UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended ~~June~~September 30, 2021

or

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

Commission File Number: 0-49677

WEST BANCORPORATION, INC.

(Exact Name of Registrant as Specified in its Charter)


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


			1601 22nd Street, West Des Moines, Iowa			50266
			(Address of principal executive offices)			(Zip Code)

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

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, no par value	WTBA	The Nasdaq Global Select Market

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

Yes ☒ No ☐

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

Yes ☒ No o

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

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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

Yes ☐ No ☒

As of ~~July 28,~~October 27, 2021, there were 16,554,846 shares of common stock, no par value, outstanding.

WEST BANCORPORATION, INC.

INDEX


		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements	4

	Consolidated Balance Sheets as of ~~June~~September 3 0 ,30, 2021 and December 31, 2020	4

	Consolidated Statements of Income for the three and ~~and six~~ nine months ended ~~June~~September 3 0 ,30, 2021 and 2020	5

	Consolidated Statements of Comprehensive Income for the three and ~~and six~~ nine months ended ~~June~~Sept ember 30,, 2021 and 2020	6

	Consolidated Statements of Stockholders' Equity for the three and nine ~~and six~~ months ended ~~June~~September 30,, 2021 and 2020	7

	Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~June~~September 30,, 2021 and 2020	9

	Notes to Consolidated Financial Statements	10

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

	"Safe Harbor" Concerning Forward-Looking Statements	30

	Critical Accounting Policies	30

	Non-GAAP Financial Measures	31

	Overview	32

	Impact of COVID-19	32

	Summary	32

	Results of Operations	35

	Financial Condition	4443

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4847

Item 4.	Controls and Procedures	4847

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	4948

Item 1A.	Risk Factors	4948

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4948

Item 3.	Defaults Upon Senior Securities	4948

Item 4.	Mine Safety Disclosures	4948

Item 5.	Other Information	4948

Item 6.	Exhibits	5049

	Signatures	5150

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

West Bancorporation, Inc. and Subsidiary

Consolidated Balance Sheet

(unaudited)


(in thousands, except share and per share data)	(in thousands, except share and per share data)	June 30, 2021		December 31, 2020		(in thousands, except share and per share data)	September 30, 2021		December 31, 2020
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	31,978	$	77,693	Cash and due from banks	$	30,922	$	77,693
Federal funds sold	Federal funds sold	238,845		318,742		Federal funds sold	1,547		318,742
Cash and cash equivalents	Cash and cash equivalents	270,823		396,435		Cash and cash equivalents	32,469		396,435
Securities available for sale, at fair value	Securities available for sale, at fair value	601,462		420,571		Securities available for sale, at fair value	763,397		420,571
Federal Home Loan Bank stock, at cost	Federal Home Loan Bank stock, at cost	10,189		11,723		Federal Home Loan Bank stock, at cost	11,544		11,723
Loans	Loans	2,309,527		2,280,575		Loans	2,359,567		2,280,575
Allowance for loan losses	Allowance for loan losses	(28,042)		(29,436)		Allowance for loan losses	(28,098)		(29,436)
Loans, net	Loans, net	2,281,485		2,251,139		Loans, net	2,331,469		2,251,139
Premises and equipment, net	Premises and equipment, net	30,753		29,077		Premises and equipment, net	33,287		29,077
Accrued interest receivable	Accrued interest receivable	11,415		11,231		Accrued interest receivable	11,772		11,231
Bank-owned life insurance	Bank-owned life insurance	43,146		42,686		Bank-owned life insurance	43,376		42,686
Deferred tax assets, net	Deferred tax assets, net	8,733		11,289		Deferred tax assets, net	10,288		11,289
Other assets	Other assets	10,754		11,593		Other assets	12,098		11,593
Total assets	Total assets	$	3,268,760	$	3,185,744	Total assets	$	3,249,700	$	3,185,744

LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY					LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES	LIABILITIES					LIABILITIES
Deposits:	Deposits:					Deposits:
Noninterest-bearing demand	Noninterest-bearing demand	$	703,691	$	696,731	Noninterest-bearing demand	$	713,076	$	696,731
Interest-bearing demand	Interest-bearing demand	487,642		553,881		Interest-bearing demand	458,165		553,881
Savings	Savings	1,391,231		1,274,254		Savings	1,379,321		1,274,254
Time of $250 or more	Time of $250 or more	46,660		46,907		Time of $250 or more	50,643		46,907
Other time	Other time	196,065		129,221		Other time	135,718		129,221
Total deposits	Total deposits	2,825,289		2,700,994		Total deposits	2,736,923		2,700,994
Federal funds purchased	Federal funds purchased	3,605		5,375		Federal funds purchased	39,380		5,375
Subordinated notes, net	Subordinated notes, net	20,458		20,452		Subordinated notes, net	20,462		20,452
Federal Home Loan Bank advances	Federal Home Loan Bank advances	125,000		175,000		Federal Home Loan Bank advances	125,000		175,000
Long-term debt	Long-term debt	20,286		21,558		Long-term debt	17,654		21,558
Accrued expenses and other liabilities	Accrued expenses and other liabilities	27,596		38,670		Accrued expenses and other liabilities	57,905		38,670
Total liabilities	Total liabilities	3,022,234		2,962,049		Total liabilities	2,997,324		2,962,049
COMMITMENTS AND CONTINGENCIES (NOTE 8)	COMMITMENTS AND CONTINGENCIES (NOTE 8)	0		0		COMMITMENTS AND CONTINGENCIES (NOTE 8)	0		0
STOCKHOLDERS' EQUITY	STOCKHOLDERS' EQUITY					STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value; authorized 50,000,000 shares; 0 shares issued and outstanding at June 30, 2021 and December 31, 2020		0		0
Common stock, 0 par value; authorized 50,000,000 shares; 16,554,846 and 16,469,272 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively		3,000		3,000
Preferred stock, $0.01 par value; authorized 50,000,000 shares; no shares issued and outstanding at September 30, 2021 and December 31, 2020						Preferred stock, $0.01 par value; authorized 50,000,000 shares; no shares issued and outstanding at September 30, 2021 and December 31, 2020	—		—
Common stock, no par value; authorized 50,000,000 shares; 16,554,846 and 16,469,272 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively						Common stock, no par value; authorized 50,000,000 shares; 16,554,846 and 16,469,272 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively	3,000		3,000
Additional paid-in capital	Additional paid-in capital	28,888		28,823		Additional paid-in capital	29,536		28,823
Retained earnings	Retained earnings	221,113		203,718		Retained earnings	229,845		203,718
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(6,475)		(11,846)		Accumulated other comprehensive loss	(10,005)		(11,846)
Total stockholders' equity	Total stockholders' equity	246,526		223,695		Total stockholders' equity	252,376		223,695
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	3,268,760	$	3,185,744	Total liabilities and stockholders' equity	$	3,249,700	$	3,185,744

See Notes to Consolidated Financial Statements.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Consolidated Statements of Income

(unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share data)	(in thousands, except per share data)	2021		2020		2021		2020		(in thousands, except per share data)	2021		2020		2021		2020
Interest income:	Interest income:									Interest income:
Loans, including fees	Loans, including fees	$	23,139	$	22,332	$	47,177	$	44,643	Loans, including fees	$	24,229	$	22,489	$	71,406	$	67,132
Securities:	Securities:									Securities:
Taxable	Taxable	1,895		1,994		3,540		4,377		Taxable	2,412		1,728		5,952		6,105
Tax-exempt	Tax-exempt	712		319		1,270		616		Tax-exempt	762		378		2,032		994
Federal funds sold	Federal funds sold	75		12		144		241		Federal funds sold	82		15		226		256
Total interest income	Total interest income	25,821		24,657		52,131		49,877		Total interest income	27,485		24,610		79,616		74,487
Interest expense:	Interest expense:									Interest expense:
Deposits	Deposits	1,995		2,351		3,872		7,397		Deposits	2,021		1,946		5,893		9,343
Federal funds purchased	Federal funds purchased	1		3		2		19		Federal funds purchased	2		2		4		21
Subordinated notes	Subordinated notes	251		253		500		508		Subordinated notes	254		254		754		762
Federal Home Loan Bank advances	Federal Home Loan Bank advances	649		1,204		1,632		2,513		Federal Home Loan Bank advances	656		1,189		2,288		3,702
Long-term debt	Long-term debt	75		99		154		229		Long-term debt	66		87		220		316
Total interest expense	Total interest expense	2,971		3,910		6,160		10,666		Total interest expense	2,999		3,478		9,159		14,144
Net interest income	Net interest income	22,850		20,747		45,971		39,211		Net interest income	24,486		21,132		70,457		60,343
Provision for loan losses	Provision for loan losses	(2,000)		3,000		(1,500)		4,000		Provision for loan losses	—		4,000		(1,500)		8,000
Net interest income after provision for loan losses	Net interest income after provision for loan losses	24,850		17,747		47,471		35,211		Net interest income after provision for loan losses	24,486		17,132		71,957		52,343
Noninterest income:	Noninterest income:									Noninterest income:
Service charges on deposit accounts	Service charges on deposit accounts	578		531		1,160		1,134		Service charges on deposit accounts	589		609		1,749		1,743
Debit card usage fees	Debit card usage fees	511		391		953		773		Debit card usage fees	490		432		1,443		1,205
Trust services	Trust services	691		461		1,343		924		Trust services	695		553		2,038		1,477
Increase in cash value of bank-owned life insurance	Increase in cash value of bank-owned life insurance	240		136		460		294		Increase in cash value of bank-owned life insurance	230		133		690		427
Loan swap fees	Loan swap fees	42		3		42		589		Loan swap fees	—		983		42		1,572
Realized securities gains (losses), net		36		(69)		40		(75)
Realized securities gains, net										Realized securities gains, net	11		156		51		81
Other income	Other income	417		322		982		656		Other income	386		337		1,368		993
Total noninterest income	Total noninterest income	2,515		1,775		4,980		4,295		Total noninterest income	2,401		3,203		7,381		7,498
Noninterest expense:	Noninterest expense:									Noninterest expense:
Salaries and employee benefits	Salaries and employee benefits	5,672		5,318		11,280		10,602		Salaries and employee benefits	6,018		5,412		17,298		16,014
Occupancy	Occupancy	1,199		1,217		2,427		2,430		Occupancy	1,203		1,221		3,630		3,651
Data processing	Data processing	617		554		1,219		1,184		Data processing	616		572		1,835		1,756
FDIC insurance	FDIC insurance	426		292		830		529		FDIC insurance	528		351		1,358		880
Professional fees	Professional fees	268		200		551		439		Professional fees	212		230		763		669
Director fees	Director fees	214		194		405		428		Director fees	176		236		581		664
Other expenses	Other expenses	2,130		1,642		4,085		3,468		Other expenses	1,959		2,037		6,044		5,505
Total noninterest expense	Total noninterest expense	10,526		9,417		20,797		19,080		Total noninterest expense	10,712		10,059		31,509		29,139
Income before income taxes	Income before income taxes	16,839		10,105		31,654		20,426		Income before income taxes	16,175		10,276		47,829		30,702
Income taxes	Income taxes	3,600		2,136		6,663		4,368		Income taxes	3,469		2,176		10,132		6,544
Net income	Net income	$	13,239	$	7,969	$	24,991	$	16,058	Net income	$	12,706	$	8,100	$	37,697	$	24,158

Basic earnings per common share	Basic earnings per common share	$	0.80	$	0.48	$	1.51	$	0.98	Basic earnings per common share	$	0.77	$	0.49	$	2.28	$	1.47
Diluted earnings per common share	Diluted earnings per common share	$	0.79	$	0.48	$	1.49	$	0.97	Diluted earnings per common share	$	0.76	$	0.49	$	2.25	$	1.46

See Notes to Consolidated Financial Statements.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Consolidated Statements of Comprehensive Income

(unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2021		2020		2021		2020		(in thousands)	2021		2020		2021		2020
Net income	Net income	$	13,239	$	7,969	$	24,991	$	16,058	Net income	$	12,706	$	8,100	$	37,697	$	24,158
Other comprehensive income (loss):	Other comprehensive income (loss):									Other comprehensive income (loss):
Unrealized gains (losses) on securities:	Unrealized gains (losses) on securities:									Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period	Unrealized holding gains (losses) arising during the period	4,048		5,622		(4,290)		5,814		Unrealized holding gains (losses) arising during the period	(6,172)		357		(10,462)		6,171
Plus: reclassification adjustment for net (gains) losses realized in net income		(36)		69		(40)		75
Plus: reclassification adjustment for net gains realized in net income										Plus: reclassification adjustment for net gains realized in net income	(11)		(156)		(51)		(81)

Income tax (expense) benefit	Income tax (expense) benefit	(1,011)		(1,423)		1,091		(1,472)		Income tax (expense) benefit	1,558		(50)		2,649		(1,522)
Other comprehensive income (loss) on securities	Other comprehensive income (loss) on securities	3,001		4,268		(3,239)		4,417		Other comprehensive income (loss) on securities	(4,625)		151		(7,864)		4,568
Unrealized gains (losses) on derivatives:	Unrealized gains (losses) on derivatives:									Unrealized gains (losses) on derivatives:
Unrealized holding gains (losses) arising during the period	Unrealized holding gains (losses) arising during the period	(2,321)		(2,910)		5,442		(24,168)		Unrealized holding gains (losses) arising during the period	359		256		5,801		(23,912)
Plus: reclassification adjustment for net losses on derivatives realized in net income	Plus: reclassification adjustment for net losses on derivatives realized in net income	1,098		1,038		6,068		1,363		Plus: reclassification adjustment for net losses on derivatives realized in net income	1,105		1,405		7,173		2,768
Plus: reclassification adjustment for amortization of derivative termination costs	Plus: reclassification adjustment for amortization of derivative termination costs	0		15		0		31		Plus: reclassification adjustment for amortization of derivative termination costs	—		—		—		31
Income tax (expense) benefit	Income tax (expense) benefit	308		463		(2,900)		5,692		Income tax (expense) benefit	(369)		(415)		(3,269)		5,277
Other comprehensive income (loss) on derivatives	Other comprehensive income (loss) on derivatives	(915)		(1,394)		8,610		(17,082)		Other comprehensive income (loss) on derivatives	1,095		1,246		9,705		(15,836)
Total other comprehensive income (loss)	Total other comprehensive income (loss)	2,086		2,874		5,371		(12,665)		Total other comprehensive income (loss)	(3,530)		1,397		1,841		(11,268)
Comprehensive income	Comprehensive income	$	15,325	$	10,843	$	30,362	$	3,393	Comprehensive income	$	9,176	$	9,497	$	39,538	$	12,890

See Notes to Consolidated Financial Statements.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Consolidated Statements of Stockholders' Equity

(unaudited)


(in thousands, except share and per share data)	(in thousands, except share and per share data)														(in thousands, except share and per share data)

		Three Months Ended June 30, 2021														Three Months Ended September 30, 2021
											Accumulated														Accumulated
							Additional				Other										Additional				Other
		Preferred		Common Stock			Paid-In		Retained		Comprehensive					Preferred		Common Stock			Paid-In		Retained		Comprehensive
		Stock		Shares	Amount		Capital		Earnings		Income (Loss)		Total			Stock		Shares	Amount		Capital		Earnings		Income (Loss)		Total
Balance, March 31, 2021		$	—	16,540,381	$	3,000	$	28,243	$	211,847	$	(8,561)	$	234,529
Balance, June 30, 2021															Balance, June 30, 2021	$	—	16,554,846	$	3,000	$	28,888	$	221,113	$	(6,475)	$	246,526
Net income	Net income	—		—	—		—		13,239		0		13,239		Net income	—		—	—		—		12,706		—		12,706
Other comprehensive income, net of tax		—		—	—		—		—		2,086		2,086
Other comprehensive loss, net of tax															Other comprehensive loss, net of tax	—		—	—		—		—		(3,530)		(3,530)
Cash dividends declared, $0.24 per common share	Cash dividends declared, $0.24 per common share	—		—	—		—		(3,973)		—		(3,973)		Cash dividends declared, $0.24 per common share	—		—	—		—		(3,974)		—		(3,974)
Stock-based compensation costs	Stock-based compensation costs	—		—	—		645		—		—		645		Stock-based compensation costs	—		—	—		648		—		—		648
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes		0		14,465	—		—		—		—		—
Balance, June 30, 2021		$	—	16,554,846	$	3,000	$	28,888	$	221,113	$	(6,475)	$	246,526
Balance, September 30, 2021															Balance, September 30, 2021	$	—	16,554,846	$	3,000	$	29,536	$	229,845	$	(10,005)	$	252,376

