholders under state and federal law.
The Basel III Rule required minimum capital ratios as of January 1, 2015, as follows: • A ratio of Common Equity Tier 1 Capital equal to 4.5% of risk-weighted assets; • A ratio of Tier 1 Capital equal to 6% of risk-weighted assets; • A continuation of the minimum required amount of Total Capital (Tier 1 plus Tier 2) at 8% of risk-weighted assets; and • A leverage ratio of Tier 1 Capital to total quarterly average assets equal to 4% in all circumstances.
The Basel III Rule requires banking organizations to maintain minimum capital ratios, as follows: • A ratio of Common Equity Tier 1 Capital equal to 4.5% of risk-weighted assets; • A ratio of Tier 1 Capital equal to 6% of risk-weighted assets; • A continuation of the minimum required amount of Total Capital (Tier 1 plus Tier 2) at 8% of risk-weighted assets; and • A leverage ratio of Tier 1 Capital to total quarterly average assets equal to 4% in all circumstances.
For institutions, like West Bank, that are not considered large and highly complex banking organizations, assessments are now based on examination ratings and financial ratios. The total base assessment rates currently range from 2.5 basis points to 32 basis points.
For institutions, like West Bank, that are not considered large and highly complex banking organizations, assessments are now based on examination ratings and financial ratios. The total base assessment rates, effective as of January 1, 2023, currently range from 2.5 basis points to 32 basis points.
Federal law prohibits any person or company from acquiring “control” of an FDIC-insured depository institution or its holding company without prior notice to the appropriate federal bank regulator.
Federal law prohibits any person or company from acquiring “control” of an FDIC-insured depository institution or its holding company without prior notice to the appropriate federal banking agencies.
On December 18, 2015, the federal banking agencies issued a statement to reinforce prudent risk-management practices related to CRE lending, having observed substantial growth in many CRE asset and lending markets, increased competitive pressures, rising CRE concentrations in banks, and an easing of CRE underwriting standards.
On December 18, 2015, and again in recent years, the federal banking agencies have issued statements to reinforce prudent risk-management practices related to CRE lending, having observed substantial growth in many CRE asset and lending markets, increased competitive pressures, rising CRE concentrations in banks, and an easing of CRE underwriting standards.
The extent of the regulators’ powers depends on whether the institution in question is “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized,” in each case as defined by regulation.
The extent of the banking agencies’ powers depends on whether the banking organization in question is “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized,” in each case as defined by regulation.
Basel III established capital standards for banks and bank holding companies that are meaningfully more stringent than those in place previously: it increased the required quantity and quality of capital; and it required a more complex, detailed and calibrated assessment of risk in the calculation of risk weightings.
The Basel III Rule established capital standards for banks and bank holding companies that are meaningfully more stringent than those established previously and are still in effect today. The Basel III Rule increased the required quantity and quality of capital and required a more complex, detailed and calibrated assessment of risk in the calculation of risk weightings for bank assets.
In addition, institutions that seek the freedom to make capital distributions (including for dividends and repurchases of stock) and pay discretionary bonuses to executive officers without restriction must also maintain 2.5% in Common Equity Tier 1 Capital attributable to a capital conservation buffer.
In addition, banking organizations that want to make capital distributions (including for dividends and repurchases of stock) and pay discretionary bonuses to executive officers without restriction must also maintain 2.5% in Common Equity Tier 1 Capital attributable to a capital conservation buffer.
The Company declared and paid cash dividends on its common stock totaling $1.00 per share in 2023 and declared a $0.25 quarterly dividend on January 24, 2024, payable on February 21, 2024, to stockholders of record on February 7, 2024. The Company expects to continue paying regular quarterly dividends in the future.
The Company declared and paid cash dividends on its common stock totaling $1.00 per share in 2024 and declared a $0.25 quarterly dividend on January 22, 2025, payable on February 19, 2025, to stockholders of record on February 5, 2025. The Company expects to continue paying regular quarterly dividends in the future.
Following the global financial crisis, the Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, announced agreement on a strengthened set of capital requirements for banking organizations around the world, known as Basel III, to address deficiencies recognized in connection with the global financial crisis. Basel III Rule.
Following the global financial crisis, the Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, announced an agreement on a strengthened set of capital requirements for banking organizations around the world, known as the Basel III accords, to address deficiencies recognized in connection with the global financial crisis. 11 Table of Contents West Bancorporation, Inc. and Subsidiary The Basel III Rule.
Although the reforms primarily targeted systemically important financial service providers, their influence filtered down in varying degrees to community banks over time and caused our compliance and risk management processes, and the costs thereof, to increase.
Although the reforms primarily targeted large banking organizations and other systemically important financial institutions, their influence filtered down in varying degrees to community banks over time and caused our compliance and risk management processes, and the costs thereof, to increase.
The United States bank regulatory agencies adopted the Basel III regulatory capital reforms, and, at the same time, effected changes required by the Dodd-Frank Act, in regulations that were effective (with certain phase-ins) in 2015 (Basel III Rule).
The U.S. federal banking agencies adopted the U.S. Basel III regulatory capital reforms, and, at the same time, effected changes required by the Dodd-Frank Act, in regulations that were effective (with certain phase-ins) in 2015 (Basel III Rule).
Community Bank Capital Simplification . Community banks have long raised concerns with bank regulators about the regulatory burden, complexity, and costs associated with certain provisions of the Basel III Rule. In response, Congress provided an “off-ramp” for institutions, like us, with total consolidated assets of less than $10 billion.
Community Bank Capital Simplification . Community banking organizations have long raised concerns with federal banking agencies about the regulatory burden, complexity, and costs associated with certain provisions of the Basel III Rule. In response, Congress provided an “off-ramp” for institutions, like us, with total consolidated assets of less than $10 billion as part of the Regulatory Relief Act.
Under the Iowa Banking Act, Iowa-chartered banks generally may pay dividends only out of undivided profits. The Iowa Division of Banking may restrict the declaration or payment of a dividend by an Iowa-chartered bank, such as West Bank.
Dividend Payments . The primary source of funds for the Company is dividends from West Bank. Under the Iowa Banking Act, Iowa-chartered banks generally may pay dividends only out of undivided profits. The Iowa Division of Banking may restrict the declaration or payment of a dividend by an Iowa-chartered bank, such as West Bank.
The CRA requires West Bank to have a continuing and affirmative obligation in a safe and sound manner to help meet the credit needs of the entire community, including low- and moderate-income neighborhoods. Federal regulators regularly assess West Bank’s record of meeting the credit needs of its communities.
Community Reinvestment Act Requirements . The CRA requires West Bank to have a continuing and affirmative obligation in a safe and sound manner to help meet the credit needs of its entire community, including low- and moderate-income neighborhoods. The FDIC regularly assesses West Bank’s record of meeting the credit needs of its communities in dedicated examinations.
Basel III includes a liquidity framework that requires the largest insured institutions to measure their liquidity against specific liquidity tests.
The Basel III Rule includes a liquidity framework that requires the largest banking organizations to measure their liquidity against specific liquidity tests.
Additionally, bank holding companies that meet certain eligibility requirements prescribed by the BHCA and elect to operate as financial holding companies may engage in, or own shares in companies engaged in, a wider range of nonbanking activities, including securities and insurance underwriting and sales, merchant banking and any other activity that the Federal Reserve, in consultation with the Secretary of the Treasury, determines by regulation or order is financial in nature or incidental to any such financial activity or that the Federal Reserve determines by order to be complementary to any such financial activity, as long as the activity does not pose a substantial risk to the safety or soundness of FDIC-insured institutions or the financial system generally.
In addition to approval from the Federal Reserve in certain circumstances, prior approval for acquisitions may be required from other agencies, such as the Iowa Division of Banking or other agencies that regulate the target company of an acquisition. 9 Table of Contents West Bancorporation, Inc. and Subsidiary Additionally, bank holding companies that meet certain eligibility requirements prescribed by the BHCA and elect to operate as financial holding companies may engage in, or own shares in companies engaged in, a wider range of nonbanking activities, including securities and insurance underwriting and sales, merchant banking and any other activity that the Federal Reserve, in consultation with the Secretary of the Treasury, determines by regulation or order is financial in nature or incidental to any such financial activity or that the Federal Reserve determines by order to be complementary to any such financial activity, as long as the activity does not pose a substantial risk to the safety or soundness of FDIC-insured institutions or the financial system generally.
West Bank has six offices in the Des Moines area, one office in Coralville, Iowa and one office in each of our four Minnesota markets. In 2023, West Bank completed construction of a permanent branch office in Mankato, Minnesota.
West Bank has six offices in the Des Moines area, one office in Coralville, Iowa and one office in each of our four Minnesota markets. In 2024, West Bank completed construction of a new headquarters building in West Des Moines, Iowa.
We are proud of our culturally and gender diverse workforce, with approximately 14 percent identifying as persons of color and approximately 59 percent as female. 7 Table of Contents West Bancorporation, Inc. and Subsidiary We continue to invest in initiatives aimed at the growth and readiness of our workforce, including our West Bank Women’s Impact Network (WIN).
We are proud of our culturally and gender diverse workforce, with approximately 22 percent identifying as culturally or ethnically diverse and approximately 59 percent as female. We continue to invest in initiatives aimed at the growth and readiness of our workforce, including our West Bank Women’s Impact Network (WIN).
We conduct periodic company-wide employee engagement surveys to assess employee satisfaction and engagement. Succession planning and talent development are important at all levels within our organization. The Board oversees executive management’s succession plan for our named executive officers. The Board’s succession planning activities are ongoing and strategic.
Non-teller turnover was approximately 7 percent in 2024, compared to 10 percent in 2023. We conduct periodic company-wide employee engagement surveys to assess employee satisfaction and engagement. Succession planning and talent development are important at all levels within our organization. The Board oversees executive management’s succession plan for our named executive officers. The Board’s succession planning activities are ongoing.
The base for the special assessment is equal to an insured depository institution’s estimated uninsured deposits for the December 31, 2022 reporting period, adjusted to exclude the first $5 billion in estimated uninsured deposits. Because West Bank’s uninsured deposits at December 31, 2023 were less than $5 billion, this special assessment does not apply. Supervisory Assessments .
The base for the special assessment is equal to an insured depository institution’s estimated uninsured deposits for the December 31, 2022 reporting period, adjusted to exclude the first $5 billion in estimated uninsured deposits. Because the Company does not have $5 billion or more in assets, this special assessment does not apply. Supervisory Assessments .
Because of the risks attendant to their business, FDIC-insured institutions generally are required to hold more capital than other businesses, which directly affects our earnings capabilities.
Because of the risks attendant to their business, FDIC-insured institutions, such as banks, as well as their holding companies (i.e., banking organizations) generally are required to hold more capital than other businesses, which directly affects our earnings capabilities.
These means are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits, and their use may affect interest rates charged on loans or paid on deposits. 10 Table of Contents West Bancorporation, Inc. and Subsidiary Federal Securities Regulation .
These means are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits, and their use may affect interest rates charged on loans or paid on deposits, which may impact our business and operations. Federal Securities Regulation .
West Bank also was in compliance with the capital conservation buffer. Prompt Corrective Action . The concept of an institution being “well-capitalized” is part of a regulatory enforcement regime that provides the federal banking regulators with broad power to take “prompt corrective action” to resolve the problems of depository institutions based on the capital level of each particular institution.
The concept of a banking organization being “well-capitalized” is part of a regulatory enforcement regime that provides the federal banking agencies with broad power to take “prompt corrective action” to resolve the problems of depository institutions based on the capital level of each particular institution.
In addition to numerous disclosure requirements, the Dodd-Frank Act and the CFPB’s enabling rules imposed new standards for mortgage loan originations on all lenders, including banks and savings associations, in an effort to strongly encourage lenders to verify a borrower’s ability to repay, while also establishing a presumption of compliance for certain “qualified mortgages.” The CFPB has from time to time released additional rules as to qualified mortgages and the borrower’s ability to repay.
In addition to numerous disclosure requirements, the Dodd-Frank Act and the CFPB’s enabling rules imposed new standards for mortgage loan originations on all lenders, including banks and savings associations, in an effort to strongly encourage lenders to verify a borrower’s ability to repay, while also establishing a presumption of compliance for certain “qualified mortgages.” The CFPB has from time to time released additional rules as to qualified mortgages and the borrower’s ability to repay. 16 Table of Contents West Bancorporation, Inc. and Subsidiary Over the last several years, the CFPB has taken an aggressive approach to the regulation (and supervision, where applicable) of providers of consumer financial products and services.
Under the final rule, a community banking organization is eligible to elect the new framework if it has: less than $10 billion in total consolidated assets, limited amounts of certain assets and off-balance sheet exposures, and a CBLR greater than 9%. West Bank has not elected to use the CBLR framework at this time. Liquidity Requirements .
Under the final rule, a community banking organization is eligible to elect to comply with its capital requirements under the CBLR framework if it has: (i) less than $10 billion in total consolidated assets, (ii) limited amounts of certain assets and off-balance sheet exposures, and (iii) a CBLR greater than 9%.
Although capital has historically been one of the key measures of the financial health of both bank holding companies and banks, its role became fundamentally more important in the wake of the 2007-2008 global financial crisis, as the banking regulators recognized that the amount and quality of capital held by banks prior to the crisis was insufficient to absorb losses during periods of severe stress. 11 Table of Contents West Bancorporation, Inc. and Subsidiary In July 2023, federal banking agencies proposed a revision to capital rules that would apply to all banking organizations with $100 billion or more in total assets.
Although capital has historically been one of the key measures of the financial health of both bank holding companies and banks, its role became fundamentally more important in the wake of the 2007-2008 global financial crisis, as the banking agencies recognized that the amount and quality of capital held by banking organizations prior to that crisis was insufficient to absorb losses during periods of severe stress.
Furthermore, if non-compliance is based on the failure of West Bank to achieve a satisfactory CRA rating, we would not be able to commence any new financial activities or acquire a company that engages in such activities.
Furthermore, if the Federal Reserve determines that West Bank has not achieved a satisfactory CRA rating, we would not be able to commence any new financial activities or acquire a company that engages in such activities.
Among the tools available to the Federal Reserve to affect the money supply are open market transactions in U.S. government securities and changes in the discount rate on bank borrowings.
The monetary policy of the Federal Reserve has a significant effect on the operating results of bank holding companies and their subsidiaries. Among the tools available to the Federal Reserve to affect the money supply are open market transactions in U.S. government securities and changes in the discount rate on bank borrowings.
These events have further underscored the importance of liquidity risk management and contingency funding planning by insured depository institutions like West Bank. 13 Table of Contents West Bancorporation, Inc. and Subsidiary The primary role of liquidity risk management is to: (i) prospectively assess the need for funds to meet financial obligations; and (ii) ensure the availability of cash or collateral to fulfill those needs at the appropriate time by coordinating the various sources of funds available to the institution under normal and stressed conditions.
The primary role of liquidity risk management is to: (i) prospectively assess the need for funds to meet financial obligations; and (ii) ensure the availability of cash or collateral to fulfill those needs at the appropriate time by coordinating the various sources of funds available to the institution under normal and stressed conditions.
These security and privacy policies and procedures are in effect across all business lines and geographic locations. Branching Authority . Iowa banks, such as West Bank, have the authority under Iowa law to establish branches anywhere in the State of Iowa, subject to receipt of all required regulatory approvals.
Branching Authority . Iowa banks, such as West Bank, have the authority under Iowa law to establish branches anywhere in the State of Iowa, subject to receipt of all required regulatory approvals.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeInterest payments on the junior subordinated debentures underlying the TPS are classified as a “dividend” by the Federal Reserve supervisory policies and therefore are subject to applicable restrictions and approvals imposed by the Federal Reserve Board. There can be no assurances concerning continuing dividend payments.
Biggest changeInterest payments on the junior subordinated debentures underlying the TPS are classified as “dividends” by the Federal Reserve supervisory policies and therefore are subject to applicable restrictions and approvals imposed by the Federal Reserve Board. 29 Table of Contents West Bancorporation, Inc. and Subsidiary Our ability to pay dividends is subject to certain limitations and restrictions, and there is no guarantee that we will be able to continue paying the same level of dividends in the future that we have paid in the past or that we will be able to pay future dividends at all.
Although we regularly review our credit exposure to specific clients and counterparties and to specific industries that we believe may present credit concerns, default risk may arise from events or circumstances that are difficult to detect, such as fraud, or such as catastrophic events affecting certain industries.
Although we regularly review our credit exposure to specific clients and counterparties and to specific industries that we believe may present credit concerns, default risk may arise from events or circumstances that are difficult to detect, such as fraud or catastrophic events affecting certain industries.
A system failure or service denial could result in a deterioration of our ability to process loans or gather deposits and provide customer service, compromise our ability to operate effectively, result in potential noncompliance with applicable laws or regulations, damage our reputation, result in a loss of customer business or subject us to additional regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on business, financial condition, results of operations and growth prospects.
A system failure or service denial could result in a deterioration of our ability to process loans or gather deposits and provide customer service, compromise our ability to operate effectively, result in potential noncompliance with applicable laws or regulations, damage our reputation, result in a loss of customer business or subject us to additional regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
This competitive climate can make it more difficult to establish and maintain relationships with new and existing customers, can lower the rate that we are able to charge on loans, and can affect our charges for other services.
This competitive climate can make it more difficult to establish and maintain relationships with new and existing customers, lower the rate that we are able to charge on loans, and affect our charges for other services.
In addition, increases in criminal activity levels and sophistication, advances in computer capabilities, new discoveries, vulnerabilities in third-party technologies (including browsers and operating systems), or other developments could result in a compromise or breach of the technology, processes and controls that we use to prevent fraudulent transactions and to protect data about us, our customers and underlying transactions, as well as the technology used by our customers to access our systems.
In addition, increases in criminal authorized activity levels and sophistication, advances in computer capabilities, new discoveries, vulnerabilities in third-party technologies (including browsers and operating systems), or other developments could result in a compromise or breach of the technology, processes and controls that we use to prevent fraudulent transactions and to protect data about us, our customers and underlying transactions, as well as the technology used by our customers to access our systems.
In line with the foregoing, we have experienced and may continue to experience an increase in the cost of interest-bearing liabilities, primarily due to raising the rates we pay on some of our deposit products to stay competitive within our market, and an increase in borrowing costs from increases in the federal funds rate.
In line with the foregoing, we have experienced and may continue to experience an increase in the cost of interest-bearing liabilities, primarily due to raising the rates we pay on some of our deposit products to stay competitive within our market, and an increase in borrowing costs stemming from increases in the federal funds rate.
In some cases, management must select the accounting policy or method to apply from two or more alternatives, any of which might be reasonable under the circumstances. The application of that chosen accounting policy or method might result in us reporting different amounts than would have been reported under a different alternative.
In some cases, management must select the accounting policy or method to apply from two or more alternatives, any of which might be reasonable under the circumstances. The application of the chosen accounting policy or method might result in us reporting different amounts than would have been reported under a different alternative.
The market price of our common stock might decline or fail to increase in response to issuing additional common or preferred stock. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside of our control.
The market price of our common stock might decline or fail to increase in response to issuing additional common or new preferred stock. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside of our control.
Common shares have been and will be issued through the Company’s 2017 Equity Incentive Plan and the Company’s 2021 Equity Incentive Plan as grants of restricted stock units vest. As additional shares of common or preferred stock are issued, the ownership interests of our existing stockholders may be diluted.
Common shares have been and will be issued through the Company’s 2017 Equity Incentive Plan and the Company’s 2021 Equity Incentive Plan as grants of restricted stock units vest. As additional shares of common or new shares of preferred stock are issued, the ownership interests of our existing stockholders may be diluted.
Continued elevated levels of inflation could also cause increased volatility and uncertainty in the business environment, which could adversely affect loan demand and our clients’ ability to repay indebtedness.
Elevated levels of inflation could also cause increased volatility and uncertainty in the business environment, which could adversely affect loan demand and our clients’ ability to repay indebtedness.
Any increases in provisions will result in a decrease in net income and capital and may have a material adverse effect on our financial condition and results of operations. 18 Table of Contents West Bancorporation, Inc. and Subsidiary Our accounting policies and methods are the basis for how we report our financial condition and results of operations, and they may require management to make estimates about matters that are inherently uncertain.
Any increases in provisions will result in a decrease in net income and capital and may have a material adverse effect on our financial condition and results of operations. 19 Table of Contents West Bancorporation, Inc. and Subsidiary Our accounting policies and methods are the basis for how we report our financial condition and results of operations, and they may require management to make estimates about matters that are inherently uncertain.
We also compete with nonbank financial service providers, such as FinTech companies, many of which are not subject to the same regulatory restrictions that we are and may be able to compete more effectively as a result. Customer loyalty can be influenced by a competitor’s new products, especially if those offerings are priced lower than our products.
We also compete with nonbank financial service providers, such as financial technology companies, many of which are not subject to the same regulatory restrictions that we are and may be able to compete more effectively as a result. Customer loyalty can be influenced by a competitor’s new products, especially if those offerings are priced lower than our products.
If we are forced to liquidate any of those investments prior to maturity, including because of a lack of liquidity, we would recognize as a charge to earnings the losses attributable to those securities. Our securities portfolio has an average duration of 6.2 years, so we expect an increase in unrealized losses in rising interest rate environments.
If we are forced to liquidate any of those investments prior to maturity, including because of a lack of liquidity, we would recognize as a charge to earnings the losses attributable to those securities. Our securities portfolio has an average duration of 6.4 years, so we expect an increase in unrealized losses in rising interest rate environments.
As a result of the foregoing, our ability to conduct business may be adversely affected by any significant disruptions to us or to third parties with whom we interact. Other Risks Related to West Bank’s Operations We are subject to liquidity risks.
As a result of the foregoing, our ability to conduct business may be adversely affected by any significant disruptions to us or to third parties with whom we interact. Other Risks Related to West Bank’s Operations and the Economy We are subject to liquidity risks.
Commercial real estate loans were a significant portion of our total loan portfolio as of December 31, 2023. The market value of real estate can fluctuate significantly in a short period of time as a result of market conditions in the geographic area in which the real estate is located.
Commercial real estate loans were a significant portion of our total loan portfolio as of December 31, 2024. The market value of real estate can fluctuate significantly in a short period of time as a result of market conditions in the geographic area in which the real estate is located.
Moreover, such circumstances, including fraud, may become more likely to occur or be detected in periods of general economic uncertainty. We may also fail to receive full information with respect to the risks of a counterparty.
Moreover, such circumstances may become more likely to occur or be detected in periods of general economic uncertainty. We may also fail to receive full information with respect to the risks of a counterparty.
While we do not offer products relating to digital assets, including cryptocurrencies, stablecoins and other similar assets, there has been a significant increase in digital asset adoption globally over the past several years.
While we do not offer products relating to digital assets, including cryptocurrencies, stablecoins or other similar assets, there has been a significant increase in digital asset adoption globally over the past several years.
It is also possible that governmental responses to the current inflation environment could adversely affect our business, such as changes to monetary and fiscal policy that are too strict, or the imposition or threatened imposition of price controls. The duration and severity of the current inflationary period cannot be estimated with precision.
It is also possible that governmental responses to elevated inflation rates could adversely affect our business, such as changes to monetary and fiscal policy that are too strict, or the imposition or threatened imposition of price controls. The duration and severity of the current inflationary period cannot be estimated with precision.
As of December 31, 2023, the Company had $20.6 million in junior subordinated debentures outstanding that were issued to the Company’s subsidiary trust, West Bancorporation Capital Trust I, and $60.0 million aggregate principal amount outstanding of the Company’s 5.25% Fixed-to-Floating Rate Subordinated Notes due 2032 (the “Notes”).
As of December 31, 2024, the Company had $20.6 million in junior subordinated debentures outstanding that were issued to the Company’s subsidiary trust, West Bancorporation Capital Trust I, and $60.0 million aggregate principal amount outstanding of the Company’s 5.25% Fixed-to-Floating Rate Subordinated Notes due in 2032 (the Notes).
Accordingly, we cannot provide assurance that we will be able to raise additional capital, if needed, or on terms acceptable to us.
Accordingly, we cannot provide assurance that we will be able to raise additional capital, if needed, or do so on terms acceptable to us.
In addition, litigation can be costly. Any financial liability, litigation costs or reputational damage caused by these legal claims could have a material adverse impact on our business, financial condition and results of operations. The soundness of other financial institutions could adversely affect us. Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships.
Any financial liability, litigation costs or reputational damage caused by these legal claims could have a material adverse impact on our business, financial condition and results of operations. The soundness of other financial institutions could adversely affect us. Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships.
Although we believe West Bank’s current sources of funds are adequate for its liquidity needs, there can be no assurance in this regard for the future. 21 Table of Contents West Bancorporation, Inc. and Subsidiary The competition for banking and financial services in our market areas is high, which could adversely affect our financial condition and results of operations.
Although we believe West Bank’s current sources of funds are adequate for its liquidity needs, there can be no assurance in this regard for the future. The competition for banking and financial services in our market areas is high, which could adversely affect our financial condition and results of operations.
Economic events, including decreases in office occupancy following the COVID-19 pandemic, or governmental regulations outside of the control of the borrower or lender could negatively impact the future cash flows and market values of the affected properties. 17 Table of Contents West Bancorporation, Inc. and Subsidiary If the loans that are collateralized by real estate become troubled and the value of the real estate has been significantly impaired, then we may not be able to recover the full contractual amount of principal and interest that we anticipated at the time of originating the loans, which could cause us to charge off all or a portion of the loans.
Economic events, including governmental regulations outside of the control of the borrower or lender could negatively impact the future cash flows and market values of the affected properties. 18 Table of Contents West Bancorporation, Inc. and Subsidiary If the loans that are collateralized by real estate become troubled and the value of the real estate has been significantly impaired, then we may not be able to recover the full contractual amount of principal and interest that we anticipated at the time of originating the loans, which could cause us to charge off all or a portion of the loans.
We are subject to various legal claims and litigation. We are periodically involved in routine litigation incidental to our business. Regardless of whether these claims and legal actions are founded or unfounded, if such legal actions are not resolved in a manner favorable to us, they may result in significant financial liability and/or adversely affect the Company’s reputation.
We are periodically involved in routine litigation incidental to our business. Regardless of whether these claims and legal actions are founded or unfounded, if such legal actions are not resolved in a manner favorable to us, they may result in significant financial liability and/or adversely affect the Company’s reputation. In addition, litigation can be costly.
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. At December 31, 2023, we had $121,787 of net unrealized losses in our securities portfolio.
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. At December 31, 2024, we had $128.8 million of net unrealized losses in our securities portfolio.
Based on these criteria, West Bank had concentrations of 90 percent and 417 percent, respectively, as of December 31, 2023. The purpose of the CRE Guidance is to assist banks in developing risk management practices and capital levels commensurate with the level and nature of commercial real estate concentrations.
Based on these criteria, West Bank had concentrations of 110 percent and 422 percent, respectively, as of December 31, 2024. The purpose of the CRE Guidance is to assist banks in developing risk management practices and capital levels commensurate with the level and nature of commercial real estate concentrations.
If management’s estimates or assumptions are incorrect, the Company may experience a material loss. From time to time, the FASB and the SEC change the financial accounting and reporting standards or the interpretation of those standards that govern the preparation of our financial statements.
If management’s estimates or assumptions are incorrect, the Company may experience a material loss. Changes in accounting policies or standards could materially impact our financial statements. From time to time, the FASB and the SEC change the financial accounting and reporting standards or the interpretation of those standards that govern the preparation of our financial statements.
These changes may also require us to invest significant management attention and resources to make any necessary changes to operations in order to comply and could therefore materially and adversely affect our business, financial condition and results of operations. 25 Table of Contents West Bancorporation, Inc. and Subsidiary Monetary policies and regulations of the Federal Reserve could adversely affect our business, financial condition and results of operations.
These changes may also require us to invest significant management attention and resources to make any necessary changes to operations in order to comply and could therefore materially and adversely affect our business, financial condition and results of operations. Monetary policies and regulations of the Federal Reserve could adversely affect our business, financial condition and results of operations.