		Three Months Ended June 30, 2020														Three Months Ended September 30, 2020
											Accumulated														Accumulated
							Additional				Other										Additional				Other
		Preferred		Common Stock			Paid-In		Retained		Comprehensive					Preferred		Common Stock			Paid-In		Retained		Comprehensive
		Stock		Shares	Amount		Capital		Earnings		Income (Loss)		Total			Stock		Shares	Amount		Capital		Earnings		Income (Loss)		Total
Balance, March 31, 2020		$	0	16,447,272	$	3,000	$	27,023	$	189,470	$	(18,800)	$	200,693
Balance, June 30, 2020															Balance, June 30, 2020	$	—	16,469,272	$	3,000	$	27,632	$	193,981	$	(15,926)	$	208,687
Net income	Net income	—		—	—		—		7,969		—		7,969		Net income	—		—	—		—		8,100		—		8,100
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—		—	—		—		—		2,874		2,874		Other comprehensive income, net of tax	—		—	—		—		—		1,397		1,397
Cash dividends declared, $0.21 per common share	Cash dividends declared, $0.21 per common share	—		—	—		—		(3,458)		—		(3,458)		Cash dividends declared, $0.21 per common share	—		—	—		—		(3,459)		—		(3,459)
Stock-based compensation costs	Stock-based compensation costs	—		—	—		609		—		—		609		Stock-based compensation costs	—		—	—		595		—		—		595
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes		0		22,000	—		—		—		—		—
Balance, June 30, 2020		$	—	16,469,272	$	3,000	$	27,632	$	193,981	$	(15,926)	$	208,687
Balance, September 30, 2020															Balance, September 30, 2020	$	—	16,469,272	$	3,000	$	28,227	$	198,622	$	(14,529)	$	215,320

See Notes to Consolidated Financial Statements.	See Notes to Consolidated Financial Statements.														See Notes to Consolidated Financial Statements.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Consolidated Statements of Stockholders' Equity

(unaudited)


(in thousands, except share and per share data)	(in thousands, except share and per share data)														(in thousands, except share and per share data)

		Six Months Ended June 30, 2021														Nine Months Ended September 30, 2021
											Accumulated														Accumulated
							Additional				Other										Additional				Other
		Preferred		Common Stock			Paid-In		Retained		Comprehensive					Preferred		Common Stock			Paid-In		Retained		Comprehensive
		Stock		Shares	Amount		Capital		Earnings		Income (Loss)		Total			Stock		Shares	Amount		Capital		Earnings		Income (Loss)		Total
Balance, December 31, 2020	Balance, December 31, 2020	$	—	16,469,272	$	3,000	$	28,823	$	203,718	$	(11,846)	$	223,695	Balance, December 31, 2020	$	—	16,469,272	$	3,000	$	28,823	$	203,718	$	(11,846)	$	223,695
Net income	Net income	—		—	—		—		24,991		0		24,991		Net income	—		—	—		—		37,697		—		37,697
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—		—	—		—		—		5,371		5,371		Other comprehensive income, net of tax	—		—	—		—		—		1,841		1,841
Cash dividends declared, $0.46 per common share		—		—	—		—		(7,596)		0		(7,596)
Cash dividends declared, $0.70 per common share															Cash dividends declared, $0.70 per common share	—		—	—		—		(11,570)		0		(11,570)
Stock-based compensation costs	Stock-based compensation costs	—		—	—		1,278		—		—		1,278		Stock-based compensation costs	—		—	—		1,926		—		—		1,926
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes	Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes	0		85,574	—		(1,213)		—		—		(1,213)		Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes	—		85,574	—		(1,213)		—		—		(1,213)
Balance, June 30, 2021		$	—	16,554,846	$	3,000	$	28,888	$	221,113	$	(6,475)	$	246,526
Balance, September 30, 2021															Balance, September 30, 2021	$	—	16,554,846	$	3,000	$	29,536	$	229,845	$	(10,005)	$	252,376

		Six Months Ended June 30, 2020														Nine Months Ended September 30, 2020
											Accumulated														Accumulated
							Additional				Other										Additional				Other
		Preferred		Common Stock			Paid-In		Retained		Comprehensive					Preferred		Common Stock			Paid-In		Retained		Comprehensive
		Stock		Shares	Amount		Capital		Earnings		Income (Loss)		Total			Stock		Shares	Amount		Capital		Earnings		Income (Loss)		Total
Balance, December 31, 2019	Balance, December 31, 2019	$	0	16,379,752	$	3,000	$	27,260	$	184,821	$	(3,261)	$	211,820	Balance, December 31, 2019	$	—	16,379,752	$	3,000	$	27,260	$	184,821	$	(3,261)	$	211,820
Net income	Net income	—		—	—		—		16,058		—		16,058		Net income	—		—	—		—		24,158		—		24,158
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax	—		—	—		—		—		(12,665)		(12,665)		Other comprehensive loss, net of tax	—		—	—		—		—		(11,268)		(11,268)
Cash dividends declared, $0.42 per common share		—		—	—		—		(6,898)		—		(6,898)
Cash dividends declared, $0.63 per common share															Cash dividends declared, $0.63 per common share	—		—	—		—		(10,357)		—		(10,357)
Stock-based compensation costs	Stock-based compensation costs	—		—	—		1,121		—		—		1,121		Stock-based compensation costs	—		—	—		1,716		—		—		1,716
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes	Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes	0		89,520	0		(749)		0		0		(749)		Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes	—		89,520	—		(749)		—		—		(749)
Balance, June 30, 2020		$	—	16,469,272	$	3,000	$	27,632	$	193,981	$	(15,926)	$	208,687
Balance, September 30, 2020															Balance, September 30, 2020	$	—	16,469,272	$	3,000	$	28,227	$	198,622	$	(14,529)	$	215,320

See Notes to Consolidated Financial Statements.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Consolidated Statements of Cash Flows

(unaudited)


		Six Months Ended June 30,					Nine Months Ended September 30,
(in thousands)	(in thousands)	2021		2020		(in thousands)	2021		2020
Cash Flows from Operating Activities:	Cash Flows from Operating Activities:					Cash Flows from Operating Activities:
Net income	Net income	$	24,991	$	16,058	Net income	$	37,697	$	24,158
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	Provision for loan losses	(1,500)		4,000		Provision for loan losses	(1,500)		8,000
Net amortization and accretion	Net amortization and accretion	929		1,269		Net amortization and accretion	1,459		1,628
Securities (gains) losses, net		(40)		75
Securities gains, net						Securities gains, net	(51)		(81)
Stock-based compensation	Stock-based compensation	1,278		1,121		Stock-based compensation	1,926		1,716
Increase in cash value of bank-owned life insurance	Increase in cash value of bank-owned life insurance	(460)		(294)		Increase in cash value of bank-owned life insurance	(690)		(427)

Depreciation	Depreciation	759		753		Depreciation	1,143		1,131
(Benefit) provision for deferred income taxes	(Benefit) provision for deferred income taxes	746		(540)		(Benefit) provision for deferred income taxes	380		(1,693)
Change in assets and liabilities:	Change in assets and liabilities:					Change in assets and liabilities:
Increase in accrued interest receivable	Increase in accrued interest receivable	(184)		(1,333)		Increase in accrued interest receivable	(541)		(3,937)
(Increase) decrease in other assets	(Increase) decrease in other assets	3,170		(119)		(Increase) decrease in other assets	2,299		(231)
Increase (decrease) in accrued expenses and other liabilities		(1,181)		2,540
Increase in accrued expenses and other liabilities						Increase in accrued expenses and other liabilities	312		798
Net cash provided by operating activities	Net cash provided by operating activities	28,508		23,530		Net cash provided by operating activities	42,434		31,062
Cash Flows from Investing Activities:	Cash Flows from Investing Activities:					Cash Flows from Investing Activities:
Proceeds from sales of securities available for sale	Proceeds from sales of securities available for sale	28,961		78,581		Proceeds from sales of securities available for sale	30,374		133,212
Proceeds from maturities and calls of securities available for sale	Proceeds from maturities and calls of securities available for sale	43,153		32,814		Proceeds from maturities and calls of securities available for sale	65,784		54,736
Purchases of securities available for sale	Purchases of securities available for sale	(258,216)		(49,748)		Purchases of securities available for sale	(420,744)		(158,540)
Purchases of Federal Home Loan Bank stock	Purchases of Federal Home Loan Bank stock	(861)		(6,853)		Purchases of Federal Home Loan Bank stock	(2,325)		(9,334)
Proceeds from redemption of Federal Home Loan Bank stock	Proceeds from redemption of Federal Home Loan Bank stock	2,395		7,037		Proceeds from redemption of Federal Home Loan Bank stock	2,504		9,920
Net increase in loans	Net increase in loans	(28,846)		(257,897)		Net increase in loans	(78,830)		(305,594)

Purchase of bank-owned life insurance						Purchase of bank-owned life insurance	—		(7,200)

Purchases of premises and equipment	Purchases of premises and equipment	(3,150)		(428)		Purchases of premises and equipment	(6,410)		(605)

Net cash used in investing activities	Net cash used in investing activities	(216,564)		(196,494)		Net cash used in investing activities	(409,647)		(283,405)
Cash Flows from Financing Activities:	Cash Flows from Financing Activities:					Cash Flows from Financing Activities:
Net increase in deposits	Net increase in deposits	124,295		240,953		Net increase in deposits	35,929		282,024
Net increase (decrease) in federal funds purchased	Net increase (decrease) in federal funds purchased	(1,770)		3,095		Net increase (decrease) in federal funds purchased	34,005		(310)

Net decrease in Federal Home Loan Bank advances	Net decrease in Federal Home Loan Bank advances	(50,000)		—		Net decrease in Federal Home Loan Bank advances	(50,000)		(5,000)
Principal payments on long-term debt	Principal payments on long-term debt	(1,272)		(58)		Principal payments on long-term debt	(3,904)		(712)
Common stock dividends paid	Common stock dividends paid	(7,596)		(6,898)		Common stock dividends paid	(11,570)		(10,357)
Restricted stock units withheld for payroll taxes	Restricted stock units withheld for payroll taxes	(1,213)		(749)		Restricted stock units withheld for payroll taxes	(1,213)		(749)
Net cash provided by financing activities	Net cash provided by financing activities	62,444		236,343		Net cash provided by financing activities	3,247		264,896
Net increase (decrease) in cash and cash equivalents	Net increase (decrease) in cash and cash equivalents	(125,612)		63,379		Net increase (decrease) in cash and cash equivalents	(363,966)		12,553
Cash and Cash Equivalents:	Cash and Cash Equivalents:					Cash and Cash Equivalents:
Beginning	Beginning	396,435		53,290		Beginning	396,435		53,290
Ending	Ending	$	270,823	$	116,669	Ending	$	32,469	$	65,843

Supplemental Disclosures of Cash Flow Information:	Supplemental Disclosures of Cash Flow Information:					Supplemental Disclosures of Cash Flow Information:
Cash payments for:	Cash payments for:					Cash payments for:
Interest	Interest	$	6,499	$	11,377	Interest	$	9,596	$	15,034
Income taxes	Income taxes	5,530		1,020		Income taxes	9,220		7,590
Supplemental Disclosure of Noncash Investing and Financing Activities:						Supplemental Disclosure of Noncash Investing and Financing Activities:
Purchase of securities available for sale, pending settlement						Purchase of securities available for sale, pending settlement	$	30,151	$	—

See Notes to Consolidated Financial Statements.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

1. Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared by West Bancorporation, Inc. (the Company) pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to such rules and regulations. Although management believes that the disclosures are adequate to make the information presented understandable, it is suggested that these interim consolidated financial statements be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 1, 2021. In the opinion of management, the accompanying consolidated financial statements of the Company contain all adjustments necessary to fairly present its financial position as of ~~June~~September 30, 2021 and December 31, 2020, net income, comprehensive income and changes in stockholders' equity for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, and cash flows for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020. The results for these interim periods may not be indicative of results for the entire year or for any other period.

The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (GAAP) established by the Financial Accounting Standards Board (FASB). References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codification™, sometimes referred to as the Codification or ASC. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses for the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term are the fair value of financial instruments and the allowance for loan losses.

The accompanying unaudited consolidated financial statements include the accounts of the Company, West Bank and West Bank's special purpose subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. In accordance with GAAP, West Bancorporation Capital Trust I is recorded on the books of the Company using the equity method of accounting and is not consolidated.

Current accounting developments: In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326). The amendments in this update require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net carrying value at the amount expected to be collected on the financial assets. Under the update, the income statement will reflect the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount of financial assets. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. The allowance for credit losses for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination that are measured at amortized cost basis is determined in a similar manner to other financial assets measured at amortized cost basis; however, the initial allowance for credit losses is added to the purchase price rather than being reported as a credit loss expense. Only subsequent changes in the allowance for credit losses are recorded as a credit loss expense for these assets. Off-balance-sheet arrangements such as commitments to extend credit, guarantees, and standby letters of credit that are not considered derivatives under ASC 815 and are not unconditionally cancellable are also within the scope of this update. Credit losses relating to available for sale debt securities should be recorded through an allowance for credit losses.

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

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Financial Instruments - Credit Losses (ASC 326), Derivatives and Hedging (ASC 815), and Financial Instruments (ASC 825). The amendments in the ASU improve the Codification by eliminating inconsistencies and providing clarifications. The amended guidance in this ASU related to the credit losses will be effective for the Company for fiscal years and interim periods beginning after December 15, 2022. The Company is currently evaluating the impact of the ASU on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this update provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. It provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact of the reference rate reform on the Company’s consolidated financial statements.

In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope. The amendments in this update refine the scope for certain optional expedients and exceptions for contract modifications and hedge accounting to apply to derivative contracts and certain hedging relationships affected by the discounting transition. The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact of the reference rate reform on the Company's consolidated financial statements.

2. Earnings per Common Share

Basic earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per common share reflect the potential dilution that could occur if the Company's outstanding restricted stock units were vested. The dilutive effect was computed using the treasury stock method, which assumes all stock-based awards were exercised and the hypothetical proceeds from exercise were used by the Company to purchase common stock at the average market price during the period. The incremental shares, to the extent they would have been dilutive, were included in the denominator of the diluted earnings per common share calculation. The calculations of earnings per common share and diluted earnings per common share for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 are presented in the following table.


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share data)	(in thousands, except per share data)	2021		2020		2021		2020		(in thousands, except per share data)	2021		2020		2021		2020
Net income	Net income	$	13,239	$	7,969	$	24,991	$	16,058	Net income	$	12,706	$	8,100	$	37,697	$	24,158

Weighted average common shares outstanding	Weighted average common shares outstanding	16,551		16,464		16,513		16,424		Weighted average common shares outstanding	16,555		16,470		16,527		16,439
Weighted average effect of restricted stock units outstanding	Weighted average effect of restricted stock units outstanding	209		42		213		55		Weighted average effect of restricted stock units outstanding	248		54		245		59
Diluted weighted average common shares outstanding	Diluted weighted average common shares outstanding	16,760		16,506		16,726		16,479		Diluted weighted average common shares outstanding	16,803		16,524		16,772		16,498

Basic earnings per common share	Basic earnings per common share	$	0.80	$	0.48	$	1.51	$	0.98	Basic earnings per common share	$	0.77	$	0.49	$	2.28	$	1.47
Diluted earnings per common share	Diluted earnings per common share	$	0.79	$	0.48	$	1.49	$	0.97	Diluted earnings per common share	$	0.76	$	0.49	$	2.25	$	1.46
Number of anti-dilutive common stock equivalents excluded from diluted earnings per share computation	Number of anti-dilutive common stock equivalents excluded from diluted earnings per share computation	0		249		56		267		Number of anti-dilutive common stock equivalents excluded from diluted earnings per share computation	—		243		—		251

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

3. Securities Available for Sale

The following tables show the amortized cost, gross unrealized gains and losses, and fair value of securities available for sale, by security type as of ~~June~~September 30, 2021 and December 31, 2020.