An overall labor shortage, lack of skilled labor, increased turnover or labor inflation, caused by general macroeconomic factors, could have a material adverse impact on our business, results of operations and financial condition. 23 Table of Contents West Bancorporation, Inc. and Subsidiary Changes in interest rates could negatively impact our financial condition and results of operations.
An overall labor shortage, lack of skilled labor, increased turnover or labor-driven inflation, caused by general macroeconomic factors, could have a material adverse impact on our business, results of operations and financial condition. Changes in interest rates could negatively impact our financial condition and results of operations.
Should any events or circumstances that could undermine our reputation occur, there can be no assurance that any lost revenue from customers opting to move their business to another institution and the additional costs and expenses that we may incur in addressing such issues would not adversely affect our financial condition and results of operations.
Should any events or circumstances that could undermine our reputation occur, there can be no assurance that any lost revenue from customers opting to move their business to another institution and the additional costs and expenses that we may incur in addressing such issues would not adversely affect our financial condition and results of operations. 23 Table of Contents West Bancorporation, Inc. and Subsidiary We are subject to various legal claims and litigation.
Community banks, such as West Bank, rely more heavily than larger institutions on net interest income as a revenue source. Larger institutions generally have more diversified sources of noninterest income.
Community banks, such as West Bank, rely more heavily than larger institutions on net interest income as a revenue source.
Additionally, we may be negatively affected by brand or reputational harm to other community banks or to the community banking industry. 22 Table of Contents West Bancorporation, Inc. and Subsidiary We may experience difficulties in managing our growth.
Additionally, we may be negatively affected by brand or reputational harm to other community banks or to the community banking industry. We may experience difficulties in managing our growth.
Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity, or investor or business confidence; limitations on the availability or increases in the cost of credit and capital; increases in inflation or interest rates; high unemployment; uncertainty in U.S. trade policies, legislation, treaties and tariffs; natural disasters; acts of war or terrorism; widespread disease or pandemics; or a combination of these or other factors.
Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity, or investor or business confidence; limitations on the availability or increases in the cost of credit and capital; inflation or interest rates; recent developments and events in the financial services industry, including the large-scale deposit withdrawals over a short period of time that resulted in several bank failures; high unemployment; uncertainty in U.S. trade policies, legislation, treaties and tariffs; natural disasters; acts of war or terrorism; widespread disease or pandemics; or a combination of these or other factors.
The loss of services of a few of our senior executive officers or key personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business, financial condition or results of operations, at least in the short term.
The loss of services of a few of our senior executive officers or key personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business, financial condition or results of operations, at least in the short term. 24 Table of Contents West Bancorporation, Inc. and Subsidiary Labor shortages and a failure to attract and retain qualified employees could negatively impact our business, results of operations and financial condition.
The specific consequences of the conflicts on our business are difficult to predict at this time, but in addition to inflationary pressures affecting our operations and those of our customers and borrowers, we may also experience an increase in cyberattacks against us, our customers and borrowers, service providers and other third parties. 24 Table of Contents West Bancorporation, Inc. and Subsidiary Continued elevated levels of inflation could adversely impact our business, results of operations and financial condition.
The specific consequences of the conflicts on our business are difficult to predict at this time, but in addition to inflationary pressures affecting our operations and those of our customers and borrowers, we may also experience an increase in cyberattacks against us, our customers and borrowers, service providers and other third parties.
We rely on customer deposits to be a low cost and stable source of funding. We compete with banks and other financial services companies, including digital asset service providers, for deposits.
We rely on customer deposits to be a low cost and stable source of funding. We compete with banks and other financial services companies, including digital asset service providers, for deposits. If our competitors raise the rates they pay on deposits, we may need to raise our rates to avoid losing deposits.
The Company may issue additional shares of common or preferred stock in order to raise capital at some date in the future to support continued growth, either internally generated or through acquisitions.
Issuing additional common or preferred stock may adversely affect the market price of our common stock, and capital may not be available when needed. The Company may issue additional shares of common or preferred stock in order to raise capital at some date in the future to support continued growth, either internally generated or through acquisitions.
Effective use of technology increases efficiency and enables banks to better serve customers. Our future success depends, in part, on our ability and the ability of our third-party partners to effectively implement new technology.
The banking industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. Effective use of technology increases efficiency and enables banks to better serve customers. Our future success depends, in part, on our ability and the ability of our third-party partners to effectively implement new technology.
Their use also affects interest rates charged on loans or paid on deposits. The monetary policies and regulations of the Federal Reserve have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future.
The monetary policies and regulations of the Federal Reserve have had a significant effect on our operating results and those of commercial banks in the past and are expected to continue to do so in the future.
Compliance with current or future privacy, data protection and information security laws could result in higher compliance and technology costs and could restrict our ability to provide certain products and services, which could adversely affect our business, financial condition or results of operations.
Compliance with current or future privacy, data protection and information security laws could result in higher compliance and technology costs and could restrict our ability to provide certain products and services, which could adversely affect our business, financial condition or results of operations. 21 Table of Contents West Bancorporation, Inc. and Subsidiary Issues with the use of artificial intelligence in our marketplace may result in reputational harm or liability, or could otherwise adversely affect our business.
At December 31, 2023, our borrowed funds increased to $592.6 million, compared to $485.9 million at December 31, 2022. The increase included $140.0 million in FHLB advances associated with long-term interest rate swaps and $20.0 million in FHLB advances with a fixed interest rate, partially offset by a decrease of $49.7 million in federal funds purchased and other short-term borrowings.
At December 31, 2024, our borrowed funds decreased to $392.6 million, compared to $592.6 million at December 31, 2023. The overall decrease included reductions of $150.3 million in federal funds purchased and other short-term borrowings, $25.0 million in FHLB advances associated with long-term interest rate swaps and $20.0 million in FHLB advances with a fixed interest rate.
In addition, political developments, including possible changes in law introduced by the Biden administration or the appointment of new personnel in regulatory agencies, add uncertainty to the implementation, scope and timing of regulatory reforms.
In addition, political developments, including the possible implementation of policies proposed by the new presidential administration, including tariffs, mass deportations and tax or financial regulations or the appointment of new personnel in regulatory agencies, add uncertainty to the implementation, scope and timing of regulatory reforms.
The desired market characteristics of depth, liquidity, and orderliness require the substantial presence of willing buyers and sellers in the marketplace at any given time. In our case, this presence depends on the individual decisions of a relatively small number of investors and general economic and market conditions over which we have no control.
In our case, this presence depends on the individual decisions of a relatively small number of investors and general economic and market conditions over which we have no control.
The specific effects of such policies upon our business, financial condition and results of operations cannot be predicted. Other Risks Related to the Banking Industry in General Technology is changing rapidly and may put us at a competitive disadvantage. The banking industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services.
The specific impact of such policies upon our business, financial condition and results of operations cannot be predicted. 27 Table of Contents West Bancorporation, Inc. and Subsidiary Other Risks Related to the Banking Industry in General Technology is changing rapidly and may put us at a competitive disadvantage.
The failure of these systems, or the termination of a third-party software license or service agreement on which any of these systems is based, could interrupt our operations.
We outsource to third parties many of our major systems, such as data processing and mobile and online banking. The failure of these systems, or the termination of a third-party software license or service agreement on which any of these systems is based, could interrupt our operations.
Our business is subject to domestic and, to a lesser extent, international economic conditions and other factors, many of which are beyond our control and could materially and adversely affect us.
Larger institutions generally have more diversified sources of noninterest income. 25 Table of Contents West Bancorporation, Inc. and Subsidiary Our business is subject to domestic and, to a lesser extent, international economic conditions and other factors, many of which are beyond our control and could materially and adversely affect us.
As is the case with many financial institutions, our emphasis on increasing the development of core deposits, those with no stated maturity date, has resulted in our interest-bearing liabilities having a shorter duration than our interest-earning assets. This imbalance can create significant earnings volatility because interest rates change over time.
A large percentage of our securities have fixed interest rates and are classified as available for sale. As is the case with many financial institutions, our emphasis on increasing the development of core deposits, those with no stated maturity date, has resulted in our interest-bearing liabilities having a shorter duration than our interest-earning assets.
Interest rates are sensitive to many factors, including government monetary and fiscal policies, domestic and international economic and political conditions and competition. If interest rates continue to increase, banks will experience competitive pressures to further increase rates paid on deposits.
Interest rates are sensitive to many factors, including government monetary and fiscal policies, domestic and international economic and political conditions and competition.
Failure to meet these capital and other regulatory requirements could affect customer confidence, our ability to grow, the costs of funds, FDIC insurance costs, the ability to pay dividends on common stock and to make distributions on the junior subordinated debentures, the ability to make acquisitions, the ability to make certain discretionary bonus payments to executive officers, and the results of operations and financial condition.
Failure to meet these capital and other regulatory requirements could affect customer confidence, our ability to grow, our costs of funds, FDIC insurance costs, our ability to pay dividends on common stock and to make distributions on our junior subordinated debentures, our ability to make acquisitions, our ability to make certain discretionary bonus payments to executive officers, and our results of operations and financial condition. 26 Table of Contents West Bancorporation, Inc. and Subsidiary Risks Related to the Supervision and Regulation of the Banking Industry and Government Policies We may be materially and adversely affected by the highly regulated environment in which we operate.
Our business is highly dependent on the successful and uninterrupted functioning of our information technology and telecommunications systems, third-party servicers, accounting systems, mobile and online banking platforms and financial intermediaries. We outsource to third parties many of our major systems, such as data processing and mobile and online banking.
We depend on information technology and telecommunications systems of third parties, and any systems failures, interruptions or data breaches involving these systems could adversely affect our operations and financial condition. Our business is highly dependent on the successful and uninterrupted functioning of our information technology and telecommunications systems, third-party servicers, accounting systems, mobile and online banking platforms and financial intermediaries.
In addition, we expect that governments will continue to assess and implement new laws and regulations concerning the use of artificial intelligence, which may affect or impair the usability or efficiency of our products and services and those developed by our third-party partners. 20 Table of Contents West Bancorporation, Inc. and Subsidiary We depend on information technology and telecommunications systems of third parties, and any systems failures, interruptions or data breaches involving these systems could adversely affect our operations and financial condition.
In addition, we expect that governments will continue to assess and implement new laws and regulations concerning the use of artificial intelligence, which may affect or impair the usability or efficiency of our products and services and those developed by our third-party partners.
Although we have not experienced any material labor shortage to date, we have recently observed an overall tightening and increasingly competitive local labor market. A sustained labor shortage or increased turnover rates within our employee base could lead to increased costs, such as increased compensation expense to attract and retain employees.
A sustained labor shortage or increased turnover rates within our employee base could lead to increased costs, such as increased compensation expense to attract and retain employees.
As with many developing technologies, artificial intelligence presents risks and challenges that could affect its further development, adoption, and use, and therefore our business.
Artificial intelligence, including generative artificial intelligence, is or may be enabled by or integrated into our products or those developed by our third-party partners. As with many developing technologies, artificial intelligence presents risks and challenges that could affect its further development, adoption, and use, and therefore our business.
Information security breaches and cybersecurity-related incidents may include fraudulent or unauthorized access to systems used by us, our customers or third-party vendors, denial or degradation of service attacks, and malware or other cyber attacks. 19 Table of Contents West Bancorporation, Inc. and Subsidiary There continues to be a rise in electronic fraudulent activity, security breaches and cyber attacks within the financial services industry, especially in the commercial banking sector due to cyber-criminals targeting commercial bank accounts, and as a result of increasingly sophisticated methods of conducting cyber attacks, including those employing artificial intelligence.
There continues to be a rise in electronic fraudulent activity, security breaches and cyber attacks within the financial services industry, especially in the commercial banking sector due to cyber-criminals targeting commercial bank accounts, and as a result of increasingly sophisticated methods of conducting cyber attacks, including those employing artificial intelligence.
As interest rates have increased, our cost of funds has increased more rapidly than the yields on a substantial portion of our interest-earning assets. In addition, the market value of our securities portfolio has declined in recent periods. At December 31, 2023, we had $121,787 of net unrealized losses in the securities portfolio.
This imbalance can create significant earnings volatility because interest rates change over time. As interest rates have increased in recent periods, our cost of funds has increased more rapidly than the yields on a substantial portion of our interest-earning assets. In addition, the market value of our securities portfolio has declined in recent periods.
The United States has recently experienced elevated levels of inflation, with the consumer price index climbing significantly in 2022. Inflationary pressures reduced in 2023 but remained elevated. Future inflation metrics are uncertain for 2024 and onward. Continued levels of inflation could have complex effects on our business, results of operations and financial condition, some of which could be materially adverse.
Continued elevated levels of inflation could adversely impact our business, results of operations and financial condition. The United States recently experienced elevated levels of inflation throughout 2022 and 2023. Inflationary pressures moderated in 2024, but future inflation metrics are uncertain for 2025 and onward.
The loss of these revenue streams and the lower cost deposits as a source of funds could have a material adverse effect on our business, financial condition and results of operations.
The loss of these revenue streams and the lower cost deposits as a source of funds could have a material adverse effect on our business, financial condition and results of operations. Potential partnerships with digital asset companies, moreover, could also entail significant investment. Climate change could adversely affect our business, affect client activity levels and damage our reputation.
Physical risks include extreme storms that damage or destroy property and inventory securing loans we make, or may interrupt our customers’ business operations, putting them in financial difficulty, and increasing the risk of default. Our customers are also facing changes in energy and commodity prices driven by climate change, as well as new regulatory requirements resulting in increased operational costs.
Physical risks include extreme storms and other weather related events that damage or destroy property and inventory securing loans we make, or may interrupt our customers’ business operations, putting them in financial difficulty, and increasing the risk of default.
Any failure to maintain an effective internal control environment could impact our ability to report our financial results on an accurate and timely basis, which could result in regulatory actions, loss of investor confidence, and an adverse impact on our business operations and stock price.
Any failure to maintain an effective internal control environment could impact our ability to report our financial results on an accurate and timely basis, which could result in regulatory actions, loss of investor confidence, and an adverse impact on our business operations and stock price. 20 Table of Contents West Bancorporation, Inc. and Subsidiary Risks Related to Information Security and Business Interruption The occurrence of fraudulent activity, breaches or failures of our information security controls or cybersecurity-related incidents could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Risks Related to West Bancorporation’s Common Stock Our stock is relatively thinly traded. Although our common stock is traded on the Nasdaq Global Select Market, the average daily trading volume of our common stock is relatively small compared to many public companies.
Although our common stock is traded on the Nasdaq Global Select Market, the average daily trading volume of our common stock is relatively small compared to many public companies. The desired market characteristics of depth, liquidity, and orderliness require the substantial presence of willing buyers and sellers in the marketplace at any given time.
Earnings in the banking industry, particularly the community bank segment, are substantially dependent on net interest income, which is the difference between interest earned on interest-earning assets (securities and loans) and interest paid on interest-bearing liabilities (deposits and borrowings).
Our earnings and cash flows are largely dependent on our net interest income, which is the difference between the interest income we earn on interest-earning assets, such as loans and investment securities, and the interest expense that we pay on interest-bearing liabilities, such as deposits and borrowings.
The Federal Reserve has announced that it is ending the BTFP and will cease making new loans under this program on March 11, 2024. If economic influences change so that we do not have access to short-term credit, or our depositors withdraw a substantial amount of their funds for other uses, West Bank might experience liquidity issues.
West Bank maintains liquidity primarily through customer deposits and other short-term funding sources, including advances from the Federal Home Loan Bank (FHLB) and the Federal Reserve discount window, brokered deposits and purchased federal funds. 22 Table of Contents West Bancorporation, Inc. and Subsidiary If economic influences change so that we do not have access to short-term credit, or our depositors withdraw a substantial amount of their funds for other uses, West Bank might experience liquidity issues.
Such fraudulent activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering and other dishonest acts.
Such fraudulent activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering and other dishonest acts. Information security breaches and cybersecurity-related incidents may include fraudulent or unauthorized access to systems used by us, our customers or third-party vendors, denial or degradation of service attacks, and malware or other cyber attacks.
Labor shortages and a failure to attract and retain qualified employees could negatively impact our business, results of operations and financial condition. A number of factors may adversely affect the labor force available to us or increase labor costs, including high employment levels and decreased labor force size and participation rates.
A number of factors may adversely affect the labor force available to us or increase labor costs, including changes in unemployment levels and decreased labor force size and participation rates. Although we have not experienced any material labor shortage to date, we have recently observed an overall tightening and increasingly competitive local labor market.
Risks Related to the Supervision and Regulation of the Banking Industry and Government Policies We may be materially and adversely affected by the highly regulated environment in which we operate. We are subject to extensive federal and state regulation, supervision and examination.
We are subject to extensive federal and state regulation, supervision and examination.
Removed
Risks Related to Information Security and Business Interruption The occurrence of fraudulent activity, breaches or failures of our information security controls or cybersecurity-related incidents could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Added
Such changes may result in us being subject to new or changing accounting and reporting standards. In addition, trends in financial and business reporting, including new disclosure requirements, could require us to incur additional reporting expense.
Removed
Issues with the use of artificial intelligence in our marketplace may result in reputational harm or liability, or could otherwise adversely affect our business. Artificial intelligence, including generative artificial intelligence, is or may be enabled by or integrated into our products or those developed by our third-party partners.
Added
Deposit balances can decrease when customers perceive alternative investments, such as money market funds, treasury securities, and certificates of deposit at other financial institutions as providing a better risk/return trade-off.
Removed
West Bank maintains liquidity primarily through customer deposits and other short-term funding sources, including advances from the Federal Home Loan Bank (FHLB) and the Federal Reserve discount window, brokered deposits and purchased federal funds.
Added
If customers move money out of bank deposits and into other investments, we could lose a relatively low cost source of funds, which would require us to seek other, potentially more expensive funding alternatives.
Removed
Additionally, the Federal Reserve established the Bank Term Funding Program, or BTFP, on March 12, 2023, offering qualifying banks loans of up to one year in length collateralized by qualifying assets, including U.S. securities valued at par, to serve as a source of additional liquidity against high-quality securities and reducing an institution’s need to quickly sell high-quality securities to meet liquidity needs.
Added
Additionally, changes in interest rates also affect our ability to fund our operations with client deposits and the fair value of securities in our investment portfolio and derivatives portfolio. Therefore, any change in general market interest rates, including changes in federal fiscal and monetary policies, can have a significant effect on our net interest income and results of operations.
Removed
As a result, our cost of funds has increased and caused a decline in our net interest income and net interest margin in 2023, as compared to 2022.
Added
Following a series of significant increases to the target federal funds rate made by the Federal Reserve throughout 2022 and 2023 as part of an effort to combat elevated levels of inflation affecting the U.S. economy, the Federal Reserve began enacting incremental rate cuts at the end of 2024.
Removed
If our competitors raise the rates they pay on deposits, our funding costs may increase, either because we raise our rates to avoid losing deposits or because we lose deposits and must rely on more expensive sources of funding.
Added
While additional rate cuts are anticipated in 2025, the occurrence or significance of changes in interest rates cannot be predicted. Our interest-earning assets and interest-bearing liabilities may react in different degrees to changes in market interest rates.
Removed
If the Federal Reserve Federal Open Markets Committee (FOMC) further increases the targeted federal funds rates, overall interest rates likely will rise, which may negatively impact the entire national economy.
Added
Interest rates on some types of assets and liabilities may fluctuate prior to changes in broader market interest rates, while rates on other types of assets and liabilities may lag behind. The result of these changes to rates may cause differing spreads on interest-earning assets and interest-bearing liabilities. We cannot control or accurately predict changes in market rates of interest.
Removed
In addition, our net interest income could be adversely affected if the rates we pay on deposits and borrowings increase more rapidly than the rates we earn on loans and other assets. Rising interest rates also may reduce the demand for loans and the value of fixed-rate securities.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAny of these systems can be compromised, including by employees, customers and other individuals who are authorized to use them, and bad actors using sophisticated and a constantly evolving set of software, tools and strategies to do so.
Biggest changeAny of these systems can be compromised, including by employees, customers and other individuals who are authorized to use them, and bad actors using sophisticated and constantly evolving sets of software, tools and strategies to do so.
To carry out their duties, the Board receives updates from the Risk Committee regarding cybersecurity risks and the Company’s efforts to prevent, detect, mitigate and remediate any cybersecurity incidents on at least a quarterly basis. 29 Table of Contents West Bancorporation, Inc. and Subsidiary
To carry out their duties, the Board receives updates from the Risk Committee regarding cybersecurity risks and the Company’s efforts to prevent, detect, mitigate and remediate any cybersecurity incidents on at least a quarterly basis. 31 Table of Contents West Bancorporation, Inc. and Subsidiary

Item 2. Properties

Properties — owned and leased real estate

2 edited+1 added−2 removed0 unchanged
Biggest changeFour branch offices in the Des Moines, Iowa, metropolitan area are leased. Three of these branch offices are full-service locations, while one is a drive-up only, express location. West Bank also leases one full-service branch office in Owatonna, Minnesota. West Bank owns five full-service branch offices in Coralville and Waukee, Iowa, and Rochester, St. Cloud and Mankato, Minnesota.
Biggest changeThree of these branch offices are full-service locations, while one is a drive-up only, express location. West Bank owns six full-service branch offices in Coralville and Waukee, Iowa, and Rochester, St. Cloud, Mankato and Owatonna, Minnesota. We believe each of our facilities is adequate to meet our needs.
ITEM 2. PROPERTIES The corporate office of the Company is located in the main office building of West Bank, at 1601 22 nd Street in West Des Moines, Iowa, 50266. West Bank leases its main banking office, along with additional office space for operational departments. West Bank operates ten branch offices in addition to its main office.
ITEM 2. PROPERTIES The corporate office of the Company is located in the headquarters building of West Bank, at 3330 Westown Parkway in West Des Moines, Iowa, 50266. West Bank operates ten branch offices in addition to its headquarters office. Four branch offices in the Des Moines, Iowa, metropolitan area are leased.
Removed
We believe each of our facilities is adequate to meet our needs. In November 2023, the Company completed construction of a new office for its Mankato, Minnesota branch. At that time, the previously leased location was vacated.
Added
In 2023, West Bank purchased land in Owatonna, Minnesota for the purpose of constructing a full-service office. West Bank completed construction and opened this new office in January 2025, upon which time the leased office in Owatonna, Minnesota was vacated.
Removed
West Bank is constructing a new corporate headquarters which is scheduled to open on April 15, 2024, at its new address of 3330 Westown Parkway, West Des Moines, Iowa 50266. Upon moving to the new corporate headquarters, our current headquarters will be vacated, which will coincide with its lease expiration.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+0 added−0 removed3 unchanged
Biggest changeThe Company’s common stock price performance shown in the following graph is not indicative of future stock price performance. Period Ending Index 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 West Bancorporation, Inc. 100.00 139.47 109.93 183.00 156.60 137.21 Nasdaq Composite Index 100.00 136.69 198.10 242.03 163.28 236.17 S&P U.S.
Biggest changeThe Company’s common stock price performance shown in the following graph is not indicative of future stock price performance. Period Ending Index 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 West Bancorporation, Inc. 100.00 78.82 131.21 112.28 98.38 105.98 Nasdaq Composite Index 100.00 144.92 177.06 119.45 172.77 223.87 S&P U.S.
In addition, applicable bank regulatory authorities have the power to require any bank to suspend the payment of dividends until the bank complies with all requirements that may be imposed by such authorities. 31 Table of Contents West Bancorporation, Inc. and Subsidiary The following performance graph provides information regarding the cumulative, five-year return on an indexed basis of the common stock of the Company as compared with the Nasdaq Composite Index and the S&P U.S.
In addition, applicable bank regulatory authorities have the power to require any bank to suspend the payment of dividends until the bank complies with all requirements that may be imposed by such authorities. 33 Table of Contents West Bancorporation, Inc. and Subsidiary The following performance graph provides information regarding the cumulative, five-year return on an indexed basis of the common stock of the Company as compared with the Nasdaq Composite Index and the S&P U.S.
BMI Banks - Midwest Region Index prepared by S&P Global Market Intelligence. The indices assume the investment of $100 on December 31, 2018, in the common stock of the Company, the Nasdaq Composite Index and the S&P U.S. BMI Banks - Midwest Region Index, with all dividends reinvested.
BMI Banks - Midwest Region Index prepared by S&P Global Market Intelligence. The indices assume the investment of $100 on December 31, 2019, in the common stock of the Company, the Nasdaq Composite Index and the S&P U.S. BMI Banks - Midwest Region Index, with all dividends reinvested.
Total cash dividends paid to common stockholders in both 2023 and 2022 were $1.00 per common share. Dividend declarations are evaluated and determined by the Board on a quarterly basis, and the dividends are paid quarterly.
Total cash dividends paid to common stockholders in both 2024 and 2023 were $1.00 per common share. Dividend declarations are evaluated and determined by the Board on a quarterly basis, and the dividends are paid quarterly.
There were 149 holders of record of the Company’s common stock as of February 16, 2024, and an estimated 4,000 additional beneficial holders whose stock was held in street name by brokerages or fiduciaries. The closing price of the Company’s common stock was $17.63 on February 16, 2024.
There were 133 holders of record of the Company’s common stock as of February 14, 2025, and an estimated 4,300 additional beneficial holders whose stock was held in street name by brokerages or fiduciaries. The closing price of the Company’s common stock was $22.20 on February 14, 2025.
BMI Banks - Midwest Region Index 100.00 130.10 111.85 147.78 127.53 130.20 *Source: S&P Global Market Intelligence. Used with permission. All rights reserved. 32 Table of Contents West Bancorporation, Inc. and Subsidiary ITEM 6. Reserved.
BMI Banks - Midwest Region Index 100.00 85.98 113.59 98.03 100.08 122.10 *Source: S&P Global Market Intelligence. Used with permission. All rights reserved. 34 Table of Contents West Bancorporation, Inc. and Subsidiary ITEM 6. Reserved.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

2 edited+0 added−5 removed1 unchanged
Biggest changeITEM 6. RESERVED 33 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 33 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 52 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 53 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 100 ITEM 9A. CONTROLS AND PROCEDURES 100 ITEM 9B.
Biggest changeITEM 6. RESERVED 35 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 35 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 54 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 55 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 100 ITEM 9A. CONTROLS AND PROCEDURES 100 ITEM 9B.
PRINCIPAL ACCOUNTANT FEES AND SERVICES 104 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 104 ITEM 16.
PRINCIPAL ACCOUNTANT FEES AND SERVICES 104 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 104
Removed
FORM 10-K SUMMARY 107 3 (PAGE INTENTIONALLY LEFT BLANK) 4 Table of Contents West Bancorporation, Inc. and Subsidiary “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).
Removed
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.
Removed
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.
Removed
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 rising 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 at Silicon Valley Bank, Signature Bank and First Republic Bank that resulted in failure of those institutions; changes in legal and regulatory requirements, limitations and costs, including in response to the recent failures of Silicon Valley Bank, Signature Bank and First Republic Bank; 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 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 businesses; 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 new 1 percent excise tax on stock buybacks by publicly traded companies; and any other risks described in the “Risk Factors” sections of reports filed by the Company with the Securities and Exchange Commission.