		June 30, 2021									September 30, 2021
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value
Securities available for sale:	Securities available for sale:									Securities available for sale:
State and political subdivisions	State and political subdivisions	$	200,660	$	3,471	$	(2,012)	$	202,119	State and political subdivisions	$	233,017	$	2,798	$	(3,954)	$	231,861
Collateralized mortgage obligations (1)	Collateralized mortgage obligations (1)	232,133		3,544		(744)		234,933		Collateralized mortgage obligations (1)	325,956		2,753		(2,123)		326,586
Mortgage-backed securities (1)	Mortgage-backed securities (1)	112,387		540		(1,107)		111,820		Mortgage-backed securities (1)	151,320		242		(2,328)		149,234
Collateralized loan obligations	Collateralized loan obligations	42,849		46		(98)		42,797		Collateralized loan obligations	42,854		75		(24)		42,905
Corporate notes	Corporate notes	9,750		43		0		9,793		Corporate notes	12,750		84		(23)		12,811
		$	597,779	$	7,644	$	(3,961)	$	601,462		$	765,897	$	5,952	$	(8,452)	$	763,397

		December 31, 2020									December 31, 2020
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value
Securities available for sale:	Securities available for sale:									Securities available for sale:
State and political subdivisions	State and political subdivisions	$	141,405	$	3,441	$	(514)	$	144,332	State and political subdivisions	$	141,405	$	3,441	$	(514)	$	144,332
Collateralized mortgage obligations (1)	Collateralized mortgage obligations (1)	135,338		5,650		(26)		140,962		Collateralized mortgage obligations (1)	135,338		5,650		(26)		140,962
Mortgage-backed securities (1)	Mortgage-backed securities (1)	82,994		651		(122)		83,523		Mortgage-backed securities (1)	82,994		651		(122)		83,523

Collateralized loan obligations	Collateralized loan obligations	52,822		50		(1,118)		51,754		Collateralized loan obligations	52,822		50		(1,118)		51,754

		$	412,559	$	9,792	$	(1,780)	$	420,571		$	412,559	$	9,792	$	(1,780)	$	420,571

(1)Collateralized mortgage obligations and mortgage-backed securities consist of residential and commercial mortgage pass-through securities and collateralized mortgage obligations guaranteed by FNMA, FHLMC, GNMA and SBA.

Securities with an amortized cost of approximately ~~$297,417~~$283,428 and $232,206 as of ~~June~~September 30, 2021 and December 31, 2020, respectively, were pledged to secure access to the Federal Reserve discount window, for public fund deposits, and for other purposes as required or permitted by law or regulation.

The amortized cost and fair value of securities available for sale as of ~~June~~September 30, 2021, by contractual maturity, are shown below. Certain securities have call features that allow the issuer to call the securities prior to maturity. Expected maturities may differ from contractual maturities for collateralized mortgage obligations and mortgage-backed securities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Therefore, collateralized mortgage obligations and mortgage-backed securities are not included in the maturity categories within the following maturity summary.


		June 30, 2021					September 30, 2021
		Amortized Cost		Fair Value			Amortized Cost		Fair Value

Due after five years through ten years	Due after five years through ten years	$	36,927	$	36,872	Due after five years through ten years	$	46,878	$	46,938
Due after ten years	Due after ten years	216,332		217,837		Due after ten years	241,743		240,639
		253,259		254,709			288,621		287,577
Collateralized mortgage obligations and mortgage-backed securities	Collateralized mortgage obligations and mortgage-backed securities	344,520		346,753		Collateralized mortgage obligations and mortgage-backed securities	477,276		475,820
		$	597,779	$	601,462		$	765,897	$	763,397

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

The details of the sales of securities available for sale for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 are summarized in the following table.


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Proceeds from sales	Proceeds from sales	$	10,186	$	39,504	$	28,961	$	78,581	Proceeds from sales	$	1,413	$	54,631	$	30,374	$	133,212
Gross gains on sales	Gross gains on sales	110		556		272		1,455		Gross gains on sales	11		318		283		1,773
Gross losses on sales	Gross losses on sales	74		625		232		1,530		Gross losses on sales	—		162		232		1,692

The following tables show the fair value and gross unrealized losses, aggregated by investment type and length of time that individual securities have been in a continuous loss position, as of ~~June~~September 30, 2021 and December 31, 2020.


		June 30, 2021													September 30, 2021
		Less than 12 months				12 months or longer				Total					Less than 12 months				12 months or longer				Total
		Fair Value		Gross Unrealized (Losses)		Fair Value		Gross Unrealized (Losses)		Fair Value		Gross Unrealized (Losses)			Fair Value		Gross Unrealized (Losses)		Fair Value		Gross Unrealized (Losses)		Fair Value		Gross Unrealized (Losses)
Securities available for sale:	Securities available for sale:													Securities available for sale:
State and political subdivisions	State and political subdivisions	$	119,419	$	(2,012)	$	0	$	0	$	119,419	$	(2,012)	State and political subdivisions	$	132,866	$	(2,850)	$	20,205	$	(1,104)	$	153,071	$	(3,954)
Collateralized mortgage obligations	Collateralized mortgage obligations	86,411		(744)		0		0		86,411		(744)		Collateralized mortgage obligations	187,026		(2,123)		—		—		187,026		(2,123)
Mortgage-backed securities	Mortgage-backed securities	82,603		(1,107)		0		0		82,603		(1,107)		Mortgage-backed securities	115,501		(2,328)		—		—		115,501		(2,328)
Collateralized loan obligations	Collateralized loan obligations	0		0		17,768		(98)		17,768		(98)		Collateralized loan obligations	14,986		(24)		—		—		14,986		(24)
Corporate notes														Corporate notes	4,227		(23)		—		—		4,227		(23)
		$	288,433	$	(3,863)	$	17,768	$	(98)	$	306,201	$	(3,961)		$	454,606	$	(7,348)	$	20,205	$	(1,104)	$	474,811	$	(8,452)


		December 31, 2020													December 31, 2020
		Less than 12 months				12 months or longer				Total					Less than 12 months				12 months or longer				Total
		Fair Value		Gross Unrealized (Losses)		Fair Value		Gross Unrealized (Losses)		Fair Value		Gross Unrealized (Losses)			Fair Value		Gross Unrealized (Losses)		Fair Value		Gross Unrealized (Losses)		Fair Value		Gross Unrealized (Losses)
Securities available for sale:	Securities available for sale:													Securities available for sale:
State and political subdivisions	State and political subdivisions	$	48,752	$	(514)	$	0	$	0	$	48,752	$	(514)	State and political subdivisions	$	48,752	$	(514)	$	—	$	—	$	48,752	$	(514)
Collateralized mortgage obligations	Collateralized mortgage obligations	9,275		(26)		0		0		9,275		(26)		Collateralized mortgage obligations	9,275		(26)		—		—		9,275		(26)
Mortgage-backed securities	Mortgage-backed securities	14,183		(122)		0		0		14,183		(122)		Mortgage-backed securities	14,183		(122)		—		—		14,183		(122)

Collateralized loan obligations	Collateralized loan obligations	14,667		(206)		32,026		(912)		46,693		(1,118)		Collateralized loan obligations	14,667		(206)		32,026		(912)		46,693		(1,118)

		$	86,877	$	(868)	$	32,026	$	(912)	$	118,903	$	(1,780)		$	86,877��	$	(868)	$	32,026	$	(912)	$	118,903	$	(1,780)

As of ~~June~~September 30, 2021, securities available for sale with unrealized losses included 3547 state and political subdivision securities, 1022 collateralized mortgage obligation securities, 1014 mortgage-backed securities, ~~and 3~~2 collateralized loan obligation ~~securities.~~securities and 4 corporate notes. Collateralized loan obligation securities are debt securities backed by pools of senior secured commercial loans to a diverse group of companies across a broad spectrum of industries. At ~~June~~September 30, 2021, the Company only owned collateralized loan obligations that were ~~AAA~~AAA- or ~~AA rated.~~AA-rated. The Company believes the unrealized losses on securities available for sale as of ~~June~~September 30, 2021 were due to market conditions rather than reduced estimated cash flows. At ~~June~~September 30, 2021, the Company did not intend to sell these securities, did not anticipate that these securities will be required to be sold before anticipated recovery, and expected full principal and interest to be collected. Therefore, the Company did not consider these securities to have other than temporary impairment as of ~~June~~September 30, 2021.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

4. Loans and Allowance for Loan Losses

Loans consisted of the following segments as of ~~June~~September 30, 2021 and December 31, 2020.


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Commercial	Commercial	$	510,947	$	603,599	Commercial	$	491,344	$	603,599
Real estate:	Real estate:					Real estate:
Construction, land and land development	Construction, land and land development	281,754		236,093		Construction, land and land development	325,655		236,093
1-4 family residential first mortgages	1-4 family residential first mortgages	66,006		58,912		1-4 family residential first mortgages	63,881		58,912
Home equity	Home equity	7,880		9,444		Home equity	8,993		9,444
Commercial	Commercial	1,445,512		1,373,007		Commercial	1,471,170		1,373,007
Consumer and other	Consumer and other	3,883		5,694		Consumer and other	3,698		5,694
		2,315,982		2,286,749			2,364,741		2,286,749
Net unamortized fees and costs	Net unamortized fees and costs	(6,455)		(6,174)		Net unamortized fees and costs	(5,174)		(6,174)
		$	2,309,527	$	2,280,575		$	2,359,567	$	2,280,575

Included in commercial loans at ~~June~~September 30, 2021 and December 31, 2020, were ~~$84,573~~$47,416 and $180,757, respectively, of loans originated in the Paycheck Protection Program (PPP). The PPP was established by the Coronavirus Aid, Relief and Economic Security Act (CARES Act), enacted on March 27, 2020, and expanded by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, enacted on December 27, 2020 and the American Rescue Plan Act, enacted on March 11, 2021, in response to the Coronavirus Disease 2019 (COVID-19) pandemic. The PPP is administered by the Small Business Administration (SBA). PPP loans may be forgiven by the SBA and are 100 percent guaranteed by the SBA. Therefore, no allowance for loan losses is allocated to PPP loans.

Real estate loans of approximately ~~$1,220,000~~$1,250,000 and $1,010,000 were pledged as security for Federal Home Loan Bank (FHLB) advances as of ~~June~~September 30, 2021 and December 31, 2020, respectively.

Loans are stated at the principal amounts outstanding, net of unamortized loan fees and costs, with interest income recognized on the interest method based upon the terms of the loan. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method. Loans are reported by the portfolio segments identified above and are analyzed by management on this basis. All loan policies identified below apply to all segments of the loan portfolio.

Delinquencies are determined based on the payment terms of the individual loan agreements. The accrual of interest on past due and other impaired loans is generally discontinued at 90 days past due or when, in the opinion of management, the borrower may be unable to make all payments pursuant to contractual terms. Unless considered collectible, all interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income, if accrued in the current year, or charged to the allowance for loan losses, if accrued in the prior year. Generally, all payments received while a loan is on nonaccrual status are applied to the principal balance of the loan. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured.

A loan is classified as a troubled debt restructured (TDR) loan when the Company separately concludes that a borrower is experiencing financial difficulties and a concession is granted that would not otherwise be considered. Concessions may include a restructuring of the loan terms to alleviate the burden of the borrower's cash requirements, such as an extension of the payment terms beyond the original maturity date or a change in the interest rate charged. TDR loans with extended payment terms are accounted for as impaired until performance is established. A change to the interest rate would change the classification of a loan to a TDR loan if the restructured loan yields a rate that is below a market rate for that of a new loan with comparable risk. TDR loans with below-market rates are considered impaired until fully collected. TDR loans may also be reported as nonaccrual or 90 days past due if they are not performing per the restructured terms.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

The CARES Act also provided financial institutions the option to temporarily suspend certain requirements under GAAP related to TDRs for a limited period of time in certain circumstances. This temporary suspension may only be applied to modifications of loans that were not more than 30 days past due as of December 31, 2019 and may not be applied to modifications that are not related to the COVID-19 pandemic. If elected, the temporary suspension may be applied to eligible modifications executed during the period beginning on March 1, 2020 and, as extended by the Coronavirus Response and Relief Supplemental Appropriations Act of 2021, ending on the earlier of January 1, 2022 or 60 days after the termination of the COVID-19 national emergency. In 2020, federal banking regulators, in consultation with FASB, issued interagency statements that included similar guidance on their approach for the accounting of loan modifications in light of the economic impact of the COVID-19 pandemic that provide that short-term modifications and additional accommodations made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs. At ~~June~~September 30, 2021, there were 0no COVID-19-related loan ~~modifications.~~modifications on the Company's loans.

Based upon its ongoing assessment of credit quality within the loan portfolio, the Company maintains a Watch List, which includes loans classified as Doubtful, Substandard and Watch according to the Company's classification criteria. These loans involve the anticipated potential for payment defaults or collateral inadequacies. A loan on the Watch List is considered impaired when management believes it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. The amount of impairment, if any, and any subsequent changes are included in the specific component of the allowance for loan losses.

TDR loans totaled $8,725 and $0 as of ~~June~~September 30, 2021 and December 31, 2020 and were included in the nonaccrual category. There were 06 loan modifications related to one borrower considered to be TDR, with a pre- and post-modification recorded investment of $14,044, that occurred during the three and nine months ended September 30, 2021. The modification included significant payment delays. A specific reserve of $2,500 and $3,000 related to these loans was recorded at September 30, 2021 and December 31, 2020, respectively. There were no loan modifications considered to be TDR that occurred during the three and ~~six~~nine months ended ~~June~~September 30, ~~2021 and~~ 2020. ~~NaN~~No TDR loans that were modified within the ~~twelve~~12 months preceding ~~June~~September 30, 2021 and 2020 have subsequently had a payment default. A TDR loan is considered to have a payment default when it is past due 30 days or more. ~~As noted above, COVID-19-related loan modifications are not reported as TDRs.~~

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

The following table summarizes the recorded investment in impaired loans by segment, broken down by loans with no related allowance for loan losses and loans with a related allowance and the amount of that allowance as of ~~June~~September 30, 2021 and December 31, 2020.


		June 30, 2021						December 31, 2020							September 30, 2021						December 31, 2020
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance			Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:	With no related allowance recorded:													With no related allowance recorded:
Commercial	Commercial	$	0	$	0	$	—	$	0	$	0	$	—	Commercial	$	—	$	—	$	—	$	—	$	—	$	—
Real estate:	Real estate:													Real estate:
Construction, land and land development	Construction, land and land development	0		0		—		0		0		—		Construction, land and land development	—		—		—		—		—		—
1-4 family residential first mortgages	1-4 family residential first mortgages	364		364		—		377		377		—		1-4 family residential first mortgages	355		355		—		377		377		—
Home equity	Home equity	0		0		—		0		0		—		Home equity	—		—		—		—		—		—
Commercial	Commercial	0		0		—		0		0		—		Commercial	—		—		—		—		—		—
Consumer and other	Consumer and other	0		0		—		0		0		—		Consumer and other	—		—		—		—		—		—
		364		364		—		377		377		—			355		355		—		377		377		—
With an allowance recorded:	With an allowance recorded:													With an allowance recorded:
Commercial	Commercial	0		0		—		0		0		—		Commercial	—		—		—		—		—		—
Real estate:	Real estate:													Real estate:
Construction, land and land development	Construction, land and land development	0		0		—		0		0		—		Construction, land and land development	—		—		—		—		—		—
1-4 family residential first mortgages	1-4 family residential first mortgages	0		0		—		0		0		—		1-4 family residential first mortgages	—		—		—		—		—		—
Home equity	Home equity	0		0		—		0		0		—		Home equity	—		—		—		—		—		—
Commercial	Commercial	14,222		14,222		3,000		15,817		15,817		3,000		Commercial	8,725		8,725		2,500		15,817		15,817		3,000
Consumer and other	Consumer and other	0		0		—		0		0		—		Consumer and other	—		—		—		—		—		—
		14,222		14,222		3,000		15,817		15,817		3,000			8,725		8,725		2,500		15,817		15,817		3,000
Total:	Total:													Total:
Commercial	Commercial	0		0		0		0		0		0		Commercial	—		—		—		—		—		—
Real estate:	Real estate:													Real estate:
Construction, land and land development	Construction, land and land development	0		0		0		0		0		0		Construction, land and land development	—		—		—		—		—		—
1-4 family residential first mortgages	1-4 family residential first mortgages	364		364		0		377		377		0		1-4 family residential first mortgages	355		355		—		377		377		—
Home equity	Home equity	0		0		0		0		0		0		Home equity	—		—		—		—		—		—
Commercial	Commercial	14,222		14,222		3,000		15,817		15,817		3,000		Commercial	8,725		8,725		2,500		15,817		15,817		3,000
Consumer and other	Consumer and other	0		0		0		0		0		0		Consumer and other	—		—		—		—		—		—
		$	14,586	$	14,586	$	3,000	$	16,194	$	16,194	$	3,000		$	9,080	$	9,080	$	2,500	$	16,194	$	16,194	$	3,000

The balance of impaired loans at ~~June~~September 30, 2021 and December 31, 2020 was composed of 2 different borrowers. The Company has 0no commitments to advance additional funds on any of the impaired loans.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

The following table summarizes the average recorded investment and interest income recognized on impaired loans by segment for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020.