Removed
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. PART I

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

111 edited+24 added−37 removed60 unchanged
Biggest changeInterest expense includes the effect of interest rate swaps, if applicable. 2023 2022 2021 Average Balance Revenue/ Expense Yield/ Rate Average Balance Revenue/ Expense Yield/ Rate Average Balance Revenue/ Expense Yield/ Rate Assets Interest-earning assets: Loans: (1) (2) Commercial $ 520,116 $ 32,067 6.17 % $ 487,151 $ 22,742 4.67 % $ 525,228 $ 23,365 4.45 % Real estate (3) 2,270,662 110,431 4.86 % 2,061,777 84,523 4.10 % 1,796,118 72,579 4.04 % Consumer and other 9,478 665 7.02 % 5,748 282 4.91 % 4,193 182 4.34 % Total loans 2,800,256 143,163 5.11 % 2,554,676 107,547 4.21 % 2,325,539 96,126 4.13 % Securities: Taxable 516,118 13,696 2.65 % 592,186 12,524 2.11 % 450,910 8,542 1.89 % Tax-exempt (3) 146,734 3,768 2.57 % 155,803 4,197 2.69 % 141,816 3,522 2.48 % Total securities 662,852 17,464 2.63 % 747,989 16,721 2.24 % 592,726 12,064 2.04 % Interest-bearing deposits 2,856 169 5.94 % 58,426 203 0.35 % 233,873 292 0.12 % Total interest-earning assets (3) 3,465,964 160,796 4.64 % 3,361,091 124,471 3.70 % 3,152,138 108,482 3.44 % Noninterest-earning assets: Cash and due from banks 23,139 23,842 41,141 Premises and equipment, net 67,281 43,299 31,291 Other, less allowance for credit losses 106,194 80,553 46,612 Total noninterest-earning assets 196,614 147,694 119,044 Total assets $ 3,662,578 $ 3,508,785 $ 3,271,182 Liabilities and Stockholders’ Equity Interest-bearing liabilities: Deposits: Interest-bearing demand $ 467,174 6,984 1.49 % $ 505,889 2,458 0.49 % $ 477,988 769 0.16 % Savings and money market 1,357,675 43,569 3.21 % 1,452,034 15,814 1.09 % 1,413,878 5,641 0.40 % Time 424,320 16,243 3.83 % 291,732 4,357 1.49 % 208,164 1,538 0.74 % Total deposits 2,249,169 66,796 2.97 % 2,249,655 22,629 1.01 % 2,100,030 7,948 0.38 % Borrowed funds: Federal funds purchased and other short-term borrowings 194,802 9,532 4.89 % 62,901 1,764 2.80 % 4,620 5 0.11 % Subordinated notes, net 79,501 4,442 5.59 % 52,873 2,867 5.42 % 20,458 1,008 4.93 % Federal Home Loan Bank advances 265,644 7,694 2.90 % 128,863 2,669 2.07 % 140,274 2,944 2.10 % Long-term debt 49,938 2,810 5.63 % 51,489 1,680 3.26 % 20,995 316 1.51 % Total borrowed funds 589,885 24,478 4.15 % 296,126 8,980 3.03 % 186,347 4,273 2.29 % Total interest-bearing liabilities 2,839,054 91,274 3.21 % 2,545,781 31,609 1.24 % 2,286,377 12,221 0.53 % Noninterest-bearing liabilities: Demand deposits 586,903 708,667 709,009 Other liabilities 25,218 30,284 31,783 Stockholders’ equity 211,403 224,053 244,013 Total liabilities and stockholders’ equity $ 3,662,578 $ 3,508,785 $ 3,271,182 Net interest income (4) /net interest spread (3) $ 69,522 1.43 % $ 92,862 2.46 % $ 96,261 2.91 % Net interest margin (3) (4) 2.01 % 2.76 % 3.05 % (1) Average loan balances include nonaccrual loans.
Biggest changeInterest expense includes the effect of interest rate swaps, if applicable. 2024 2023 2022 Average Balance Revenue/ Expense Yield/ Rate Average Balance Revenue/ Expense Yield/ Rate Average Balance Revenue/ Expense Yield/ Rate Assets Interest-earning assets: Loans: (1) (2) Commercial $ 519,568 $ 34,423 6.63 % $ 520,116 $ 32,067 6.17 % $ 487,151 $ 22,742 4.67 % Real estate (3) 2,451,830 130,829 5.34 % 2,270,662 110,431 4.86 % 2,061,777 84,523 4.10 % Consumer and other 14,425 1,065 7.38 % 9,478 665 7.02 % 5,748 282 4.91 % Total loans 2,985,823 166,317 5.57 % 2,800,256 143,163 5.11 % 2,554,676 107,547 4.21 % Securities: Taxable 472,351 13,030 2.76 % 516,118 13,696 2.65 % 592,186 12,524 2.11 % Tax-exempt (3) 141,033 3,306 2.34 % 146,734 3,768 2.57 % 155,803 4,197 2.69 % Total securities 613,384 16,336 2.66 % 662,852 17,464 2.63 % 747,989 16,721 2.24 % Interest-bearing deposits 148,321 7,595 5.12 % 2,856 169 5.94 % 58,426 203 0.35 % Total interest-earning assets (3) 3,747,528 190,248 5.08 % 3,465,964 160,796 4.64 % 3,361,091 124,471 3.70 % Noninterest-earning assets: Cash and due from banks 23,699 23,139 23,842 Premises and equipment, net 101,413 67,281 43,299 Other, less allowance for credit losses 99,110 106,194 80,553 Total noninterest-earning assets 224,222 196,614 147,694 Total assets $ 3,971,750 $ 3,662,578 $ 3,508,785 Liabilities and Stockholders’ Equity Interest-bearing liabilities: Deposits: Interest-bearing demand $ 466,238 8,684 1.86 % $ 467,174 6,984 1.49 % $ 505,889 2,458 0.49 % Savings and money market 1,560,136 57,140 3.66 % 1,357,675 43,569 3.21 % 1,452,034 15,814 1.09 % Time 639,278 31,460 4.92 % 424,320 16,243 3.83 % 291,732 4,357 1.49 % Total deposits 2,665,652 97,284 3.65 % 2,249,169 66,796 2.97 % 2,249,655 22,629 1.01 % Borrowed funds: Federal funds purchased and other short-term borrowings 75,736 4,248 5.61 % 194,802 9,532 4.89 % 62,901 1,764 2.80 % Subordinated notes, net 79,760 4,431 5.55 % 79,501 4,442 5.59 % 52,873 2,867 5.42 % Federal Home Loan Bank advances 312,363 10,313 3.30 % 265,644 7,694 2.90 % 128,863 2,669 2.07 % Long-term debt 45,055 2,428 5.39 % 49,938 2,810 5.63 % 51,489 1,680 3.26 % Total borrowed funds 512,914 21,420 4.18 % 589,885 24,478 4.15 % 296,126 8,980 3.03 % Total interest-bearing liabilities 3,178,566 118,704 3.73 % 2,839,054 91,274 3.21 % 2,545,781 31,609 1.24 % Noninterest-bearing liabilities: Demand deposits 528,391 586,903 708,667 Other liabilities 40,308 25,218 30,284 Stockholders’ equity 224,485 211,403 224,053 Total liabilities and stockholders’ equity $ 3,971,750 $ 3,662,578 $ 3,508,785 Net interest income (4) /net interest spread (3) $ 71,544 1.35 % $ 69,522 1.43 % $ 92,862 2.46 % Net interest margin (3) (4) 1.91 % 2.01 % 2.76 % (1) Average loan balances include nonaccrual loans.
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. In addition to the historical loss information, the Company utilizes qualitative factors to adjust the ACL as appropriate.
For all loan segments, the Company uses a forecast period of four quarters and reverts to a historical loss rate after four quarters. When estimating prepayment speed and curtailment rates, the modeling is based on historical internal data. In addition to the historical loss information, the Company utilizes qualitative factors to adjust the ACL as appropriate.
The credit loss expense recorded in 2023 included an allocation of $500 to the allowance for credit losses related to loans and $200 to the allowance for credit losses related to unfunded commitments. This credit loss expense was primarily due to growth in loans and unfunded loan commitments.
The credit loss expense recorded in 2023 included an allocation of $500 to the allowance for credit losses related to loans and $200 to the allowance for credit losses related to unfunded commitments. The credit loss expense in 2023 was primarily due to growth in loans and unfunded loan commitments.
The allowance for credit losses is management’s estimate of expected lifetime losses in the loan portfolio as of the balance sheet date. 46 Table of Contents (dollars in thousands, except per share amounts) Factors considered by management 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 allowance for credit losses is management’s estimate of expected lifetime losses in the loan portfolio as of the balance sheet date. 48 Table of Contents (dollars in thousands, except per share amounts) Factors considered by management 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.
For further information, refer to the section “Non-GAAP Financial Measures” of this Item. 40 Table of Contents (dollars in thousands, except per share amounts) Net Interest Income 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.
For further information, refer to the section “Non-GAAP Financial Measures” of this Item. 42 Table of Contents (dollars in thousands, except per share amounts) Net Interest Income 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.
The Company continues to maintain a valuation allowance against the tax effect of state net operating losses carryforwards as management believes it is likely that such carryforwards will expire without being utilized. 39 Table of Contents (dollars in thousands, except per share amounts) DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS’ EQUITY; INTEREST RATES; AND INTEREST DIFFERENTIAL Average Balances and an Analysis of Average Rates Earned and Paid The following table shows average balances and interest income or interest expense, with the resulting average yield or rate by category of average interest-earning assets or interest-bearing liabilities for the years indicated.
The Company continues to maintain a valuation allowance against the tax effect of state net operating losses carryforwards as management believes it is likely that a portion of such carryforwards will expire without being utilized. 41 Table of Contents (dollars in thousands, except per share amounts) DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS’ EQUITY; INTEREST RATES; AND INTEREST DIFFERENTIAL Average Balances and an Analysis of Average Rates Earned and Paid The following table shows average balances and interest income or interest expense, with the resulting average yield or rate by category of average interest-earning assets or interest-bearing liabilities for the years indicated.
Non-owner occupied commercial real estate loan concentrations and the weighted average LTV by property type as of December 31, 2023 and 2022 are shown in the following table. LTV is determined using the maximum credit exposure of the loan compared to the most recent appraisal data on the property obtained in accordance with the Company’s lending policies.
Non-owner occupied commercial real estate loan concentrations and the weighted average LTV by property type as of December 31, 2024 and 2023 are shown in the following table. LTV is determined using the maximum credit exposure of the loan compared to the most recent appraisal data on the property obtained in accordance with the Company’s lending policies.
Risk ratings are defined in Note 4 to the consolidated financial statements included in Item 8 of this Form 10-K.
Risk ratings are defined in Note 4 of the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K.
Expected credit losses are reflected in the allowance for credit losses (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.
Expected credit losses on loans are reflected in the allowance for credit losses (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.
As of 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 December 31, 2024, 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.
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 measures expected credit losses on loans on a collective (pool) basis when the loans share similar risk characteristics and uses a cash flow based model to estimate expected credit losses for each of these pools.
Results of operations and financial condition for the year ended December 31, 2022 compared to the year ended December 31, 2021 can be found in Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company’s 2022 annual report on Form 10-K filed with the SEC on February 23, 2023. 34 Table of Contents (dollars in thousands, except per share amounts) CRITICAL ACCOUNTING POLICIES AND ESTIMATES This report is based on the Company’s audited consolidated financial statements that have been prepared in accordance with GAAP established by the FASB.
Results of operations and financial condition for the year ended December 31, 2023 compared to the year ended December 31, 2022 can be found in Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company’s 2023 annual report on Form 10-K/A filed with the SEC on February 23, 2024. 36 Table of Contents (dollars in thousands, except per share amounts) CRITICAL ACCOUNTING POLICIES AND ESTIMATES This report is based on the Company’s audited consolidated financial statements that have been prepared in accordance with GAAP established by the FASB.
Proceeds from this debt issuance were used to make a $58,650 capital injection into West Bank, the Company’s subsidiary. The Company has an interest rate swap with a notional amount of $20,000 which converts variable-rate subordinated debentures to fixed-rate debt.
Proceeds from this debt issuance were used to make a $58,650 capital injection into West Bank, the Company’s subsidiary to fund organic growth. The Company has an interest rate swap with a notional amount of $20,000 which converts variable-rate subordinated debentures to fixed-rate debt.
The Company’s significant accounting policies are described in the Notes to Consolidated Financial Statements. Based on its consideration of accounting policies that involve the most complex and subjective estimates and judgments, management has identified its most critical accounting policies to be those related to the fair value of financial instruments and the allowance for credit losses.
The Company’s significant accounting policies are described in the Notes to Consolidated Financial Statements. Based on its consideration of accounting policies that involve the most complex and subjective estimates and judgments, management has identified its most critical accounting policies to be those related to the allowance for credit losses.
As of 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.
As of December 31, 2024, the Company also determined that no individual securities in an unrealized loss position represented credit losses that would require an allowance for credit losses.
Brokered deposits are utilized, along with other wholesale funding sources, to fund loan growth and offset core deposit outflows. 48 Table of Contents (dollars in thousands, except per share amounts) The following table sets forth the average balances for each major category of deposits and the weighted average interest rate paid for those deposits during the years indicated.
When necessary, brokered deposits are utilized, along with other wholesale funding sources, to fund loan growth and offset core deposit outflows. 50 Table of Contents (dollars in thousands, except per share amounts) The following table sets forth the average balances for each major category of deposits and the weighted average interest rate paid for those deposits during the years indicated.
The interest rate is a variable rate based on the 3-month term SOFR plus 0.26161 percent tenor spread adjustment plus 3.05 percent. This interest rate swap has a fixed rate of 4.81 percent and matures in September 2026. West Bank’s new markets tax credit special purpose subsidiary has a credit agreement for $11,486.
The interest rate is a variable rate based on the 3-month term SOFR plus 0.26161 percent tenor spread adjustment plus 3.05 percent. This interest rate swap has a fixed rate of 4.81 percent and matures in September 2026. West Bank’s new markets tax credit special purpose subsidiary has a credit agreement for $11,486 as of December 31, 2024.
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 December 31, 2023, approximately 61 percent of the available for sale securities portfolio consisted of government agency guaranteed collateralized mortgage obligations and mortgage-backed securities.
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 December 31, 2024, approximately 62 percent of the available for sale securities portfolio consisted of government agency guaranteed collateralized mortgage obligations and mortgage-backed securities.
The uninsured deposit amounts are estimated based on the methodologies and assumptions used for regulatory reporting requirements and include brokered funds and collateralized public unit deposits.
The uninsured deposit amounts are estimated based on the methodologies and assumptions used for regulatory reporting requirements and include collateralized public unit deposits.
Results of operations for the year ended December 31, 2023 are compared to the results for the year ended December 31, 2022 and the consolidated financial condition of the Company as of December 31, 2023 is compared to December 31, 2022.
Results of operations for the year ended December 31, 2024 are compared to the results for the year ended December 31, 2023 and the consolidated financial condition of the Company as of December 31, 2024 is compared to December 31, 2023.
As of December 31, 2023, the Company and West Bank met all capital adequacy requirements to which they were subject, and the Company’s and West Bank’s capital ratios were in excess of the requirements to be well-capitalized under capital regulations.
As of December 31, 2024, the Company and West Bank met all capital adequacy requirements to which they were subject, and the Company’s and West Bank’s capital ratios were in excess of the requirements to be considered well-capitalized under capital regulations.
The peer group for 2023 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, MidWest One Financial Group, Inc., Nicolet Bankshares, Inc., Peoples Bancorp, Inc., and Southern Missouri Bancorp, Inc.
The peer group for 2024 consists of 21 Midwestern, publicly traded financial institutions including Bank First Corporation, Bridgewater Bancshares, Inc., ChoiceOne Financial Services, Inc., Civista Bancshares, Inc., CrossFirst Bankshares, Inc., Equity Bancshares, Inc., Farmers National Banc Corp., Farmers & Merchants Bancorp., First Business Financial Services, Inc., First Financial Corp., First Mid Bancshares, Inc., German American Bancorp, Inc., HBT Financial, Inc., Hills Bancorporation, Isabella Bank Corporation, LCNB Corp., Mercantile Bank Corporation, MidWest One Financial Group, Inc., Nicolet Bankshares, Inc., Peoples Bancorp, Inc., and Southern Missouri Bancorp, Inc.
The effective tax rate for both 2023 and 2022 was also impacted by federal income tax credits, including low income housing tax credits and a new markets tax credit from West Bank’s investment in a qualified community development entity, of approximately $1,498 and $1,468, respectively.
The effective tax rate for both 2024 and 2023 was also impacted by federal income tax credits, including low income housing tax credits and a new markets tax credit from West Bank’s investment in a qualified community development entity, of approximately $1,508 and $1,498, respectively.
The effective income tax rates differ from the federal statutory income tax rates 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, stock compensation and state income taxes.
The effective income tax rates differ from the federal statutory income tax rates 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, stock compensation, state income taxes and the investment tax credit mentioned above.
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.
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 and Federal Reserve Bank, 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 West Bank’s asset-liability management policy. The Company had liquid assets (cash and cash equivalents) of $65,357 as of December 31, 2023 compared with $26,539 as of December 31, 2022.
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 West Bank’s asset-liability management policy. The Company had liquid assets (cash and cash equivalents) of $243,478 as of December 31, 2024 compared with $65,357 as of December 31, 2023.
(1) A lower ratio is more desirable. (2) As presented, this is a non-GAAP financial measure. For further information, refer to the section "Non-GAAP Financial Measures" of this item. 33 Table of Contents (dollars in thousands, except per share amounts) The Company’s 2023 net income was $24,137, compared to $46,399 in 2022.
(1) A lower ratio is more desirable. (2) As presented, this is a non-GAAP financial measure. For further information, refer to the section "Non-GAAP Financial Measures" of this item. 35 Table of Contents (dollars in thousands, except per share amounts) The Company’s 2024 net income was $24,050, compared to $24,137 in 2023.
Off-balance sheet commitments are more fully discussed in Note 17 to the consolidated financial statements included in Item 8 of this Form 10-K. 50 Table of Contents (dollars in thousands, except per share amounts) As of December 31, 2023, the allowance for credit losses related to off-balance sheet unfunded commitments was $2,544.
Off-balance sheet commitments are more fully discussed in Note 17 of the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K. 52 Table of Contents (dollars in thousands, except per share amounts) As of December 31, 2024, the allowance for credit losses related to off-balance sheet commitments was $1,544.
The average balance of securities available for sale in 2023 was $85,137 lower than in 2022, primarily due to principal paydowns on securities, sales of securities, and the decline in fair value of available for sale securities during 2023 resulting from the increase in market interest rates during 2023.
The average balance of securities available for sale in 2024 was $49,468 lower than in 2023, primarily due to principal paydowns on securities, sales of securities, and the decline in fair value of available for sale securities during 2024 resulting from the increase in market interest rates during 2024.
For further information, refer to the section “Non-GAAP Financial Measures” of this Item. 41 Table of Contents (dollars in thousands, except per share amounts) Tax-equivalent interest income and fees on loans increased $35,616 for the year ended December 31, 2023, compared to 2022.
For further information, refer to the section “Non-GAAP Financial Measures” of this Item. 43 Table of Contents (dollars in thousands, except per share amounts) Tax-equivalent interest income and fees on loans increased $23,154 for the year ended December 31, 2024, compared to 2023.
A lower ratio is more desirable. 36 Table of Contents (dollars in thousands, except per share amounts) RESULTS OF OPERATIONS - 2023 COMPARED TO 2022 OVERVIEW Net income for the year ended December 31, 2023 was $24,137, compared to $46,399 for the year ended December 31, 2022.
A lower ratio is more desirable. 38 Table of Contents (dollars in thousands, except per share amounts) RESULTS OF OPERATIONS - 2024 COMPARED TO 2023 OVERVIEW Net income for the year ended December 31, 2024 was $24,050, compared to $24,137 for the year ended December 31, 2023.
The political and economic environments can also influence the volume of new loan originations and the mix of variable-rate versus fixed-rate loans. Tax-equivalent interest income on securities increased $743 for the year ended December 31, 2023, compared to 2022.
The political and economic environments can also influence the volume of new loan originations and the mix of variable-rate versus fixed-rate loans. Tax-equivalent interest income on securities decreased $1,128 for the year ended December 31, 2024, compared to 2023.
We consider these reciprocal deposits to be in-market deposits as distinguished from traditional out-of-market brokered deposits. Time deposits as of December 31, 2023 and 2022, included $152,160 and $122,915, respectively, of reciprocal deposits.
We consider these reciprocal deposits to be in-market deposits as distinguished from traditional out-of-market brokered deposits. Time deposits as of December 31, 2024 and 2023, included $162,148 and $152,160, respectively, of reciprocal deposits.
Deposits increased to $2,973,779 as of December 31, 2023, from $2,880,408 as of December 31, 2022. The Company compares three key performance metrics to those of an identified peer group for evaluating its results.
Deposits increased to $3,357,596 as of December 31, 2024, from $2,973,779 as of December 31, 2023. The Company compares three key performance metrics to those of an identified peer group for evaluating its results.
It is the objective of the Company’s credit policies to diversify the commercial loan portfolio to limit concentrations in any single industry. As of December 31, 2023, total loans were approximately 98.4 percent of total deposits and 76.5 percent of total assets. Loans outstanding at the end of 2023 increased 6.7 percent compared to the end of 2022.
It is the objective of the Company’s credit policies to diversify the commercial loan portfolio to limit concentrations in any single industry. As of December 31, 2024, total loans were approximately 89.5 percent of total deposits and 74.8 percent of total assets. Loans outstanding at the end of 2024 increased 2.6 percent compared to the end of 2023.
The following table shows the amount of time deposits in excess of the insurance limit by maturity. 3 months or less $ 148,585 Over 3 through 6 months 65,890 Over 6 through 12 months 27,038 Over 12 months 24,538 $ 266,051 49 Table of Contents (dollars in thousands, except per share amounts) BORROWED FUNDS The fluctuation 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 or FHLB advances.
The following table shows the amount of time deposits in excess of the insurance limit by maturity. 3 months or less $ 103,813 Over 3 through 6 months 65,597 Over 6 through 12 months 97,033 Over 12 months 810 $ 267,253 51 Table of Contents (dollars in thousands, except per share amounts) BORROWED FUNDS The fluctuation 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 or FHLB advances.
The dividend declared and paid in the first quarter of 2024 was $0.25 per common share. Total assets were $3,825,758 at December 31, 2023, compared to $3,613,218 at December 31, 2022, a 5.9 percent increase. Our loan portfolio grew to $2,927,535 as of December 31, 2023, from $2,742,836 as of December 31, 2022.
The dividend declared and paid in the first quarter of 2025 was $0.25 per common share. Total assets were $4,014,991 at December 31, 2024, compared to $3,825,758 at December 31, 2023, a 4.9 percent increase. Our loan portfolio grew to $3,004,860 as of December 31, 2024, from $2,927,535 as of December 31, 2023.
It is anticipated that a significant portion of the core time deposits will be renewed. In the event a substantial volume of core time deposits are not renewed, management believes the Company has sufficient liquid assets and funding sources to offset the potential runoff.
In the event a substantial volume of core time deposits are not renewed, management believes the Company has sufficient liquid assets and funding sources to offset the potential runoff.
Total gross unrealized losses in the securities available for sale portfolio were $121,806 at December 31, 2023 compared to $138,736 at December 31, 2022.
Total gross unrealized losses in the securities available for sale portfolio were $128,838 at December 31, 2024 compared to $121,806 at December 31, 2023.
Federal income tax expense for 2023 and 2022 was $3,711 and $9,165, respectively, while state income tax expense was $1,938 and $3,833, respectively. The effective rate of income tax expense as a percent of income before income taxes was 18.9 percent and 21.9 percent, respectively, for 2023 and 2022.
Federal income tax expense for 2024 and 2023 was $1,928 and $3,711, respectively, while state income tax expense was $1,465 and $1,938, respectively. The effective rate of income tax expense as a percent of income before income taxes was 12.3 percent and 18.9 percent, respectively, for 2024 and 2023.
Noninterest Expense The following table shows the variance from the prior year in the noninterest expense categories shown in the Consolidated Statements of Income. In addition, accounts within the “Other expenses” category that represent a significant portion of the total or a significant variance are shown.
The estimated earn back period of the 2024 transaction is approximately two years. Noninterest Expense The following table shows the variance from the prior year in the noninterest expense categories shown in the Consolidated Statements of Income. In addition, accounts within the “Other expenses” category that represent a significant portion of the total or a significant variance are shown.
The internal findings are reported quarterly to the ELC. 44 Table of Contents (dollars in thousands, except per share amounts) Commercial loans secured by real estate, including construction, land and land development, totaled $2,267,987, or 77.4 percent of total loans, at December 31, 2023.
The internal findings are reported quarterly to the ELC. 46 Table of Contents (dollars in thousands, except per share amounts) Commercial loans secured by real estate, including construction, land and land development, totaled $2,369,342, or 78.8 percent of total loans, at December 31, 2024.
As of and for the Years Ended December 31, 2023 2022 2021 Performance Ratios Return on average assets 0.66 % 1.32 % 1.52 % Return on average equity 11.42 % 20.71 % 20.33 % Efficiency ratio (1)(2) 60.73 % 43.70 % 40.91 % Nonperforming assets/total assets (1) 0.01 % 0.01 % 0.26 % Net interest margin (2) 2.01 % 2.76 % 3.05 % Dividends and Per Share Data Basic earnings per common share $ 1.44 $ 2.79 $ 3.00 Diluted earnings per common share 1.44 2.76 2.95 Cash dividends per common share 1.00 1.00 0.94 Dividend payout ratio 69.21 % 35.82 % 31.33 % Dividend yield 4.72 % 3.91 % 3.03 % Operating Results and Year-End Balances Net income $ 24,137 $ 46,399 $ 49,607 Total assets 3,825,758 3,613,218 3,500,201 Securities available for sale 623,919 664,115 758,822 Loans 2,927,535 2,742,836 2,456,196 Deposits 2,973,779 2,880,408 3,016,005 Borrowings 592,637 485,855 199,866 Stockholders’ equity 225,043 211,112 260,328 Average equity to average assets ratio 5.77 % 6.39 % 7.46 % Definition of ratios: • Return on average assets - net income divided by average assets. • Return on average equity - net income divided by average equity. • 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. • Nonperforming assets to total assets - total nonperforming assets divided by total assets. • Net interest margin - tax-equivalent net interest income divided by average interest-earning assets. • Dividend payout ratio - dividends paid to common stockholders divided by net income. • Dividend yield - dividends per share paid to common stockholders divided by closing year-end stock price. • Average equity to average assets ratio - average equity divided by average assets.
As of and for the Years Ended December 31, 2024 2023 2022 Performance Ratios Return on average assets 0.61 % 0.66 % 1.32 % Return on average equity 10.71 % 11.42 % 20.71 % Efficiency ratio (1)(2) 63.25 % 60.73 % 43.70 % Nonperforming assets/total assets (1) 0.00 % 0.01 % 0.01 % Net interest margin (2) 1.91 % 2.01 % 2.76 % Dividends and Per Share Data Basic earnings per common share $ 1.43 $ 1.44 $ 2.79 Diluted earnings per common share 1.42 1.44 2.76 Cash dividends per common share 1.00 1.00 1.00 Dividend payout ratio 69.88 % 69.21 % 35.82 % Dividend yield 4.62 % 4.72 % 3.91 % Operating Results and Year-End Balances Net income $ 24,050 $ 24,137 $ 46,399 Total assets 4,014,991 3,825,758 3,613,218 Securities available for sale 544,565 623,919 664,115 Loans 3,004,860 2,927,535 2,742,836 Deposits 3,357,596 2,973,779 2,880,408 Borrowings 392,629 592,637 485,855 Stockholders’ equity 227,875 225,043 211,112 Average equity to average assets ratio 5.65 % 5.77 % 6.39 % Definition of ratios: • Return on average assets - net income divided by average assets. • Return on average equity - net income divided by average equity. • 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. • Nonperforming assets to total assets - total nonperforming assets divided by total assets. • Net interest margin - tax-equivalent net interest income divided by average interest-earning assets. • Dividend payout ratio - dividends paid to common stockholders divided by net income. • Dividend yield - dividends per share paid to common stockholders divided by closing year-end stock price. • Average equity to average assets ratio - average equity divided by average assets.
All collateralized mortgage obligations and mortgage-backed securities consist of residential and commercial mortgage pass-through securities and collateralized mortgage obligations guaranteed by the Federal Home Loan Mortgage Corporation (FHLMC), Federal National Mortgage Association (FNMA), Government National Mortgage Association (GNMA), or the Small Business Administration (SBA). The securities issued by state and political subdivisions are diversified among municipalities in 26 states.
All collateralized mortgage obligations and mortgage-backed securities consist of residential and commercial mortgage pass-through securities and collateralized mortgage obligations guaranteed by the Federal Home Loan Mortgage Corporation (FHLMC), Federal National Mortgage Association (FNMA), Government National Mortgage Association (GNMA), or the Small Business Administration (SBA).