		Three Months Ended June 30,								Six Months Ended June 30,									Three Months Ended September 30,								Nine Months Ended September 30,
		2021				2020				2021				2020					2021				2020				2021				2020
		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized			Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:	With no related allowance recorded:																	With no related allowance recorded:
Commercial	Commercial	$	0	$	0	$	67	$	2	$	0	$	0	$	77	$	2	Commercial	$	—	$	—	$	—	$	—	$	—	$	—	$	54	$	2
Real estate:	Real estate:																	Real estate:
Construction, land and land development	Construction, land and land development	0		0		0		0		0		0		0		0		Construction, land and land development	—		—		—		—		—		—		—		—
1-4 family residential first mortgages	1-4 family residential first mortgages	367		0		394		3		370		0		399		3		1-4 family residential first mortgages	360		—		386		1		367		—		395		4
Home equity	Home equity	0		0		0		0		0		0		5		0		Home equity	—		—		—		—		—		—		3		—
Commercial	Commercial	0		0		0		5		0		0		1		10		Commercial	—		—		3,979		4		—		—		1,592		14
Consumer and other	Consumer and other	0		0		0		0		0		0		0		0		Consumer and other	—		—		—		—		—		—		—		—
		367		0		461		10		370		0		482		15			360		—		4,365		5		367		—		2,044		20
With an allowance recorded:	With an allowance recorded:																	With an allowance recorded:
Commercial	Commercial	0		0		0		0		0		0		0		0		Commercial	—		—		369		—		—		—		148		—
Real estate:	Real estate:																	Real estate:
Construction, land and land development	Construction, land and land development	0		0		0		0		0		0		0		0		Construction, land and land development	—		—		—		—		—		—		—		—
1-4 family residential first mortgages	1-4 family residential first mortgages	0		0		0		0		0		0		0		0		1-4 family residential first mortgages	—		—		—		—		—		—		—		—
Home equity	Home equity	0		0		0		0		0		0		0		0		Home equity	—		—		—		—		—		—		—		—
Commercial	Commercial	14,688		0		0		0		15,172		0		0		0		Commercial	12,781		—		—		—		14,310		—		—		—
Consumer and other	Consumer and other	0		0		0		0		0		0		0		0		Consumer and other	—		—		—		—		—		—		—		—
		14,688		0		0		0		15,172		0		0		0			12,781		—		369		—		14,310		—		148		—
Total:	Total:																	Total:
Commercial	Commercial	0		0		67		2		0		0		77		2		Commercial	—		—		369		—		—		—		202		2
Real estate:	Real estate:																	Real estate:
Construction, land and land development	Construction, land and land development	0		0		0		0		0		0		0		0		Construction, land and land development	—		—		—		—		—		—		—		—
1-4 family residential first mortgages	1-4 family residential first mortgages	367		0		394		3		370		0		399		3		1-4 family residential first mortgages	360		—		386		1		367		—		395		4
Home equity	Home equity	0		0		0		0		0		0		5		0		Home equity	—		—		—		—		—		—		3		—
Commercial	Commercial	14,688		0		0		5		15,172		0		1		10		Commercial	12,781		—		3,979		4		14,310		—		1,592		14
Consumer and other	Consumer and other	0		0		0		0		0		0		0		0		Consumer and other	—		—		—		—		—		—		—		—
		$	15,055	$	0	$	461	$	10	$	15,542	$	0	$	482	$	15		$	13,141	$	—	$	4,734	$	5	$	14,677	$	—	$	2,192	$	20

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

The following tables provide an analysis of the payment status of the recorded investment in loans as of ~~June~~September 30, 2021 and December 31, 2020.


		June 30, 2021															September 30, 2021
		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Nonaccrual Loans		Total Loans			30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Nonaccrual Loans		Total Loans
Commercial	Commercial	$	0	$	0	$	0	$	0	$	510,947	$	0	$	510,947	Commercial	$	—	$	—	$	—	$	—	$	491,344	$	—	$	491,344
Real estate:	Real estate:															Real estate:
Construction, land and	Construction, land and															Construction, land and
land development	land development	0		0		0		0		281,754		0		281,754		land development	—		—		—		—		325,655		—		325,655
1-4 family residential	1-4 family residential															1-4 family residential
first mortgages	first mortgages	0		85		0		85		65,557		364		66,006		first mortgages	—		—		—		—		63,526		355		63,881
Home equity	Home equity	0		0		0		0		7,880		0		7,880		Home equity	—		—		—		—		8,993		—		8,993
Commercial	Commercial	0		0		0		0		1,431,290		14,222		1,445,512		Commercial	—		—		—		—		1,462,445		8,725		1,471,170
Consumer and other	Consumer and other	0		0		0		0		3,883		0		3,883		Consumer and other	—		—		—		—		3,698		—		3,698
Total	Total	$	0	$	85	$	0	$	85	$	2,301,311	$	14,586	$	2,315,982	Total	$	—	$	—	$	—	$	—	$	2,355,661	$	9,080	$	2,364,741


		December 31, 2020															December 31, 2020
		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Nonaccrual Loans		Total Loans			30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Nonaccrual Loans		Total Loans
Commercial	Commercial	$	18	$	0	$	0	$	18	$	603,581	$	0	$	603,599	Commercial	$	18	$	—	$	—	$	18	$	603,581	$	—	$	603,599
Real estate:	Real estate:															Real estate:
Construction, land and	Construction, land and															Construction, land and
land development	land development	0		0		0		0		236,093		0		236,093		land development	—		—		—		—		236,093		—		236,093
1-4 family residential	1-4 family residential															1-4 family residential
first mortgages	first mortgages	0		0		0		0		58,535		377		58,912		first mortgages	—		—		—		—		58,535		377		58,912
Home equity	Home equity	0		0		0		0		9,444		0		9,444		Home equity	—		—		—		—		9,444		—		9,444
Commercial	Commercial	0		0		0		0		1,357,190		15,817		1,373,007		Commercial	—		—		—		—		1,357,190		15,817		1,373,007
Consumer and other	Consumer and other	0		0		0		0		5,694		0		5,694		Consumer and other	—		—		—		—		5,694		—		5,694
Total	Total	$	18	$	0	$	0	$	18	$	2,270,537	$	16,194	$	2,286,749	Total	$	18	$	—	$	—	$	18	$	2,270,537	$	16,194	$	2,286,749

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

The following tables present the recorded investment in loans by credit quality indicator and loan segment as of ~~June~~September 30, 2021 and December 31, 2020.


		June 30, 2021											September 30, 2021
		Pass		Watch		Substandard		Doubtful		Total			Pass		Watch		Substandard		Doubtful		Total
Commercial	Commercial	$	510,405	$	86	$	456	$	0	$	510,947	Commercial	$	491,013	$	282	$	49	$	—	$	491,344
Real estate:	Real estate:											Real estate:
Construction, land and land development	Construction, land and land development	281,697		57		0		0		281,754		Construction, land and land development	325,599		56		—		—		325,655
1-4 family residential first mortgages	1-4 family residential first mortgages	65,134		244		628		0		66,006		1-4 family residential first mortgages	63,240		157		484		—		63,881
Home equity	Home equity	7,880		0		0		0		7,880		Home equity	8,993		—		—		—		8,993
Commercial	Commercial	1,340,984		90,306		14,222		0		1,445,512		Commercial	1,371,615		90,830		8,725		—		1,471,170
Consumer and other	Consumer and other	3,883		0		0		0		3,883		Consumer and other	3,698		—		—		—		3,698
Total	Total	$	2,209,983	$	90,693	$	15,306	$	0	$	2,315,982	Total	$	2,264,158	$	91,325	$	9,258	$	—	$	2,364,741


		December 31, 2020											December 31, 2020
		Pass		Watch		Substandard		Doubtful		Total			Pass		Watch		Substandard		Doubtful		Total
Commercial	Commercial	$	601,806	$	992	$	801	$	0	$	603,599	Commercial	$	601,806	$	992	$	801	$	—	$	603,599
Real estate:	Real estate:											Real estate:
Construction, land and land development	Construction, land and land development	236,035		58		0		0		236,093		Construction, land and land development	236,035		58		—		—		236,093
1-4 family residential first mortgages	1-4 family residential first mortgages	57,680		609		623		0		58,912		1-4 family residential first mortgages	57,680		609		623		—		58,912
Home equity	Home equity	9,113		331		0		0		9,444		Home equity	9,113		331		—		—		9,444
Commercial	Commercial	1,331,780		24,725		16,502		0		1,373,007		Commercial	1,331,780		24,725		16,502		—		1,373,007
Consumer and other	Consumer and other	5,694		0		0		0		5,694		Consumer and other	5,694		—		—		—		5,694
Total	Total	$	2,242,108	$	26,715	$	17,926	$	0	$	2,286,749	Total	$	2,242,108	$	26,715	$	17,926	$	—	$	2,286,749

All loans are subject to the assessment of a credit quality indicator. Risk ratings are assigned for each loan at the time of approval, and they change as circumstances dictate during the term of the loan. The Company utilizes a 9-point risk rating scale as shown below, with ratings 1 - 5 included in the Pass column, rating 6 included in the Watch column, ratings 7 - 8 included in the Substandard column and rating 9 included in the Doubtful column. All loans classified as impaired that are included in the specific evaluation of the allowance for loan losses are included in the Substandard column along with all other loans with ratings of 7 - 8.

Risk rating 1: The loan is secured by cash equivalent collateral.

Risk rating 2: The loan is secured by properly margined marketable securities, bonds or cash surrender value of life insurance.

Risk rating 3: The borrower is in strong financial condition and has strong debt service capacity. The loan is performing as agreed, and the financial characteristics and trends of the borrower exceed industry statistics.

Risk rating 4: The borrower's financial condition is satisfactory and stable. The borrower has satisfactory debt service capacity, and the loan is well secured. The loan is performing as agreed, and the financial characteristics and trends fall in line with industry statistics.

Risk rating 5: The borrower's financial condition is less than satisfactory. The loan is still generally paying as agreed, but strained cash flows may cause some slowness in payments. The collateral values adequately preclude loss on the loan. Financial characteristics and trends lag industry statistics. There may be noncompliance with loan covenants.

Risk rating 6: The borrower's financial condition is deficient. Payment delinquencies may be more common. Collateral values still protect from loss, but margins are narrow. The loan may be reliant on secondary sources of repayment, including liquidation of collateral and guarantor support.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

Risk rating 7: The loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Well-defined weaknesses exist that jeopardize the liquidation of the debt. The Company is inadequately protected by the valuation or paying capacity of the collateral pledged. If deficiencies are not corrected, there is a distinct possibility that a loss will be sustained.

Risk rating 8: All the characteristics of rating 7 exist with the added condition that the loan is past due more than 90 days or there is reason to believe the Company will not receive its principal and interest according to the terms of the loan agreement.

Risk rating 9: All the weaknesses inherent in risk ratings 7 and 8 exist with the added condition that collection or liquidation, on the basis of currently known facts, conditions and values, is highly questionable and improbable. A loan reaching this category would most likely be charged off.

Credit quality indicators for all loans and the Company's risk rating process are dynamic and updated on a continuous basis. Risk ratings are updated as circumstances that could affect the repayment of an individual loan are brought to management's attention through an established monitoring process. Individual bankers initiate changes as appropriate for ratings 1 through 5, and changes for ratings 6 through 9 are initiated ~~via communications with~~by management. The likelihood of loss increases as the risk rating increases and is generally preceded by a loan appearing on the Watch List, which consists of all loans with a risk rating of 6 or worse. Written action plans with firm target dates for resolution of identified problems are maintained and reviewed on a quarterly basis for all segments of loans included on the Watch List.

In addition to the Company's internal credit monitoring practices and procedures, an outsourced independent credit review function is in place to further assess assigned internal risk classifications and monitor compliance with internal lending policies and procedures.

In all portfolio segments, the primary risks are that a borrower's income stream diminishes to the point that the borrower is not able to make scheduled principal and interest payments and any collateral securing the loan declines in value. The risk of declining collateral values is present for most types of loans.

Commercial loans consist primarily of loans to businesses for various purposes, including revolving lines to finance current operations, inventory and accounts receivable, and capital expenditure loans to finance equipment and other fixed assets. These loans generally have short maturities, have either adjustable or fixed interest rates, and are either unsecured or secured by inventory, accounts receivable and/or fixed assets. For commercial loans, the primary source of repayment is from the operation of the business.

Real estate loans include various types of loans for which the Company holds real property as collateral, and consist of loans on commercial properties and single and multifamily residences. Real estate loans are typically structured to mature or reprice every five to ten years with payments based on amortization periods up to 30 years. The majority of construction loans are to contractors and developers for construction of commercial buildings or residential real estate. These loans typically have maturities of up to 24 months. The Company's loan policy includes minimum appraisal and other credit guidelines.

Consumer loans include loans extended to individuals for household, family and other personal expenditures not secured by real estate. The majority of the Company's consumer lending is for vehicles, consolidation of personal debts and household improvements. The repayment source for consumer loans, including 1-4 family residential and home equity loans, is typically wages.

The allowance for loan losses is established through a provision for loan losses charged to expense. The allowance is an amount that management believes will be adequate to absorb probable losses on existing loans based on an evaluation of the collectability of loans and prior loss experience. This evaluation also takes into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, the review of specific problem loans, and the current economic conditions that may affect the borrower's ability to pay. Loans are charged-off against the allowance for loan losses when management believes that collectability of the principal is unlikely. While management uses the best information available to make its evaluations, future adjustments to the allowance may be necessary if there are significant changes in economic conditions or the other factors relied upon.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

The allowance for loan losses consists of specific and general components. The specific component relates to loans that meet the definition of impaired. The general component covers the remaining loans and is based on historical loss experience adjusted for qualitative factors such as delinquency trends, loan growth, economic elements and local market conditions. These same policies are applied to all segments of loans. In addition, regulatory agencies, as an integral part of their examination processes, periodically review the Company's allowance for loan losses, and may require the Company to make additions to the allowance based on their judgment about information available to them at the time of their examinations.

The following tables detail the changes in the allowance for loan losses by segment for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020.


		Three Months Ended June 30, 2021															Three Months Ended September 30, 2021
				Real Estate															Real Estate
		Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total			Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Beginning balance	Beginning balance	$	4,618	$	2,743	$	430	$	90	$	22,057	$	70	$	30,008	Beginning balance	$	4,464	$	2,950	$	359	$	91	$	20,129	$	49	$	28,042
Charge-offs	Charge-offs	0		0		0		0		0		0		0		Charge-offs	—		—		—		—		—		—		—
Recoveries	Recoveries	30		0		0		1		3		0		34		Recoveries	45		—		1		1		4		5		56
Provision (1)	Provision (1)	(184)		207		(71)		0		(1,931)		(21)		(2,000)		Provision (1)	191		498		(5)		9		(686)		(7)		—
Ending balance	Ending balance	$	4,464	$	2,950	$	359	$	91	$	20,129	$	49	$	28,042	Ending balance	$	4,700	$	3,448	$	355	$	101	$	19,447	$	47	$	28,098

		Three Months Ended June 30, 2020															Three Months Ended September 30, 2020
				Real Estate															Real Estate
		Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total			Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Beginning balance	Beginning balance	$	4,131	$	2,595	$	247	$	127	$	11,154	$	78	$	18,332	Beginning balance	$	4,318	$	3,300	$	331	$	128	$	13,205	$	81	$	21,363
Charge-offs	Charge-offs	0		0		0		0		0		0		0		Charge-offs	—		—		—		—		—		—		—
Recoveries	Recoveries	21		0		1		1		3		5		31		Recoveries	35		—		—		1		4		—		40
Provision (1)	Provision (1)	166		705		83		0		2,048		(2)		3,000		Provision (1)	491		124		29		(2)		3,358		—		4,000
Ending balance	Ending balance	$	4,318	$	3,300	$	331	$	128	$	13,205	$	81	$	21,363	Ending balance	$	4,844	$	3,424	$	360	$	127	$	16,567	$	81	$	25,403

		Six Months Ended June 30, 2021															Nine Months Ended September 30, 2021
				Real Estate															Real Estate
		Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total			Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Beginning balance	Beginning balance	$	4,718	$	2,634	$	360	$	114	$	21,535	$	75	$	29,436	Beginning balance	$	4,718	$	2,634	$	360	$	114	$	21,535	$	75	$	29,436
Charge-offs	Charge-offs	0		0		0		0		0		0		0		Charge-offs	—		—		—		—		—		—		—
Recoveries	Recoveries	97		0		1		2		6		0		106		Recoveries	142		—		2		3		10		5		162
Provision (1)	Provision (1)	(351)		316		(2)		(25)		(1,412)		(26)		(1,500)		Provision (1)	(160)		814		(7)		(16)		(2,098)		(33)		(1,500)
Ending balance	Ending balance	$	4,464	$	2,950	$	359	$	91	$	20,129	$	49	$	28,042	Ending balance	$	4,700	$	3,448	$	355	$	101	$	19,447	$	47	$	28,098

		Six Months Ended June 30, 2020															Nine Months Ended September 30, 2020
				Real Estate															Real Estate
		Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total			Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Beginning balance	Beginning balance	$	3,875	$	2,375	$	216	$	127	$	10,565	$	77	$	17,235	Beginning balance	$	3,875	$	2,375	$	216	$	127	$	10,565	$	77	$	17,235
Charge-offs	Charge-offs	0		0		0		(1)		0		0		(1)		Charge-offs	—		—		—		(1)		—		—		(1)
Recoveries	Recoveries	44		0		71		2		6		6		129		Recoveries	79		—		71		3		10		6		169
Provision (1)	Provision (1)	399		925		44		0		2,634		(2)		4,000		Provision (1)	890		1,049		73		(2)		5,992		(2)		8,000
Ending balance	Ending balance	$	4,318	$	3,300	$	331	$	128	$	13,205	$	81	$	21,363	Ending balance	$	4,844	$	3,424	$	360	$	127	$	16,567	$	81	$	25,403

(1)The negative provisions for the various segments are related to the decline in outstanding balances in each of those portfolio segments during the time periods disclosed and/or improvement in the credit quality factors related to those portfolio segments.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

The following tables present a breakdown of the allowance for loan losses disaggregated on the basis of impairment analysis method by segment as of ~~June~~September 30, 2021 and December 31, 2020.


		June 30, 2021															September 30, 2021
				Real Estate															Real Estate
		Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total			Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Ending balance:	Ending balance:															Ending balance:
Individually evaluated for impairment	Individually evaluated for impairment	$	0	$	0	$	0	$	0	$	3,000	$	0	$	3,000	Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	2,500	$	—	$	2,500
Collectively evaluated for impairment	Collectively evaluated for impairment	4,464		2,950		359		91		17,129		49		25,042		Collectively evaluated for impairment	4,700		3,448		355		101		16,947		47		25,598
Total	Total	$	4,464	$	2,950	$	359	$	91	$	20,129	$	49	$	28,042	Total	$	4,700	$	3,448	$	355	$	101	$	19,447	$	47	$	28,098

		December 31, 2020															December 31, 2020
				Real Estate															Real Estate
		Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total			Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Ending balance:	Ending balance:															Ending balance:
Individually evaluated for impairment	Individually evaluated for impairment	$	0	$	0	$	0	$	0	$	3,000	$	0	$	3,000	Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	3,000	$	—	$	3,000
Collectively evaluated for impairment	Collectively evaluated for impairment	4,718		2,634		360		114		18,535		75		26,436		Collectively evaluated for impairment	4,718		2,634		360		114		18,535		75		26,436
Total	Total	$	4,718	$	2,634	$	360	$	114	$	21,535	$	75	$	29,436	Total	$	4,718	$	2,634	$	360	$	114	$	21,535	$	75	$	29,436

The following tables present the recorded investment in loans, exclusive of unamortized fees and costs, disaggregated on the basis of impairment analysis method by segment as of ~~June~~September 30, 2021 and December 31, 2020.


		June 30, 2021															September 30, 2021
				Real Estate															Real Estate
		Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total			Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Ending balance:	Ending balance:															Ending balance:
Individually evaluated for impairment	Individually evaluated for impairment	$	0	$	0	$	364	$	0	$	14,222	$	0	$	14,586	Individually evaluated for impairment	$	—	$	—	$	355	$	—	$	8,725	$	—	$	9,080
Collectively evaluated for impairment	Collectively evaluated for impairment	510,947		281,754		65,642		7,880		1,431,290		3,883		2,301,396		Collectively evaluated for impairment	491,344		325,655		63,526		8,993		1,462,445		3,698		2,355,661
Total	Total	$	510,947	$	281,754	$	66,006	$	7,880	$	1,445,512	$	3,883	$	2,315,982	Total	$	491,344	$	325,655	$	63,881	$	8,993	$	1,471,170	$	3,698	$	2,364,741


		December 31, 2020															December 31, 2020
				Real Estate															Real Estate
		Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total			Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Ending balance:	Ending balance:															Ending balance:
Individually evaluated for impairment	Individually evaluated for impairment	$	0	$	0	$	377	$	0	$	15,817	$	0	$	16,194	Individually evaluated for impairment	$	—	$	—	$	377	$	—	$	15,817	$	—	$	16,194
Collectively evaluated for impairment	Collectively evaluated for impairment	603,599		236,093		58,535		9,444		1,357,190		5,694		2,270,555		Collectively evaluated for impairment	603,599		236,093		58,535		9,444		1,357,190		5,694		2,270,555
Total	Total	$	603,599	$	236,093	$	58,912	$	9,444	$	1,373,007	$	5,694	$	2,286,749	Total	$	603,599	$	236,093	$	58,912	$	9,444	$	1,373,007	$	5,694	$	2,286,749

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

5. Derivatives

The Company has entered into various interest rate swap agreements as part of its interest rate risk management strategy. The Company uses interest rate swaps to manage its interest rate risk exposure on certain loans, variable-rate and short-term borrowings, and deposits due to interest rate movements. The notional amounts of the interest rate swaps do not represent amounts exchanged by the counterparties, but rather, the notional amount is used to determine, along with other terms of the derivative, the amounts to be exchanged between the counterparties.

Interest Rate Swaps Designated as a Cash Flow Hedge: The Company had interest rate swaps designated as cash flow hedges with total notional amounts of $255,000 and $305,000 at ~~June~~September 30, 2021 and December 31, 2020, respectively. As of ~~June~~September 30, 2021, the Company had swaps with a total notional amount of $125,000 that hedge the interest payments of rolling fixed-rate one-month funding consisting of FHLB advances or brokered deposits. Also as of ~~June~~September 30, 2021, the Company had a swap with a total notional amount of $20,000 that effectively converts variable-rate junior subordinated notes to fixed-rate debt, and swaps with a total notional amount of $110,000 that hedge the interest payments of certain ~~deposits~~deposit accounts. In March 2021, the Company terminated interest rate swaps with a total notional amount of $50,000. In the second quarter of 2021, the Company repaid $50,000 of FHLB advances related to these terminated swaps as a result of excess liquidity and in response to market conditions. Pre-tax losses of $3,600 were reclassified from accumulated other comprehensive income (AOCI) and recorded in noninterest income at termination.

Derivatives Not Designated as Accounting Hedges: To accommodate customer needs, the Company on occasion offers loan level interest rate swaps to its customers and offsets its exposure from such contracts by entering into mirror image swaps with a swap counterparty (back-to-back swap program). The interest rate swaps are free-standing derivatives and are recorded at fair value. The Company enters into a floating-rate loan and a fixed-rate swap with our customer. Simultaneously, the Company enters into an offsetting fixed-rate swap with a swap counterparty. In connection with each swap transaction, the Company agrees to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on the same notional amount at a fixed interest rate. At the same time, the Company agrees to pay a swap counterparty the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. These transactions allow the Company’s customers to effectively convert variable-rate loans to fixed-rate loans. The customer accommodations and any offsetting swaps are treated as non-hedging derivative instruments which do not qualify for hedge accounting.

The Company entered into forward-starting interest rate swaps with a total notional amount of $100,000 in January 2021 that were not accounting hedges. These swaps were terminated in March 2021, and the resulting gains of $3,781 were recorded in noninterest income.

The table below identifies the balance sheet category and fair values of the Company's derivative instruments as of ~~June~~September 30, 2021 and December 31, 2020.


		June 30, 2021			December 31, 2020				September 30, 2021			December 31, 2020
Cash Flow Hedges:	Cash Flow Hedges:							Cash Flow Hedges:
Gross notional amount	Gross notional amount	$	255,000		$	305,000		Gross notional amount	$	255,000		$	305,000
Fair value in other liabilities	Fair value in other liabilities	(12,340)			(23,848)			Fair value in other liabilities	(10,874)			(23,848)
Weighted-average floating rate received	Weighted-average floating rate received	0.37		%	0.38		%	Weighted-average floating rate received	0.37		%	0.38		%
Weighted-average fixed rate paid	Weighted-average fixed rate paid	2.09		%	2.17		%	Weighted-average fixed rate paid	2.09		%	2.17		%
Weighted-average maturity in years	Weighted-average maturity in years	4.7			5.0			Weighted-average maturity in years	4.4			5.0

Non-Hedging Derivatives:	Non-Hedging Derivatives:							Non-Hedging Derivatives:
Gross notional amount	Gross notional amount	$	166,294		$	167,752		Gross notional amount	$	165,384		$	167,752
Fair value in other assets	Fair value in other assets	2,821			492			Fair value in other assets	3,295			492
Fair value in other liabilities	Fair value in other liabilities	(2,821)			(492)			Fair value in other liabilities	(3,295)			(492)

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

The following table identifies the pre-tax gains or losses recognized on the Company's derivative instruments designated as cash flow hedges for the ~~six~~three and nine months ended ~~June~~September 30, 2021 and 2020.


		Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020			2021		2020		2021		2020
Pre-tax gain (loss) recognized in other comprehensive income	Pre-tax gain (loss) recognized in other comprehensive income	$	5,442	$	(24,168)	Pre-tax gain (loss) recognized in other comprehensive income	$	359	$	256	$	5,801	$	(23,912)
Reclassification from AOCI into income:	Reclassification from AOCI into income:					Reclassification from AOCI into income:
Interest expense	Interest expense	$	(2,468)	$	(1,394)	Interest expense	$	(1,105)	$	(1,405)	$	(3,573)	$	(2,799)
Swap termination losses reclassified to noninterest income	Swap termination losses reclassified to noninterest income	3,600		0		Swap termination losses reclassified to noninterest income	—		—		3,600		—

The Company estimates there will be approximately ~~$4,380~~$4,379 reclassified from accumulated other comprehensive income to interest expense through the 12 months ending ~~June~~September 30, 2022 related to cash flow hedges.

The Company is exposed to credit risk in the event of nonperformance by interest rate swap counterparties, which is minimized by collateral-pledging provisions in the agreements. Derivative contracts with swap counterparties are executed with a Credit Support Annex, which is a bilateral ratings-sensitive agreement that requires collateral postings at established credit threshold levels. These agreements protect the interests of the Company and its counterparties should either party suffer a credit rating deterioration. As of ~~June~~September 30, 2021 and December 31, 2020, the Company pledged ~~$9,520~~$7,720 and $24,100, respectively, of collateral to the counterparties in the form of cash on deposit with third parties. The interest rate swap product with the borrower is cross-collateralized with the underlying loan and therefore there is no pledged cash collateral under swap contracts with customers.

6. Income Taxes

Net deferred tax assets consisted of the following as of ~~June~~September 30, 2021 and December 31, 2020.


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Deferred tax assets:	Deferred tax assets:					Deferred tax assets:
Allowance for loan losses	Allowance for loan losses	$	7,067	$	7,418	Allowance for loan losses	$	7,081	$	7,418

Net unrealized losses on securities available for sale						Net unrealized losses on securities available for sale	630		—
Net unrealized losses on interest rate swaps	Net unrealized losses on interest rate swaps	3,110		6,010		Net unrealized losses on interest rate swaps	2,741		6,010
Lease liabilities	Lease liabilities	1,757		1,919		Lease liabilities	1,671		1,919
Accrued expenses	Accrued expenses	320		352		Accrued expenses	388		352
Restricted stock unit compensation	Restricted stock unit compensation	492		763		Restricted stock unit compensation	654		763
State net operating loss carryforward	State net operating loss carryforward	1,238		1,197		State net operating loss carryforward	1,256		1,197

Other	Other	18		37		Other	125		37
		14,002		17,696			14,546		17,696
Deferred tax liabilities:	Deferred tax liabilities:					Deferred tax liabilities:
Right-of-use assets	Right-of-use assets	1,702		1,863		Right-of-use assets	1,616		1,863
Net deferred loan fees and costs	Net deferred loan fees and costs	254		256		Net deferred loan fees and costs	247		256
Net unrealized gains on securities available for sale	Net unrealized gains on securities available for sale	928		2,019		Net unrealized gains on securities available for sale	—		2,019

Premises and equipment	Premises and equipment	865		801		Premises and equipment	846		801
Other	Other	282		271		Other	293		271
		4,031		5,210			3,002		5,210
Net deferred tax assets before valuation allowance	Net deferred tax assets before valuation allowance	9,971		12,486		Net deferred tax assets before valuation allowance	11,544		12,486
Valuation allowance	Valuation allowance	(1,238)		(1,197)		Valuation allowance	(1,256)		(1,197)
Net deferred tax assets	Net deferred tax assets	$	8,733	$	11,289	Net deferred tax assets	$	10,288	$	11,289

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

The Company has recorded a valuation allowance against the tax effect of the state net operating loss carryforwards, as management believes it is more likely than not that these carryforwards will expire without being utilized. The state net operating loss carryforwards expire in 2021 and thereafter.

~~Table of Contents~~

~~West Bancorporation, Inc. and Subsidiary~~

~~Notes to Consolidated Financial Statements~~

~~(unaudited)~~

~~(dollars in thousands, except per share data)~~

7. Accumulated Other Comprehensive Income (Loss)

The following table summarizes the changes in the balances of each component of accumulated other comprehensive income (loss), net of tax, for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020.