Basic and diluted earnings per common share for 2023 were $1.44 and $1.44, respectively, compared to $2.79 and $2.76, respectively, in 2022. During 2023, we paid our common stockholders $16,704 ($1.00 per common share) in dividends compared to $16,619 ($1.00 per common share) in 2022.
Basic and diluted earnings per common share for 2024 were $1.43 and $1.42, respectively, compared to $1.44 and $1.44, respectively, in 2023. During 2024, we paid our common stockholders $16,806 ($1.00 per common share) in dividends compared to $16,704 ($1.00 per common share) in 2023.
The portion of the allowance for credit losses related to loans collectively evaluated for credit losses increased to $28,342, or 0.97 percent of outstanding loans as of December 31, 2023, compared to $25,473, or 0.93 percent of outstanding loans as of December 31, 2022.
The portion of the allowance for credit losses related to loans collectively evaluated for credit losses increased to $30,432, or 1.01 percent of outstanding loans as of December 31, 2024, compared to $28,342, or 0.97 percent of outstanding loans as of December 31, 2023.
As and for the Years Ended December 31 2023 2022 2021 Reconciliation of net interest income and net interest margin on an FTE basis to GAAP: Net interest income (GAAP) $ 69,031 $ 91,740 $ 95,059 Tax-equivalent adjustment (1) 491 1,122 1,202 Net interest income on an FTE basis (non-GAAP) 69,522 92,862 96,261 Average interest-earning assets 3,465,964 3,361,091 3,152,138 Net interest margin on an FTE basis (non-GAAP) 2.01 % 2.76 % 3.05 % Reconciliation of efficiency ratio on an FTE basis to GAAP: Net interest income on an FTE basis (non-GAAP) $ 69,522 $ 92,862 $ 96,261 Noninterest income 10,066 10,208 9,729 Adjustment for realized securities (gains) losses, net 431 — (51) Adjustment for losses on disposal of premises and equipment, net 29 29 84 Adjusted income 80,048 103,099 106,023 Noninterest expense 48,611 45,051 43,380 Efficiency ratio on an adjusted and FTE basis (non-GAAP) (2) 60.73 % 43.70 % 40.91 % (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.
As and for the Years Ended December 31 2024 2023 2022 Reconciliation of net interest income and net interest margin on an FTE basis to GAAP: Net interest income (GAAP) $ 71,362 $ 69,031 $ 91,740 Tax-equivalent adjustment (1) 182 491 1,122 Net interest income on an FTE basis (non-GAAP) 71,544 69,522 92,862 Average interest-earning assets 3,747,528 3,465,964 3,361,091 Net interest margin on an FTE basis (non-GAAP) 1.91 % 2.01 % 2.76 % Reconciliation of efficiency ratio on an FTE basis to GAAP: Net interest income on an FTE basis (non-GAAP) $ 71,544 $ 69,522 $ 92,862 Noninterest income 8,434 10,066 10,208 Adjustment for realized securities losses, net 1,172 431 — Adjustment for losses on disposal of premises and equipment, net 47 29 29 Adjusted income 81,197 80,048 103,099 Noninterest expense 51,353 48,611 45,051 Efficiency ratio on an adjusted and FTE basis (non-GAAP) (2) 63.25 % 60.73 % 43.70 % (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.
Noninterest income decreased $142, or 1.4 percent, in 2023 compared to 2022, primarily due to realized losses on the sales of securities and a decrease in loan swap fees, partially offset by a gain from bank-owned life insurance.
Noninterest income decreased $1,632, or 16.2 percent, in 2024 compared to 2023, primarily due to an increase in realized losses on the sales of securities, a decrease in loan swap fees, and a nonrecurring gain from bank-owned life insurance in 2023, partially offset by an increase in trust services revenue.
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 potential for additional target federal funds interest rate changes in 2024 is unknown at this time.
The Federal Reserve increased the target federal funds interest rate by a total of 425 basis points in 2022 and an additional 100 basis points in 2023. In 2024, the Federal Reserve decreased the target federal funds rate by a total of 100 basis points.
For the years ended December 31, 2023, 2022 and 2021, the Company’s net interest margin on a tax-equivalent basis was 2.01, 2.76 and 3.05 percent, respectively. Tax-equivalent net interest income decreased $23,340 in 2023 compared to 2022.
For the years ended December 31, 2024, 2023 and 2022, the Company’s net interest margin on a tax-equivalent basis was 1.91, 2.01 and 2.76 percent, respectively. Tax-equivalent net interest income increased $2,022 in 2024 compared to 2023.
Net interest margin on an 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 timing and extent of additional interest rate changes by the Federal Reserve is not known at this time. Net interest margin on an 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 yield on the loan portfolio is expected to increase in a rising rate environment as variable-rate loans reprice at higher rates and fixed rate loan renewals and new originations are priced at prevailing market rates, which exceed the average rate on existing fixed rate loans.
The yield on the loan portfolio is expected to increase in flat and rising rate environments as variable-rate loans reprice at higher rates and renewals and new originations are priced at prevailing market rates, which exceed the roll-off rate of principal repayments and maturities of existing loans.
As of December 31 2023 2022 2021 Amount %* Amount %* Amount %* Balance at end of period applicable to: Commercial $ 5,291 18.13 % $ 4,804 18.90 % $ 4,776 20.03 % Real estate: Construction, land and land development 3,668 14.11 3,548 13.21 3,646 14.60 1-4 family residential first mortgages 704 3.64 357 2.74 339 2.69 Home equity 142 0.50 101 0.38 91 0.34 Commercial 18,420 63.25 16,575 64.50 19,466 62.19 Consumer and other 117 0.37 88 0.27 46 0.15 $ 28,342 100.00 % $ 25,473 100.00 % $ 28,364 100.00 % * Percent of loans in each category to total loans.
As of December 31 2024 2023 2022 Amount %* Amount %* Amount %* Balance at end of period applicable to: Commercial $ 5,489 17.10 % $ 5,291 18.13 % $ 4,804 18.90 % Real estate: Construction, land and land development 4,354 16.89 3,668 14.11 3,548 13.21 1-4 family residential first mortgages 650 2.92 704 3.64 357 2.74 Home equity 200 0.64 142 0.50 101 0.38 Commercial 19,544 61.88 18,420 63.25 16,575 64.50 Consumer and other 195 0.57 117 0.37 88 0.27 $ 30,432 100.00 % $ 28,342 100.00 % $ 25,473 100.00 % * Percent of loans in each category to total loans.
As of December 31, 2023 there was no allowance for credit losses related to loans individually evaluated for credit losses. As of December 31, 2022, there were no specific reserves related to loans individually evaluated for impairment.
As of December 31, 2024 and 2023 there was no allowance for credit losses related to loans individually evaluated for credit losses.
The net interest margin for 2023 decreased 75 basis points to 2.01 percent, compared to 2.76 percent for 2022. The average yield on earning assets increased by 94 basis points, while the average rate paid on interest-bearing liabilities increased by 197 basis points.
The net interest margin for 2024 decreased 10 basis points to 1.91 percent, compared to 2.01 percent for 2023. The average yield on earning assets increased by 44 basis points, while the average rate paid on interest-bearing liabilities increased by 52 basis points.
The following table shows the amounts and remaining maturities of time deposits with balances of $100 or more as of December 31, 2023. 3 months or less $ 231,110 Over 3 through 6 months 123,674 Over 6 through 12 months 91,151 Over 12 months 28,283 $ 474,218 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.
The following table shows the amounts and remaining maturities of time deposits with balances of $100 or more as of December 31, 2024. 3 months or less $ 246,691 Over 3 through 6 months 166,024 Over 6 through 12 months 183,137 Over 12 months 2,038 $ 597,890 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.
Also, as of December 31, 2023, the ratios for the Company and West Bank were sufficient to meet the capital conservation buffer. 51 Table of Contents (dollars in thousands, except per share amounts) EFFECTS OF NEW STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS A discussion of the effects of new financial accounting standards and developments as they relate to the Company is located in Note 1 to the consolidated financial statements included in Item 8 of this Form 10-K.
EFFECTS OF NEW STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS A discussion of the effects of new financial accounting standards and developments as they relate to the Company is located in Note 1 of the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K. 53 Table of Contents (dollars in thousands, except per share amounts)
Required quarterly principal payments began in May 2023. The Company may make additional principal payments without penalty. The interest rate is variable at the Wall Street Journal Prime Rate minus 1.00 percent, which was 7.50 percent as of December 31, 2023.
Required quarterly principal payments are $1,250, with the remaining balance due February 2027. The Company may make additional principal payments without penalty. The interest rate is variable at the Wall Street Journal Prime Rate minus 1.00 percent, which was 6.50 percent as of December 31, 2024.
The decrease in accumulated other comprehensive loss was driven by the decrease in the net unrealized losses on available for sale securities between December 31, 2022 and December 31, 2023. While accumulated other comprehensive losses reduce tangible common equity, they have no impact on regulatory capital. As of December 31, 2023 and 2022, the Company had no intangible assets.
The increase in accumulated other comprehensive loss was driven by the increase in net unrealized losses on available for sale securities between December 31, 2023 and December 31, 2024, due to the increase in market interest rates. While accumulated other comprehensive losses reduce tangible common equity, they have no impact on regulatory capital.
The Company and West Bank are subject to various regulatory capital requirements administered by federal and state banking agencies. Capital requirements are more fully discussed under the heading “Supervision and Regulation” included in Item 1 and in Note 16 to the consolidated financial statements included in Item 8 of this Form 10-K.
Capital requirements are more fully discussed under the heading “Supervision and Regulation” included in Item 1 and in Note 16 of the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K.
Included in total deposits as of December 31, 2023 and 2022, were $165,858 and $155,888, respectively, of reciprocal interest-bearing checking and $254,504 and $186,160, respectively, of reciprocal money market deposits. Total estimated uninsured deposits were $1,435,406, $1,412,955 and $1,312,933 as of December 31, 2023, 2022 and 2021, respectively.
Included in total deposits as of December 31, 2024 and 2023, were $220,627 and $165,858, respectively, of reciprocal interest-bearing checking and $273,126 and $254,504, respectively, of reciprocal money market deposits. Total estimated uninsured deposits were $1,562,981, $1,435,406 and $1,412,955 as of December 31, 2024, 2023 and 2022, respectively.
The policy establishes lending limits, review criteria and other guidelines for loan administration and the allowance for credit losses, among other things. Loans are approved in accordance with the applicable guidelines and underwriting policies. Loans to any one borrower are limited by state banking laws. Loan officer lending authorities vary according to the individual loan officer’s experience and expertise.
The loan policy is reviewed at least annually and is updated as considered necessary. The policy establishes lending limits, review criteria and other guidelines for loan administration and the allowance for credit losses, among other things. Loans are approved in accordance with the applicable guidelines and underwriting policies. Loans to any one borrower are limited by state banking laws.
This decrease was primarily due to principal paydowns on securities and a sale of $11,285 of securities in the fourth quarter of 2023. The proceeds from this sale were reinvested into the loan portfolio.
This decrease was primarily due to principal paydowns on securities, a decline in fair value of securities during 2024 resulting from the increase in market interest rates and the sale of $11,841 of securities in the fourth quarter of 2024. The proceeds from this sale were reinvested into the loan portfolio.
Federal funds purchased and other short-term borrowings decreased from $200,000 as of December 31, 2022 to $150,270 as of December 31, 2023. The Company had $315,000 of FHLB advances outstanding at December 31, 2023, compared to $155,000 at December 31, 2022.
Federal funds purchased and other short-term borrowings decreased from $150,270 as of December 31, 2023 to $0 as of December 31, 2024. This decrease was primarily due to the increase in customer deposits. The Company had $270,000 of FHLB advances outstanding at December 31, 2024, compared to $315,000 at December 31, 2023.
The Notes initially bear interest at 5.25 percent per annum, with interest payable semi-annually for the first five years of the Notes. Beginning June 15, 2027, the interest rate will reset quarterly to a floating rate per annum that is expected to be three-month term Secured Overnight Financing Rate (SOFR) plus 2.41 percent, with payments due quarterly.
Beginning June 15, 2027, the interest rate will reset quarterly to a floating rate per annum that will be three-month term Secured Overnight Financing Rate (SOFR) plus 2.41 percent, with payments due quarterly.
Nonperforming loans include loans on nonaccrual status, loans past due 90 days or more and still accruing interest, and loans that have been considered to be loan restructurings made to borrowers experiencing financial difficulty.
Nonperforming loans include loans on nonaccrual status, loans past due 90 days or more and still accruing interest, and loans that have been considered to be loan restructurings made to borrowers experiencing financial difficulty. The Company held no other real estate owned properties as of December 31, 2024 or 2023.
Net Interest Income Net interest income decreased to $69,031 for 2023 from $91,740 for 2022, as the impact of the increase in average rates paid on and growth in average balances of interest-bearing liabilities exceeded the benefits of the growth in average balances and increase in average yields on interest-earning assets.
Net Interest Income Net interest income increased to $71,362 for 2024 from $69,031 for 2023, as the impact of the growth of interest-earning assets and increases in average yields on interest-earning assets exceeded the effects of an increase in average balances of interest-bearing liabilities and increase in average rate paid on interest-bearing liabilities.
For additional analysis of net interest income, see the section captioned “Distribution of Assets, Liabilities and Stockholders’ Equity; Interest Rates; and Interest Differential” in this Item of this Form 10-K.
For additional analysis of net interest income, see the section captioned “Distribution of Assets, Liabilities and Stockholders’ Equity; Interest Rates; and Interest Differential” in this Item of this Form 10-K. Credit Loss Expense A credit loss expense of $1,000 was recorded in 2024, compared to a credit loss expense of $700 in 2023.
The average balances of FHLB advances increased by $136,781 in 2023 compared to 2022. This increase in average balances was primarily due to increases in our rolling funding program whereby rolling one-month FHLB advances are hedged with long-term interest rate swap agreements to provide long-term fixed cost wholesale funding.
This increase in average balances was primarily due to an increase in rolling one-month FHLB advances that are hedged with long-term interest rate swap agreements to provide fixed-cost wholesale funding. The average rate paid on FHLB advances increased 40 basis points in 2024 compared to 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, fluctuations in our corporate customers’ and municipal customers’ own liquidity needs and recent developments in the financial services industry.