		Unrealized		Unrealized		Accumulated			Unrealized		Unrealized		Accumulated
		Gains		Gains		Other			Gains		Gains		Other
		(Losses) on		(Losses) on		Comprehensive			(Losses) on		(Losses) on		Comprehensive
		Securities		Derivatives		Income (Loss)			Securities		Derivatives		Income (Loss)
Balance, December 31, 2020	Balance, December 31, 2020	$	5,994	$	(17,840)	$	(11,846)	Balance, December 31, 2020	$	5,994	$	(17,840)	$	(11,846)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	(3,209)		4,072		863		Other comprehensive income (loss) before reclassifications	(7,826)		4,340		(3,486)
Amounts reclassified from accumulated other comprehensive income	Amounts reclassified from accumulated other comprehensive income	(30)		4,538		4,508		Amounts reclassified from accumulated other comprehensive income	(38)		5,365		5,327
Net current period other comprehensive income (loss)	Net current period other comprehensive income (loss)	(3,239)		8,610		5,371		Net current period other comprehensive income (loss)	(7,864)		9,705		1,841
Balance, June 30, 2021		$	2,755	$	(9,230)	$	(6,475)
Balance, September 30, 2021								Balance, September 30, 2021	$	(1,870)	$	(8,135)	$	(10,005)

Balance, December 31, 2019	Balance, December 31, 2019	$	1,057	$	(4,318)	$	(3,261)	Balance, December 31, 2019	$	1,057	$	(4,318)	$	(3,261)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	4,361		(18,126)		(13,765)		Other comprehensive income (loss) before reclassifications	4,628		(17,934)		(13,306)
Amounts reclassified from accumulated other comprehensive income	Amounts reclassified from accumulated other comprehensive income	56		1,044		1,100		Amounts reclassified from accumulated other comprehensive income	(60)		2,098		2,038
Net current period other comprehensive income (loss)	Net current period other comprehensive income (loss)	4,417		(17,082)		(12,665)		Net current period other comprehensive income (loss)	4,568		(15,836)		(11,268)
Balance, June 30, 2020		$	5,474	$	(21,400)	$	(15,926)
Balance, September 30, 2020								Balance, September 30, 2020	$	5,625	$	(20,154)	$	(14,529)

8. Commitments and Contingencies

Financial instruments with off-balance-sheet risk: The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations that it uses for on-balance-sheet instruments. The Company's commitments consisted of the following amounts as of ~~June~~September 30, 2021 and December 31, 2020.


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Commitments to extend credit	Commitments to extend credit	$	798,749	$	832,590	Commitments to extend credit	$	874,647	$	832,590
Standby letters of credit	Standby letters of credit	17,614		23,295		Standby letters of credit	14,234		23,295
		$	816,363	$	855,885		$	888,881	$	855,885

West Bank previously executed Mortgage Partnership Finance (MPF) Master Commitments (Commitments) with the FHLB of Des Moines to deliver residential mortgage loans and to guarantee the payment of any realized losses that exceed the FHLB's first loss account for mortgages delivered under the Commitments. West Bank receives credit enhancement fees from the FHLB for providing this guarantee and continuing to assist with managing the credit risk of the MPF Program residential mortgage loans. The outstanding balance of mortgage loans sold under the MPF Program was ~~$34,187~~$31,552 and $43,847 at ~~June~~September 30, 2021 and December 31, 2020, respectively.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

Contractual commitments: The Company had remaining commitments to invest in qualified affordable housing projects totaling ~~$3,294~~$3,992 and $3,505 as of ~~June~~September 30, 2021 and December 31, 2020, respectively.

During 2020, the Company began construction on a new office in Sartell, Minnesota, which had a remaining construction commitment of ~~$5,729~~$3,477 and $8,324 as of ~~June~~September 30, 2021 and December 31, 2020, respectively.

Contingencies: Neither the Company nor West Bank is a party, and no property of these entities is subject, to any material pending legal proceedings, other than ordinary routine litigation incidental to West Bank's business. The Company does not know of any proceeding contemplated by a governmental authority against the Company or West Bank.

9. Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts business. The Company's balance sheet contains securities available for sale and derivative instruments that are recorded at fair value on a recurring basis. The three-level valuation hierarchy for disclosure of fair value is as follows:

Level 1 uses quoted market prices in active markets for identical assets or liabilities.

Level 2 uses observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3 uses unobservable inputs that are not corroborated by market data.

The Company's policy is to recognize transfers between levels at the end of each reporting period, if applicable. There were 0no transfers between levels of the fair value hierarchy during the ~~six~~nine months ended ~~June~~September 30, 2021.

The following is a description of valuation methodologies used for financial assets and liabilities recorded at fair value on a recurring basis.

Securities available for sale: When available, quoted market prices are used to determine the fair value of securities (Level 1). If quoted market prices are not available, the Company determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable (Level 2). The fair values of these securities are determined by pricing models that consider observable market data such as interest rate volatilities, yield curves, credit spreads, prices from market makers and live trading systems.

Management obtains the fair value of securities at the end of each reporting period via a third-party pricing service. Management reviewed the valuation process used by the third party and believed the process was valid. On a quarterly basis, management corroborates the fair values of a randomly selected sample of securities by obtaining pricing from an independent financial market data vendor and comparing the two sets of fair values. Any significant variances are reviewed and investigated. For a sample of securities, prices are further validated by management by obtaining details of the inputs used by the pricing service. Those inputs were independently tested, and management concluded the fair values were consistent with GAAP requirements and the securities were properly classified in the fair value hierarchy.

Derivative instruments: The Company's derivative instruments consist of interest rate swaps accounted for as cash flow hedges, as well as interest rate swaps which are accounted for as non-hedging derivatives. The Company's derivative positions are classified within Level 2 of the fair value hierarchy and are valued using models generally accepted in the financial services industry and that use actively quoted or observable market input values from external market data providers and/or non-binding broker-dealer quotations. The fair value of the derivatives is determined using discounted cash flow models. These models’ key assumptions include the contractual terms of the respective contract along with significant observable inputs, including interest rates, yield curves, nonperformance risk and volatility.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

The following tables present the balances of financial assets and liabilities measured at fair value on a recurring basis by level as of ~~June~~September 30, 2021 and December 31, 2020.


		June 30, 2021									September 30, 2021
		Total		Level 1		Level 2		Level 3			Total		Level 1		Level 2		Level 3
Financial assets:	Financial assets:									Financial assets:
Securities available for sale:	Securities available for sale:									Securities available for sale:
State and political subdivisions	State and political subdivisions	$	202,119	$	0	$	202,119	$	0	State and political subdivisions	$	231,861	$	—	$	231,861	$	—
Collateralized mortgage obligations	Collateralized mortgage obligations	234,933		0		234,933		0		Collateralized mortgage obligations	326,586		—		326,586		—
Mortgage-backed securities	Mortgage-backed securities	111,820		0		111,820		0		Mortgage-backed securities	149,234		—		149,234		—
Collateralized loan obligations	Collateralized loan obligations	42,797		0		42,797		0		Collateralized loan obligations	42,905		—		42,905		—
Corporate notes	Corporate notes	9,793		0		9,793		0		Corporate notes	12,811		—		12,811		—
Derivative instruments, interest rate swaps	Derivative instruments, interest rate swaps	2,821		0		2,821		0		Derivative instruments, interest rate swaps	3,295		—		3,295		—

Financial liabilities:	Financial liabilities:									Financial liabilities:
Derivative instruments, interest rate swaps	Derivative instruments, interest rate swaps	$	15,161	$	0	$	15,161	$	0	Derivative instruments, interest rate swaps	$	14,169	$	—	$	14,169	$	—


		December 31, 2020									December 31, 2020
		Total		Level 1		Level 2		Level 3			Total		Level 1		Level 2		Level 3
Financial assets:	Financial assets:									Financial assets:
Securities available for sale:	Securities available for sale:									Securities available for sale:
State and political subdivisions	State and political subdivisions	$	144,332	$	0	$	144,332	$	0	State and political subdivisions	$	144,332	$	—	$	144,332	$	—
Collateralized mortgage obligations	Collateralized mortgage obligations	140,962		0		140,962		0		Collateralized mortgage obligations	140,962		—		140,962		—
Mortgage-backed securities	Mortgage-backed securities	83,523		0		83,523		0		Mortgage-backed securities	83,523		—		83,523		—

Collateralized loan obligations	Collateralized loan obligations	51,754		0		51,754		0		Collateralized loan obligations	51,754		—		51,754		—

Derivative instruments, interest rate swaps	Derivative instruments, interest rate swaps	492		0		492		0		Derivative instruments, interest rate swaps	492		—		492		—

Financial liabilities:	Financial liabilities:									Financial liabilities:
Derivative instrument, interest rate swap	Derivative instrument, interest rate swap	$	24,340	$	0	$	24,340	$	0	Derivative instrument, interest rate swap	$	24,340	$	—	$	24,340	$	—

Certain assets are measured at fair value on a nonrecurring basis. That is, they are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Impaired loans with a net book value of ~~$11,222~~$6,225 and $12,817 for which a fair value adjustment was recorded were classified as Level 3 as of ~~June~~September 30, 2021 and December 31, 2020, respectively.

In determining the estimated net realizable value of the underlying collateral of impaired loans, the Company primarily uses third-party appraisals or broker opinions which may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available and include consideration of variations in location, size, and income production capacity of the property. Additionally, the appraisals are periodically further adjusted by the Company in consideration of charges that may be incurred in the event of foreclosure and are based on management’s historical knowledge, changes in business factors and changes in market conditions. Because of the high degree of judgment required in estimating the fair value of collateral underlying impaired loans and because of the relationship between fair value and general economic conditions, the Company considers the fair value of impaired loans to be highly sensitive to changes in market conditions.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2021 and December 31, 2020.

~~Valuation Technique~~

~~Unobservable Inputs~~

~~Range (Weighted Average)~~

~~Impaired loans~~

~~Appraisal of collateral~~

~~Appraisal adjustment~~

~~7% selling costs~~

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis.

Valuation Technique

Unobservable Inputs

Range (Weighted Average)

September 30, 2021

Impaired loans

Appraisal of collateral

Appraisal adjustment

50%, including selling costs

December 31, 2020

Impaired loans

Appraisal of collateral

Appraisal adjustment

7% selling costs

GAAP requires disclosure of the fair value of financial assets and financial liabilities, including those that are not measured and reported at fair value on a recurring or nonrecurring basis. The following table presents the carrying amounts and approximate fair values of financial assets and liabilities as of ~~June~~September 30, 2021 and December 31, 2020.


		June 30, 2021											September 30, 2021
		Carrying Amount		Approximate Fair Value		Level 1		Level 2		Level 3			Carrying Amount		Approximate Fair Value		Level 1		Level 2		Level 3
Financial assets:	Financial assets:											Financial assets:
Cash and due from banks	Cash and due from banks	$	31,978	$	31,978	$	31,978	$	—	$	—	Cash and due from banks	$	30,922	$	30,922	$	30,922	$	—	$	—
Federal funds sold	Federal funds sold	238,845		238,845		238,845		—		—		Federal funds sold	1,547		1,547		1,547		—		—
Securities available for sale	Securities available for sale	601,462		601,462		—		601,462		—		Securities available for sale	763,397		763,397		—		763,397		—
Federal Home Loan Bank stock	Federal Home Loan Bank stock	10,189		10,189		10,189		—		—		Federal Home Loan Bank stock	11,544		11,544		11,544		—		—
Loans, net	Loans, net	2,281,485		2,344,457		—		2,333,235		11,222		Loans, net	2,331,469		2,386,774		—		2,380,549		6,225
Accrued interest receivable	Accrued interest receivable	11,415		11,415		11,415		—		—		Accrued interest receivable	11,772		11,772		11,772		—		—
Interest rate swaps	Interest rate swaps	2,821		2,821		—		2,821		—		Interest rate swaps	3,295		3,295		—		3,295		—
Financial liabilities:	Financial liabilities:											Financial liabilities:
Deposits	Deposits	$	2,825,289	$	2,825,803	$	—	$	2,825,803	$	—	Deposits	$	2,736,923	$	2,737,307	$	—	$	2,737,307	$	—
Federal funds purchased	Federal funds purchased	3,605		3,605		3,605		—		—		Federal funds purchased	39,380		39,380		39,380		—		—
Subordinated notes, net	Subordinated notes, net	20,458		17,148		—		17,148		—		Subordinated notes, net	20,462		16,743		—		16,743		—
Federal Home Loan Bank advances	Federal Home Loan Bank advances	125,000		125,000		—		125,000		—		Federal Home Loan Bank advances	125,000		125,000		—		125,000		—
Long-term debt	Long-term debt	20,286		20,285		—		20,285		—		Long-term debt	17,654		17,654		—		17,654		—
Accrued interest payable	Accrued interest payable	600		600		600		—		—		Accrued interest payable	503		503		503		—		—
Interest rate swaps	Interest rate swaps	15,161		15,161		—		15,161		—		Interest rate swaps	14,169		14,169		—		14,169		—
Off-balance sheet financial instruments:	Off-balance sheet financial instruments:											Off-balance sheet financial instruments:
Commitments to extend credit	Commitments to extend credit	0		—		0		0		0		Commitments to extend credit	—		—		—		—		—
Standby letters of credit	Standby letters of credit	0		—		0		0		0		Standby letters of credit	—		—		—		—		—

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)


		December 31, 2020											December 31, 2020
		Carrying Amount		Approximate Fair Value		Level 1		Level 2		Level 3			Carrying Amount		Approximate Fair Value		Level 1		Level 2		Level 3
Financial assets:	Financial assets:											Financial assets:
Cash and due from banks	Cash and due from banks	$	77,693	$	77,693	$	77,693	$	—	$	—	Cash and due from banks	$	77,693	$	77,693	$	77,693	$	—	$	—
Federal funds sold	Federal funds sold	318,742		318,742		318,742		—		—		Federal funds sold	318,742		318,742		318,742		—		—
Securities available for sale	Securities available for sale	420,571		420,571		—		420,571		—		Securities available for sale	420,571		420,571		—		420,571		—
Federal Home Loan Bank stock	Federal Home Loan Bank stock	11,723		11,723		11,723		—		—		Federal Home Loan Bank stock	11,723		11,723		11,723		—		—
Loans, net	Loans, net	2,251,139		2,329,684		—		2,316,867		12,817		Loans, net	2,251,139		2,329,684		—		2,316,867		12,817
Accrued interest receivable	Accrued interest receivable	11,231		11,231		11,231		—		—		Accrued interest receivable	11,231		11,231		11,231		—		—
Interest rate swaps	Interest rate swaps	492		492		—		492		—		Interest rate swaps	492		492		—		492		—
Financial liabilities:	Financial liabilities:											Financial liabilities:
Deposits	Deposits	$	2,700,994	$	2,701,833	$	—	$	2,701,833	$	—	Deposits	$	2,700,994	$	2,701,833	$	—	$	2,701,833	$	—
Federal funds purchased	Federal funds purchased	5,375		5,375		5,375		—		—		Federal funds purchased	5,375		5,375		5,375		—		—
Subordinated notes, net	Subordinated notes, net	20,452		17,349		—		17,349		—		Subordinated notes, net	20,452		17,349		—		17,349		—
Federal Home Loan Bank advances	Federal Home Loan Bank advances	175,000		175,000		—		175,000		—		Federal Home Loan Bank advances	175,000		175,000		—		175,000		—
Long-term debt	Long-term debt	21,558		21,556		—		21,556		—		Long-term debt	21,558		21,556		—		21,556		—
Accrued interest payable	Accrued interest payable	939		939		939		—		—		Accrued interest payable	939		939		939		—		—
Interest rate swaps	Interest rate swaps	24,340		24,340		—		24,340		—		Interest rate swaps	24,340		24,340		—		24,340		—
Off-balance sheet financial instruments:	Off-balance sheet financial instruments:											Off-balance sheet financial instruments:
Commitments to extend credit	Commitments to extend credit	0		0		0		0		0		Commitments to extend credit	—		—		—		—		—
Standby letters of credit	Standby letters of credit	0		—		0		0		0		Standby letters of credit	—		—		—		—		—

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

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

"SAFE HARBOR" CONCERNING FORWARD-LOOKING STATEMENTS

Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to the Company’s business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meanings of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Forward-looking statements may appear throughout this report. These forward-looking statements are generally identified by the words “believes,” “expects,” “intends,” “anticipates,” “projects,” “future,” “may,” “should,” “will,” “strategy,” “plan,” “opportunity,” “will be,” “will likely result,” “will continue” or similar references, or references to estimates, predictions or future events. Such forward-looking statements are based upon certain underlying assumptions, risks and uncertainties. Because of the possibility that the underlying assumptions are incorrect or do not materialize as expected in the future, actual results could differ materially from these forward-looking statements. Risks and uncertainties that may affect future results include: the effects of the COVID-19 pandemic, including its potential effects on the economic environment, our customers and our operations, as well as any changes to federal, state or local government laws, regulations or orders in connection with the pandemic; interest rate risk; competitive pressures; pricing pressures on loans and deposits; changes in credit and other risks posed by the Company’s loan and investment portfolios, including declines in commercial or residential real estate values or changes in the allowance for loan losses dictated by new market conditions, accounting standards (including as a result of the future implementation of the current expected credit loss (CECL) accounting standard) or regulatory requirements; actions of bank and nonbank competitors; changes in local, national and international economic conditions; changes in legal and regulatory requirements, limitations and costs; changes in customers’ acceptance of the Company’s products and services; cyber-attacks; unexpected outcomes of existing or new litigation involving the Company; the monetary, trade and other regulatory policies of the U.S. government; acts of war or terrorism, widespread disease or pandemics, such as the COVID-19 pandemic, or other adverse external events; developments and uncertainty related to the future use and availability of some reference rates, such as the London Interbank Offered Rate, as well as other alternative reference rates; changes to U.S. tax laws, regulations and guidance; and any other risks described in the “Risk Factors” sections of this and other reports filed by the Company with the SEC. The Company undertakes no obligation to revise or update such forward-looking statements to reflect current or future events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of the Company's financial condition and results of operations are based upon the Company's consolidated financial statements that have been prepared in accordance with GAAP. The preparation of the Company's financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, income and expenses. These estimates are based upon historical experience and on various other assumptions that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The estimates and judgments that management believes involve the most complex and subjective estimates and judgments and have the most effect on the Company's reported financial position and results of operations are described as critical accounting policies in the Company's Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on March 1, 2021. There have been no significant changes in the critical accounting policies or the assumptions and judgments utilized in applying these policies since December 31, 2020.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

NON-GAAP FINANCIAL MEASURES

This report contains references to financial measures that are not defined in GAAP. Such non-GAAP financial measures include the Company’s presentation of net interest income and net interest margin on a fully taxable equivalent (FTE) basis, the presentation of the efficiency ratio on an adjusted and FTE basis, excluding certain income and expenses, loans, net of PPP loans, and the presentation of the allowance for loan losses ratio, excluding PPP loans. Management believes these non-GAAP financial measures provide useful information to both management and investors to analyze and evaluate the Company’s financial performance. These measures are considered standard measures of comparison within the banking industry. Additionally, management believes providing measures on a FTE basis enhances the comparability of income arising from taxable and nontaxable sources. Limitations associated with non-GAAP financial measures include the risks that persons might disagree as to the appropriateness of items included in these measures and that different companies might calculate these measures differently. These non-GAAP disclosures should not be considered an alternative to the Company’s GAAP results. The following table reconciles the non-GAAP financial measures of net interest income and net interest margin on a fully taxable equivalent basis, efficiency ratio on an adjusted and FTE basis, loans, net of PPP loans and allowance for loan losses ratio, excluding PPP loans to their most directly comparable measures under GAAP.


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,						Nine Months Ended September 30,
		2021			2020			2021			2020				2021			2020			2021			2020
Reconciliation of net interest income and net interest margin on a FTE basis to GAAP:	Reconciliation of net interest income and net interest margin on a FTE basis to GAAP:													Reconciliation of net interest income and net interest margin on a FTE basis to GAAP:
Net interest income (GAAP)	Net interest income (GAAP)	$	22,850		$	20,747		$	45,971		$	39,211		Net interest income (GAAP)	$	24,486		$	21,132		$	70,457		$	60,343
Tax-equivalent adjustment (1)	Tax-equivalent adjustment (1)	270			194			499			372			Tax-equivalent adjustment(1)	306			144			805			516
Net interest income on a FTE basis (non-GAAP)	Net interest income on a FTE basis (non-GAAP)	23,120			20,941			46,470			39,583			Net interest income on a FTE basis (non-GAAP)	24,792			21,276			71,262			60,859
Average interest-earning assets	Average interest-earning assets	3,102,649			2,572,211			3,041,519			2,496,354			Average interest-earning assets	3,212,283			2,639,532			3,099,066			2,544,429
Net interest margin on a FTE basis (non-GAAP)	Net interest margin on a FTE basis (non-GAAP)	2.99		%	3.27		%	3.08		%	3.19		%	Net interest margin on a FTE basis (non-GAAP)	3.06		%	3.21		%	3.07		%	3.19		%

Reconciliation of efficiency ratio on an adjusted and FTE basis to GAAP:	Reconciliation of efficiency ratio on an adjusted and FTE basis to GAAP:													Reconciliation of efficiency ratio on an adjusted and FTE basis to GAAP:
Net interest income on a FTE basis (non-GAAP)	Net interest income on a FTE basis (non-GAAP)	$	23,120		$	20,941		$	46,470		$	39,583		Net interest income on a FTE basis (non-GAAP)	$	24,792		$	21,276		$	71,262		$	60,859
Noninterest income	Noninterest income	2,515			1,775			4,980			4,295			Noninterest income	2,401			3,203			7,381			7,498
Adjustment for realized securities (gains) losses, net		(36)			69			(40)			75
Adjustment for losses on disposal of premises & equipment, net		5			—			29			2
Adjustment for realized securities gains, net														Adjustment for realized securities gains, net	(11)			(156)			(51)			(81)
Adjustment for losses on disposal of premises and equipment, net														Adjustment for losses on disposal of premises and equipment, net	—			1			29			3
Adjusted income	Adjusted income	25,604			22,785			51,439			43,955			Adjusted income	27,182			24,324			78,621			68,279
Noninterest expense	Noninterest expense	10,526			9,417			20,797			19,080			Noninterest expense	10,712			10,059			31,509			29,139
Efficiency ratio on an adjusted and FTE basis (non-GAAP) (2)	Efficiency ratio on an adjusted and FTE basis (non-GAAP) (2)	41.11		%	41.33		%	40.43		%	43.41		%	Efficiency ratio on an adjusted and FTE basis (non-GAAP)(2)	39.41		%	41.35		%	40.08		%	42.68		%

								June 30, 2021			December 31, 2020
Reconciliation of allowance for loan losses ratio, excluding PPP loans:	Reconciliation of allowance for loan losses ratio, excluding PPP loans:													Reconciliation of allowance for loan losses ratio, excluding PPP loans:				September 30, 2021			December 31, 2020			September 30, 2020
Loans outstanding (GAAP)	Loans outstanding (GAAP)							$	2,309,527		$	2,280,575		Loans outstanding (GAAP)				$	2,359,567		$	2,280,575		$	2,247,425
Less: PPP loans	Less: PPP loans							(84,573)			(180,757)			Less: PPP loans				(47,416)			(180,757)			(224,489)
Loans, net of PPP loans (non-GAAP)	Loans, net of PPP loans (non-GAAP)							2,224,954			2,099,818			Loans, net of PPP loans (non-GAAP)				2,312,151			2,099,818			2,022,936
Allowance for loan losses	Allowance for loan losses							28,042			29,436			Allowance for loan losses				28,098			29,436			25,403
Allowance for loan losses ratio, excluding PPP loans (non-GAAP)								1.26		%	1.40		%
Allowance for loan losses ratio, excluding PPP loans (non-GAAP)(3)														Allowance for loan losses ratio, excluding PPP loans (non-GAAP)(3)				1.22		%	1.40		%	1.26		%

(1) Computed on a tax-equivalent basis using a federal income tax rate of 21 percent, adjusted to reflect the effect of the nondeductible interest expense associated with owning tax-exempt securities and loans. Management believes the presentation of this non-GAAP measure provides supplemental useful information for proper understanding of the financial results, as it enhances the comparability of income arising from taxable and nontaxable sources.

(2) The efficiency ratio expresses noninterest expense as a percent of fully taxable equivalent net interest income and noninterest income, excluding specific noninterest income and expenses. Management believes the presentation of this non-GAAP measure provides supplemental useful information for proper understanding of the Company's financial performance. It is a standard measure of comparison within the banking industry. A lower ratio is more desirable.

(3) Management believes that presenting the allowance for loan losses as a percentage of total loans excluding PPP loans is useful in assessing the credit quality of the Company's core portfolio.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

OVERVIEW

The following discussion describes the consolidated operations and financial condition of the Company, West Bank and West Bank's special purpose subsidiaries (which are invested in new markets tax credit activities). Results of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2021 are compared to the results for the same periods in 2020, and the consolidated financial condition of the Company as of ~~June~~September 30, 2021 is compared to that as of December 31, 2020. This discussion and analysis should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 1, 2021.

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

IMPACT OF COVID-19

We continue to monitor the impact COVID-19 ~~has~~is having on the local economies we operate in and the uncertainty of the long-term ramifications to our customers and operations. Within our markets, vaccinations have become readily available, infection positivity rates are ~~relatively low,~~at moderate levels, and the restrictions on businesses have generally been fully lifted. However, the lasting effects of government aid programs are ~~relatively unknown~~uncertain as stimulus packages ~~begin to~~ taper, and the ultimate ~~ramifications~~long-term impact of the business shutdowns that occurred as a result of COVID-19 ~~are~~remains uncertain in many sectors of the economy. ~~The potential~~In the third quarter of 2021, COVID-19 positivity rates and hospitalizations in our markets rose due to the impact of ~~COVID-19 variants, such as~~ the Delta ~~variant, remains unknown at this time.~~variant.

The Federal Reserve, in response to the economic risks resulting from the COVID-19 pandemic, returned to a zero-interest rate policy in March 2020. This was after most broader market rates decreased significantly in response to evolving news about the COVID-19 pandemic. Many areas of consumer and business spending have rebounded in recent months, but there remains uncertainty about the longer lasting impact on local businesses as well as the travel, hospitality and entertainment industries resulting from the COVID-19 pandemic. This could cause a longer recovery time for all sectors of the economy and could make it challenging for sectors that have had better recoveries to maintain those recoveries in the long run. Inflation and supply shortages also pose risks to the economic recovery.

At the onset of the COVID-19 pandemic, the Bank lowered its offered rates on all deposit products and experienced an immediate positive impact on our cost of deposits. We responded to lower market rates for lending by lowering rates offered on our loan products. Given current rates offered by the Bank on new loans and prepayments on existing loans, the yield on the total loan portfolio is likely to continue to decrease. With significant cash inflows realized from growth in deposit balances and forgiveness of PPP loans, the current yields on reinvested funds into new securities are lower than existing portfolio yields. Considering the low market interest rates and the ongoing economic uncertainty, our net interest margin could decrease in future periods.

Certain industries have been particularly impacted by shutdowns, capacity restrictions, quarantines and social distancing that were put in place in response to COVID-19. Those industries include travel, hospitality and entertainment. At June 30, 2021, West Bank's commercial real estate and commercial operating loan exposure to the hotel, restaurant and movie theater industries was approximately $218,964, $19,705 and $17,393, respectively. Collectively, at June 30, 2021, those exposures made up approximately 11.1 percent of the total loan portfolio. Hotel occupancy rates have been steadily increasing and restaurants and theaters have been allowed to return to normal operations. We do not have any loans at June 30, 2021 that are under COVID-19-related modifications.

SUMMARY

Net income for the three months ended ~~June~~September 30, 2021 was ~~$13,239,~~$12,706, or ~~$0.79~~$0.76 per diluted common share, compared to ~~$7,969,~~$8,100, or ~~$0.48~~$0.49 per diluted common share, for the three months ended ~~June~~September 30, 2020. The Company's annualized return on average assets and return on average equity for the three months ended ~~June~~September 30, 2021 were ~~1.65~~1.52 percent and ~~22.20~~20.02 percent, respectively, compared to ~~1.19~~1.16 percent and ~~15.68~~15.20 percent, respectively, for the three months ended ~~June~~September 30, 2020.

The increase in net income for the three months ended ~~June~~September 30, 2021 compared to the same period in 2020 was primarily due to a decrease in the provision for loan losses and an increase in net interest income, ~~and~~partially offset by a decrease in noninterest income ~~partially offset by~~and an increase in noninterest expense.

Net interest income for the three months ended September 30, 2021 grew $3,354, or 15.9 percent, compared to the three months ended September 30, 2020. The increase in net interest income was primarily due to the increase in interest income on loans and securities and the decrease in interest expense on borrowed funds. The Company recorded no provision for loan losses during the three months ended September 30, 2021, compared to a provision of $4,000 for the three months ended September 30, 2020. The provision in 2020 was due to uncertainty surrounding economic conditions as a result of the COVID-19 pandemic.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

~~Net interest~~Noninterest income for the three months ended June 30, 2021 grew $2,103, or 10.1 percent, compared to the three months ended June 30, 2020. The increase in net interest income was primarily due to the increase in interest income on loans and decrease in interest expense on deposits and borrowed funds. The Company recorded a negative provision for loan losses of $2,000decreased $802 during the three months ended June 30, 2021, compared to a provision of $3,000 for the three months ended June 30, 2020. The provision in 2020 was due to uncertainty surrounding economic conditions as a result of the COVID-19 pandemic. The negative provision recorded in the second quarter of 2021 was due to the improvements in economic conditions and removal of pandemic-related restrictions for businesses, in addition to the lack of loan losses for the Company since the onset of the COVID-19 pandemic.

~~Noninterest income increased $740 during the three months ended June~~September 30, 2021 compared to the three months ended ~~June~~September 30, 2020, primarily due to ~~an increase~~a decrease in ~~trust services revenue and debit card usage~~loan swap fees. Noninterest expense increased ~~$1,109~~$653 during the three months ended ~~June~~September 30, 2021 compared to the three months ended ~~June~~September 30, 2020, primarily due to increases in salaries and employee benefits and FDIC insurance expense.

Net income for the ~~six~~nine months ended ~~June~~September 30, 2021 was ~~$24,991,~~$37,697, or ~~$1.49~~$2.25 per diluted common share, compared to ~~$16,058,~~$24,158, or ~~$0.97~~$1.46 per diluted common share, for the ~~six~~nine months ended ~~June~~September 30, 2020. The Company's annualized return on average assets and return on average equity for the ~~six~~nine months ended ~~June~~September 30, 2021 were ~~1.59~~1.56 percent and ~~21.50~~20.98 percent, respectively, compared to ~~1.23~~1.21 percent and ~~15.61~~15.47 percent, respectively, for the first ~~six~~nine months of 2020.

The increase in net income for the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same period in 2020 was primarily due to a decrease in the provision for loan losses and ~~increases~~an increase in net interest ~~income and noninterest~~ income, partially offset by an increase in noninterest ~~expenses.~~expense.

Net interest income for the ~~six~~nine months ended ~~June~~September 30, 2021 grew ~~$6,760,~~$10,114, or ~~17.2~~16.8 percent, compared to the ~~six~~nine months ended ~~June~~September 30, 2020. The increase in net interest income was primarily due to the increase in interest income on loans and securities and the decrease in interest expense on deposits and borrowed funds. The Company recorded a negative provision for loan losses of $1,500 during the ~~six~~nine months ended ~~June~~September 30, 2021, compared to a provision of ~~$4,000~~$8,000 for the ~~six~~nine months ended ~~June~~September 30, 2020. The provision in 2020 was due primarily to uncertainty surrounding economic conditions as a result of the COVID-19 pandemic. The negative provision in 2021 was due primarily to the improvement in economic conditions and removal of pandemic-related restrictions on businesses ~~along with the lack of loan losses for the Company since the onset of the COVID-19 pandemic.~~in our market areas.

Noninterest income ~~increased $685~~decreased $117 during the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the ~~six~~nine months ended ~~June~~September 30, 2020, primarily due ~~primarily~~ to ~~the~~a decrease in loan swap fees, partially offset by increases in trust revenue and increase in ~~trust services revenue.~~cash value of bank-owned life insurance. Noninterest expense increased ~~$1,717~~$2,370 for the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the ~~six~~nine months ended ~~June~~September 30, 2020, primarily due to increases in salaries and employee benefits and FDIC insurance ~~expenses.~~expense.