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’ and municipal customers’ own liquidity needs. The Company utilizes brokered deposits and other wholesale funding to supplement core deposit fluctuations and loan growth.
Competitive pressures, the creditworthiness of the borrower, market interest rates, the availability of funds, and government regulations further influence the rate charged on a loan. The Company follows a loan policy approved by West Bank’s Board of Directors. The loan policy is reviewed at least annually and is updated as considered necessary.
The interest rates charged on loans vary with the degree of risk and the amount and terms of the loan. Competitive pressures, the creditworthiness of the borrower, market interest rates, the availability of funds, and government regulations further influence the rate charged on a loan. The Company follows a loan policy approved by West Bank’s Board of Directors.
As of December 31 2023 2022 Balance % of Non-owner Occupied CRE Weighted Average LTV Balance % of Non-owner Occupied CRE Weighted Average LTV Non-owner occupied: Multifamily $ 453,958 24.2 % 69 % $ 371,224 21.0 % 69 % Medical & senior care facilities 225,314 12.0 63 249,127 14.1 65 Warehouse & trucking 167,030 8.9 63 169,462 9.6 67 Hotels 251,497 13.4 66 216,539 12.3 68 Mixed use 96,488 5.2 67 100,985 5.7 67 Offices 137,468 7.4 70 139,163 7.9 71 Land for development 110,874 5.9 64 114,428 6.5 62 All other 430,515 23.0 not available 405,261 22.9 not available $ 1,873,144 100.0 % $ 1,766,189 100.0 % The following table summarizes non-owner occupied commercial real estate loans by property type by risk rating as of December 31, 2023.
As of December 31 2024 2023 Balance % of Non-owner Occupied CRE Weighted Average LTV Balance % of Non-owner Occupied CRE Weighted Average LTV Non-owner occupied: Multifamily $ 542,322 28.5 % 69 % $ 453,958 24.2 % 69 % Medical & senior care facilities 180,144 9.5 64 225,314 12.0 63 Warehouse & trucking 160,783 8.4 60 167,030 8.9 63 Hotels 253,939 13.3 64 251,497 13.4 66 Mixed use 98,988 5.2 67 96,488 5.2 67 Offices 126,270 6.6 68 137,468 7.4 70 Land for development 89,974 4.7 56 110,874 5.9 64 All other 452,772 23.8 not available 430,515 23.0 not available $ 1,905,192 100.0 % $ 1,873,144 100.0 % The following table summarizes non-owner occupied commercial real estate loans by property type and risk rating as of December 31, 2024.
As of December 31, 2023, West Bank had additional borrowing capacity available from the FHLB of approximately $528,000, as well as approximately $2,282 through the Federal Reserve discount window, $35,000 through unsecured federal funds lines of credit with correspondent banks and $89,000 through the BTFP.
As of December 31, 2024, West Bank had additional borrowing capacity available from the FHLB of approximately $610,000, as well as approximately $116,840 through the Federal Reserve discount window and $75,000 through unsecured federal funds lines of credit.
Analysis of the Allowance for Credit Losses for the Years Ended December 31 2023 2022 2021 Ratio of net (charge-offs) recoveries during the period to average loans outstanding by segment: Commercial — % — % 0.02 % Real estate: Construction, land and land development — — — 1-4 family residential first mortgages — — — Home equity — — — Commercial — (0.02) % — Consumer and other — — — Total 0.00 % (0.02) % 0.02 % Ratio of allowance for credit losses to total loans at the end of period 0.97 % 0.93 % 1.15 % Ratio of nonaccrual loans to total loans at end of period 0.01 % 0.01 % 0.36 % Ratio of allowance for credit losses to total nonaccrual loans at the end of period 9,575.00 % 7,910.87 % 316.99 % Ratio of net (charge-offs) recoveries to total loans at end of period 0.00 % (0.01) % 0.02 % (1) As presented, this is a non-GAAP financial measure.
Analysis of the Allowance for Credit Losses for the Years Ended December 31 2024 2023 2022 Ratio of net (charge-offs) recoveries during the period to average loans outstanding by segment: Commercial — % — % — % Real estate: Construction, land and land development — — — 1-4 family residential first mortgages — — — Home equity — — — Commercial — — (0.02) % Consumer and other — — — Total 0.00 % 0.00 % (0.02) % Ratio of allowance for credit losses to total loans at the end of period 1.01 % 0.97 % 0.93 % Ratio of nonaccrual loans to total loans at end of period 0.00 % 0.01 % 0.01 % Ratio of allowance for credit losses to total nonaccrual loans at the end of period 22,881.20 % 9,575.00 % 7,910.87 % Ratio of net (charge-offs) recoveries to total loans at end of period 0.00 % 0.00 % (0.01) % 49 Table of Contents (dollars in thousands, except per share amounts) Nonperforming loans at December 31, 2024 totaled $133, or 0.00 percent of total loans, a slight decrease from $296, or 0.01 percent of total loans, at December 31, 2023.
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.
Loan originations and renewals in 2024 continued to reprice at prevailing market rates which exceeded the current weighted average portfolio rate. 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.
Peer Group Range As of and for the year ended December 31, 2023 As of and for the year ended December 31, 2023 Return on average equity 11.42% 1.85%-17.24% Efficiency ratio (1) 60.73% 45.85%-70.02% Nonperforming assets to total assets 0.01% 0.00%-0.73% (1) The efficiency ratio is a non-GAAP financial measure.
Peer Group Range As of and for the year ended December 31, 2024 As of and for the year ended December 31, 2024 Return on average equity 10.71% (11.08%)-14.44% Efficiency ratio (1) 63.25% 46.23%-73.19% Nonperforming assets to total assets 0.00% 0.01%-0.80% (1) The efficiency ratio is a non-GAAP financial measure.
The collateralized mortgage obligations and mortgage-backed securities have monthly paydowns that are not reflected in the table. 42 Table of Contents (dollars in thousands, except per share amounts) Within one year After one year but within five years After five years but within ten years After ten years Total Securities available for sale: State and political subdivisions (1) — % — % 1.93 % 2.15 % 2.13 % Collateralized mortgage obligations — — 2.38 1.56 1.56 Mortgage-backed securities — 1.45 1.61 1.65 1.63 Collateralized loan obligations — — 7.35 — 7.35 Corporate notes — — 3.26 — 3.26 — % 1.45 % 4.07 % 1.77 % 2.07 % (1) Yields on tax-exempt obligations have been computed on a tax-equivalent basis using a federal income tax rate of 21 percent and are adjusted to reflect the effect of the nondeductible interest expense associated with owning tax-exempt investment securities.
Within one year After one year but within five years After five years but within ten years After ten years Total Securities available for sale: State and political subdivisions (1) — % — % 1.73 % 2.06 % 2.03 % Collateralized mortgage obligations — — 2.27 1.64 1.64 Mortgage-backed securities — 1.36 1.61 1.55 1.55 Collateralized loan obligations — — 6.53 — 6.53 Corporate notes — — 3.26 — 3.26 — % 1.36 % 3.09 % 1.77 % 1.92 % (1) Yields on tax-exempt obligations have been computed on a tax-equivalent basis using a federal income tax rate of 21 percent and are adjusted to reflect the effect of the nondeductible interest expense associated with owning tax-exempt investment securities.
Loan swap fees in 2023 and 2022 consist of fees earned in the back-to-back swap program. In 2023, the Company sold $11,285 of securities from the available for sale securities portfolio and realized a net loss of $431. The proceeds from this sale were reinvested in the loan portfolio.
In 2024, the Company sold $11,841 of securities from the available for sale securities portfolio and realized a net loss of $1,172, compared to sales of $11,285 of securities available for sale and a realized net loss of $431 in 2023. The proceeds from both periods were reinvested in the loan portfolio.
The change in interest that is due to both volume and rate has been allocated to the change due to volume and the change due to rate in proportion to the absolute value of the change in each. 2023 Compared to 2022 2022 Compared to 2021 Volume Rate Total Volume Rate Total Interest Income Loans: (1) Commercial $ 1,625 $ 7,700 $ 9,325 $ (1,744) $ 1,121 $ (623) Real estate (2) 9,125 16,783 25,908 10,877 1,067 11,944 Consumer and other 230 153 383 74 26 100 Total loans (including fees) 10,980 24,636 35,616 9,207 2,214 11,421 Securities: Taxable (1,746) 2,918 1,172 2,903 1,079 3,982 Tax-exempt (2) (238) (191) (429) 363 312 675 Total securities (1,984) 2,727 743 3,266 1,391 4,657 Interest-bearing deposits (366) 332 (34) (335) 246 (89) Total interest income (2) 8,630 27,695 36,325 12,138 3,851 15,989 Interest Expense Deposits: Interest-bearing demand (202) 4,728 4,526 47 1,642 1,689 Savings and money market (1,092) 28,847 27,755 156 10,017 10,173 Time 2,677 9,209 11,886 795 2,024 2,819 Total deposits 1,383 42,784 44,167 998 13,683 14,681 Borrowed funds: Federal funds purchased and other short-term borrowings 5,732 2,036 7,768 591 1,168 1,759 Subordinated debt, net 1,485 90 1,575 1,748 111 1,859 Federal Home Loan Bank advances 3,654 1,371 5,025 (237) (38) (275) Long-term debt (52) 1,182 1,130 756 608 1,364 Total borrowed funds 10,819 4,679 15,498 2,858 1,849 4,707 Total interest expense 12,202 47,463 59,665 3,856 15,532 19,388 Net interest income (2) (3) $ (3,572) $ (19,768) $ (23,340) $ 8,282 $ (11,681) $ (3,399) (1) Average balances of nonaccrual loans were included for computational purposes.
The change in interest that is due to both volume and rate has been allocated to the change due to volume and the change due to rate in proportion to the absolute value of the change in each. 2024 Compared to 2023 2023 Compared to 2022 Volume Rate Total Volume Rate Total Interest Income Loans: (1) Commercial $ (34) $ 2,390 $ 2,356 $ 1,625 $ 7,700 $ 9,325 Real estate (2) 9,197 11,201 20,398 9,125 16,783 25,908 Consumer and other 364 36 400 230 153 383 Total loans (including fees) 9,527 13,627 23,154 10,980 24,636 35,616 Securities: Taxable (1,193) 527 (666) (1,746) 2,918 1,172 Tax-exempt (2) (142) (320) (462) (238) (191) (429) Total securities (1,335) 207 (1,128) (1,984) 2,727 743 Interest-bearing deposits 7,452 (26) 7,426 (366) 332 (34) Total interest income (2) 15,644 13,808 29,452 8,630 27,695 36,325 Interest Expense Deposits: Interest-bearing demand (14) 1,714 1,700 (202) 4,728 4,526 Savings and money market 6,969 6,602 13,571 (1,092) 28,847 27,755 Time 9,731 5,486 15,217 2,677 9,209 11,886 Total deposits 16,686 13,802 30,488 1,383 42,784 44,167 Borrowed funds: Federal funds purchased and other short-term borrowings (6,514) 1,230 (5,284) 5,732 2,036 7,768 Subordinated debt, net 14 (25) (11) 1,485 90 1,575 Federal Home Loan Bank advances 1,459 1,160 2,619 3,654 1,371 5,025 Long-term debt (267) (115) (382) (52) 1,182 1,130 Total borrowed funds (5,308) 2,250 (3,058) 10,819 4,679 15,498 Total interest expense 11,378 16,052 27,430 12,202 47,463 59,665 Net interest income (2) (3) $ 4,266 $ (2,244) $ 2,022 $ (3,572) $ (19,768) $ (23,340) (1) Average balances of nonaccrual loans were included for computational purposes.
Changes in the loan portfolio during 2023 included increases of $82,570 in commercial real estate loans, $50,463 in construction, land and land development loans and $31,477 in 1-4 family residential first mortgage loans. The Company continues to focus on business development efforts in all of its markets.
Changes in the loan portfolio during 2024 included an increase of $94,670 in construction, land and land development loans and decreases of $18,830 in 1-4 family residential first mortgage loans and $17,362 in commercial and industrial loans. The Company continues to focus on business development efforts in all of its markets.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe modeled scenarios begin with a base case in which rates are unchanged and can include parallel and nonparallel rate shocks. The results of these 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.
Biggest changeThe 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.
To measure that risk, the Company uses an earnings simulation approach. The Company has an Asset Liability Committee which meets quarterly, or more often when deemed necessary, to review the interest rate sensitivity position and to review and develop various strategies for managing interest rate risk.
To measure that risk, the Company uses an earnings simulation approach. The Company has an Asset Liability Committee which meets quarterly, or more often when deemed necessary, to review the interest rate sensitivity position and develop various strategies for managing interest rate risk.
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. 52 Table of Contents West Bancorporation, Inc. and Subsidiary
Actual results may differ from the computations 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. 54 Table of Contents West Bancorporation, Inc. and Subsidiary
The results of the simulation are compared against approved policy limits. The following table presents the estimated change in net interest income for one year under several scenarios of assumed interest rate changes for the rate shock levels shown.
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 net interest income in each scenario is based on immediate parallel yield curve changes in the interest rates applied to a static balance sheet. These do not reflect the earnings expectations of management.
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.
Net Interest Income at December 31, 2023 Change in Interest Rates $ Change % Change 300 basis points rising $ (11,456) (14.73) % 200 basis points rising (7,187) (9.24) 100 basis points rising (3,559) (4.58) 100 basis points falling 2,461 3.16 200 basis points falling 4,786 6.16 Computations of the prospective effects of hypothetical interest rate changes are based on numerous assumptions.
At December 31, 2024 Sensitivity of Net Interest Income Over One Year Horizon Change in Interest Rates $ Change % Change 300 basis points rising $ (8,155) (8.54) % 200 basis points rising (5,060) (5.30) 100 basis points rising (2,928) (3.06) 100 basis points falling 2,165 2.27 200 basis points falling 3,333 3.49 300 basis points falling 4,075 4.27 Computations of the prospective effects of hypothetical interest rate changes are based on numerous assumptions.
Added
The modeled scenarios begin with a base case in which rates are unchanged and can 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.

Other WTBA 10-K year-over-year comparisons