Total loans outstanding increased ~~$28,952,~~$78,992, or ~~1.3~~3.5 percent, during the first ~~six~~nine months of 2021. Excluding the impact of PPP loan activity, total loans outstanding increased ~~$125,136,~~$212,333, or ~~6.0~~10.1 percent, during the first ~~six~~nine months of 2021. As of ~~June~~September 30, 2021, the allowance for loan losses was ~~1.21~~1.19 percent of outstanding loans, compared to 1.29 percent as of December 31, 2020. At ~~June~~September 30, 2021, the allowance for loan losses was ~~1.26~~1.22 percent of outstanding loans, excluding ~~$84,573~~$47,416 of PPP loans (a non-GAAP financial measure), which are 100 percent guaranteed by the SBA, compared to 1.40 percent of outstanding loans, excluding $180,757 of PPP loans, as of December 31, 2020. Management believed the allowance for loan losses at ~~June~~September 30, 2021 was adequate to absorb any losses inherent in the loan portfolio as of that date.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

On a quarterly basis, the Company compares three key performance metrics to those of our identified peer group. The peer group for 2021 consists of 21 Midwestern, publicly traded financial institutions including Bank First Corporation, 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., Hills Bancorporation, Isabella Bank Corporation, LCNB Corp., Level One Bancorp, Inc., Macatawa Bank Corporation, Mackinac Financial Corporation, Mercantile Bank Corporation, MidWestOne Financial Group, Inc., Nicolet Bankshares, Inc., Peoples Bancorp, Inc., and Southern Missouri Bancorp, Inc. The Company is in the middle of the group in terms of asset size. The Company's goal is to perform at or near the top of this peer group relative to what we consider to be three key metrics: return on average equity, efficiency ratio and Texas ratio. We believe these measures encompass the factors that define the performance of a community bank. Company and peer results for the key financial performance measures are summarized below.


		West Bancorporation, Inc.		Peer Group Range(3)		West Bancorporation, Inc.		Peer Group Range(3)
		As of and for the six months ended June 30, 2021	As of and for the three months ended March 31, 2021	As of and for the three months ended March 31, 2021		As of and for the nine months ended September 30, 2021	As of and for the six months ended June 30, 2021	As of and for the six months ended June 30, 2021
Return on average equity	Return on average equity	21.50%	20.77%	2.78% - 18.48%	Return on average equity	20.98%	21.50%	5.44% - 17.01%
Efficiency ratio(1) (2)	Efficiency ratio(1) (2)	40.43%	39.75%	41.92% - 72.31%	Efficiency ratio(1) (2)	40.08%	40.43%	42.19% - 71.57%
Texas ratio(2)	Texas ratio(2)	5.31%	9.38%	2.03% - 18.89%	Texas ratio(2)	3.24%	5.31%	1.92% - 16.74%

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

(2) A lower ratio is more desirable.

(3) Latest data available.

At its meeting on ~~July 28,~~October 27, 2021, the Company's Board of Directors declared a quarterly cash dividend of $0.24 per common share. The dividend is payable on ~~August 25,~~November 24, 2021, to stockholders of record on ~~August 11,~~November 10, 2021.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

RESULTS OF OPERATIONS

The following table shows selected financial results and measures for the three and ~~six~~nine months ended ~~June~~September 30, 2021 compared with the same periods in 2020.


		Three Months Ended June 30,											Six Months Ended June 30,												Three Months Ended September 30,											Nine Months Ended September 30,
		2021			2020			Change			Change %		2021			2020			Change			Change %			2021			2020			Change			Change %		2021			2020			Change			Change %
Net income	Net income	$	13,239		$	7,969		$	5,270		66.13	%	$	24,991		$	16,058		$	8,933		55.63	%	Net income	$	12,706		$	8,100		$	4,606		56.86	%	$	37,697		$	24,158		$	13,539		56.04	%
Average assets	Average assets	3,224,318			2,700,720			523,598			19.39	%	3,167,401			2,616,175			551,226			21.07	%	Average assets	3,325,522			2,766,151			559,371			20.22	%	3,220,687			2,666,532			554,155			20.78	%
Average stockholders' equity	Average stockholders' equity	239,218			204,387			34,831			17.04	%	234,372			206,896			27,476			13.28	%	Average stockholders' equity	251,770			212,054			39,716			18.73	%	240,235			208,628			31,607			15.15	%

Return on average assets	Return on average assets	1.65		%	1.19		%	0.46		%			1.59		%	1.23		%	0.36		%			Return on average assets	1.52		%	1.16		%	0.36		%			1.56		%	1.21		%	0.35		%
Return on average equity	Return on average equity	22.20		%	15.68		%	6.52		%			21.50		%	15.61		%	5.89		%			Return on average equity	20.02		%	15.20		%	4.82		%			20.98		%	15.47		%	5.51		%
Net interest margin (1)	Net interest margin (1)	2.99		%	3.27		%	(0.28)		%			3.08		%	3.19		%	(0.11)		%			Net interest margin (1)	3.06		%	3.21		%	(0.15)		%			3.07		%	3.19		%	(0.12)		%
Efficiency ratio (1) (2)	Efficiency ratio (1) (2)	41.11		%	41.33		%	(0.22)		%			40.43		%	43.41		%	(2.98)		%			Efficiency ratio (1) (2)	39.41		%	41.35		%	(1.94)		%			40.08		%	42.68		%	(2.60)		%
Dividend payout ratio	Dividend payout ratio	30.01		%	43.40		%	(13.39)		%			30.40		%	42.96		%	(12.56)		%			Dividend payout ratio	31.27		%	42.70		%	(11.43)		%			30.69		%	42.87		%	(12.18)		%
Average equity to average assets ratio	Average equity to average assets ratio	7.42		%	7.57		%	(0.15)		%			7.40		%	7.91		%	(0.51)		%			Average equity to average assets ratio	7.57		%	7.67		%	(0.10)		%			7.46		%	7.82		%	(0.36)		%

													As of June 30,																							As of September 30,
													2021			2020			Change																	2021			2020			Change
Texas ratio (2)	Texas ratio (2)												5.31		%	0.17		%	5.14		%			Texas ratio (2)												3.24		%	7.38		%	(4.14)		%
Equity to assets ratio	Equity to assets ratio												7.54		%	7.62		%	(0.08)		%			Equity to assets ratio												7.77		%	7.76		%	0.01		%
Tangible common equity ratio	Tangible common equity ratio												7.54		%	7.62		%	(0.08)		%			Tangible common equity ratio												7.77		%	7.76		%	0.01		%

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

(2) A lower ratio is more desirable.

Definitions of ratios:

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

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

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

•Efficiency ratio - noninterest expense (excluding other real estate owned expense and write-down of premises) divided by noninterest income (excluding net securities ~~gains (losses)~~gains/losses and gains/losses on disposition of premises and equipment) plus tax-equivalent net interest income.

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

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

•Texas ratio - total nonperforming assets divided by tangible common equity plus the allowance for loan losses.

•Equity to assets ratio - equity divided by assets.

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

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Net Interest Income

The following tables present average balances and related interest income or interest expense, with the resulting annualized average yield or rate by category of interest-earning assets or interest-bearing liabilities. Interest income and the resulting net interest income are shown on ana FTE basis.


Data for the three months ended June 30:
																									Three Months Ended September 30,
		Average Balance								Interest Income/Expense								Yield/Rate							Average Balance								Interest Income/Expense								Yield/Rate
		2021		2020		Change		Change- %		2021		2020		Change		Change- %		2021		2020		Change			2021		2020		Change		Change- %		2021		2020		Change		Change- %		2021		2020		Change
Interest-earning assets:	Interest-earning assets:																							Interest-earning assets:
Loans: (1) (2)	Loans: (1) (2)																							Loans: (1) (2)
Commercial	Commercial	$	553,401	$	582,605	$	(29,204)	(5.01)	%	$	5,383	$	5,362	$	21	0.39	%	3.90	%	3.70	%	0.20	%	Commercial	$	496,485	$	635,577	$	(139,092)	(21.88)	%	$	5,687	$	5,549	$	138	2.49	%	4.54	%	3.47	%	1.07	%
Real estate (3)	Real estate (3)	1,750,198		1,559,152		191,046		12.25	%	17,807		17,022		785		4.61	%	4.08	%	4.39	%	(0.31)	%	Real estate (3)	1,837,251		1,589,000		248,251		15.62	%	18,632		16,934		1,698		10.03	%	4.02	%	4.24	%	(0.22)	%
Consumer and other	Consumer and other	4,112		6,215		(2,103)		(33.84)	%	53		66		(13)		(19.70)	%	5.13	%	4.29	%	0.84	%	Consumer and other	3,619		6,031		(2,412)		(39.99)	%	39		64		(25)		(39.06)	%	4.30	%	4.19	%	0.11	%
Total loans	Total loans	2,307,711		2,147,972		159,739		7.44	%	23,243		22,450		793		3.53	%	4.04	%	4.20	%	(0.16)	%	Total loans	2,337,355		2,230,608		106,747		4.79	%	24,358		22,547		1,811		8.03	%	4.13	%	4.02	%	0.11	%

Securities:	Securities:																							Securities:
Taxable	Taxable	376,165		329,780		46,385		14.07	%	1,895		1,994		(99)		(4.96)	%	2.01	%	2.42	%	(0.41)	%	Taxable	506,746		294,545		212,201		72.04	%	2,412		1,728		684		39.58	%	1.90	%	2.35	%	(0.45)	%
Tax-exempt (3)	Tax-exempt (3)	141,819		45,488		96,331		211.77	%	879		395		484		122.53	%	2.47	%	3.46	%	(0.99)	%	Tax-exempt (3)	155,806		57,839		97,967		169.38	%	940		465		475		102.15	%	2.41	%	3.22	%	(0.81)	%
Total securities	Total securities	517,984		375,268		142,716		38.03	%	2,774		2,389		385		16.12	%	2.14	%	2.55	%	(0.41)	%	Total securities	662,552		352,384		310,168		88.02	%	3,352		2,193		1,159		52.85	%	2.02	%	2.49	%	(0.47)	%

Federal funds sold	Federal funds sold	276,955		48,971		227,984		465.55	%	75		12		63		525.00	%	0.11	%	0.10	%	0.01	%	Federal funds sold	212,376		56,540		155,836		275.62	%	82		15		67		446.67	%	0.15	%	0.10	%	0.05	%
Total interest-earning assets (3)	Total interest-earning assets (3)	$	3,102,650	$	2,572,211	$	530,439	20.62	%	26,092		24,851		1,241		4.99	%	3.37	%	3.89	%	(0.52)	%	Total interest-earning assets (3)	$	3,212,283	$	2,639,532	$	572,751	21.70	%	27,792		24,755		3,037		12.27	%	3.43	%	3.73	%	(0.30)	%

Interest-bearing liabilities:	Interest-bearing liabilities:																							Interest-bearing liabilities:
Deposits:	Deposits:																							Deposits:
Interest-bearing demand,	Interest-bearing demand,																							Interest-bearing demand,
savings and money	savings and money																							savings and money
market	market	$	1,828,394	$	1,453,322	$	375,072	25.81	%	1,536		1,317		219		16.63	%	0.34	%	0.36	%	(0.02)	%	market	$	1,935,286	$	1,482,705	$	452,581	30.52	%	1,660		1,355		305		22.51	%	0.34	%	0.36	%	(0.02)	%
Time deposits	Time deposits	240,988		237,951		3,037		1.28	%	459		1,034		(575)		(55.61)	%	0.76	%	1.75	%	(0.99)	%	Time deposits	210,465		188,828		21,637		11.46	%	361		591		(230)		(38.92)	%	0.68	%	1.25	%	(0.57)	%
Total deposits	Total deposits	2,069,382		1,691,273		378,109		22.36	%	1,995		2,351		(356)		(15.14)	%	0.39	%	0.56	%	(0.17)	%	Total deposits	2,145,751		1,671,533		474,218		28.37	%	2,021		1,946		75		3.85	%	0.37	%	0.46	%	(0.09)	%
Other borrowed funds	Other borrowed funds	181,890		229,847		(47,957)		(20.86)	%	976		1,559		(583)		(37.40)	%	2.15	%	2.73	%	(0.58)	%	Other borrowed funds	169,183		225,995		(56,812)		(25.14)	%	978		1,532		(554)		(36.16)	%	2.29	%	2.70	%	(0.41)	%
Total interest-bearing	Total interest-bearing																							Total interest-bearing
liabilities	liabilities	$	2,251,272	$	1,921,120	$	330,152	17.19	%	2,971		3,910		(939)		(24.02)	%	0.53	%	0.82	%	(0.29)	%	liabilities	$	2,314,934	$	1,897,528	$	417,406	22.00	%	2,999		3,478		(479)		(13.77)	%	0.51	%	0.73	%	(0.22)	%

Net interest income (FTE) (4)	Net interest income (FTE) (4)									$	23,121	$	20,941	$	2,180	10.41	%							Net interest income (FTE) (4)									$	24,793	$	21,277	$	3,516	16.52	%
Net interest spread (FTE)	Net interest spread (FTE)																	2.84	%	3.07	%	(0.23)	%	Net interest spread (FTE)																	2.92	%	3.00	%	(0.08)	%
Net interest margin (FTE) (4)	Net interest margin (FTE) (4)																	2.99	%	3.27	%	(0.28)	%	Net interest margin (FTE) (4)																	3.06	%	3.21	%	(0.15)	%

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)


Data for the six months ended June 30:
																									Nine Months Ended September 30,
		Average Balance								Interest Income/Expense								Yield/Rate								Average Balance								Interest Income/Expense								Yield/Rate
		2021		2020		Change		Change- %		2021		2020		Change		Change- %		2021		2020		Change				2021		2020		Change		Change- %		2021		2020		Change		Change- %		2021		2020		Change
Interest-earning assets:	Interest-earning assets:																							Interest-earning assets:
Loans: (1) (2)	Loans: (1) (2)																							Loans: (1) (2)
Commercial	Commercial	$	559,975	$	508,963	$	51,012	10.02	%	$	12,193	$	10,378	$	1,815	17.49	%	4.39	%	4.10	%	0.29	%	Commercial		$	538,579	$	551,476	$	(12,897)	(2.34)	%	$	17,880	$	15,927	$	1,953	12.26	%	4.44	%	3.86	%	0.58	%
Real estate (3)	Real estate (3)	1,727,198		1,541,142		186,056		12.07	%	35,080		34,350		730		2.13	%	4.10	%	4.48	%	(0.38)	%	Real estate (3)		1,764,285		1,557,211		207,074		13.30	%	53,712		51,284		2,428		4.73	%	4.07	%	4.40	%	(0.33)	%
Consumer and other	Consumer and other	4,744		6,547		(1,803)		(27.54)	%	107		146		(39)		(26.71)	%	4.55	%	4.50	%	0.05	%	Consumer and other		4,365		6,374		(2,009)		(31.52)	%	146		210		(64)		(30.48)	%	4.48	%	4.40	%	0.08	%
Total loans	Total loans	2,291,917		2,056,652		235,265		11.44	%	47,380		44,874		2,506		5.58	%	4.17	%	4.39	%	(0.22)	%	Total loans		2,307,229		2,115,061		192,168		9.09	%	71,738		67,421		4,317		6.40	%	4.16	%	4.26	%	(0.10)	%

Securities:	Securities:																							Securities:
Taxable	Taxable	351,584		341,866		9,718		2.84	%	3,540		4,377		(837)		(19.12)	%	2.01	%	2.56	%	(0.55)	%	Taxable		403,873		325,853		78,020		23.94	%	5,952		6,105		(153)		(2.51)	%	1.96	%	2.50	%	(0.54)	%
Tax-exempt (3)	Tax-exempt (3)	121,519		43,413		78,106		179.91	%	1,566		757		809		106.87	%	2.58	%	3.49	%	(0.91)	%	Tax-exempt (3)		133,074		48,381		84,693		175.05	%	2,506		1,221		1,285		105.24	%	2.51	%	3.37	%	(0.86)	%
Total securities	Total securities	473,103		385,279		87,824		22.79	%	5,106		5,134		(28)		(0.55)	%	2.16	%	2.67	%	(0.51)	%	Total securities		536,947		374,234		162,713		43.48	%	8,458		7,326		1,132		15.45	%	2.10	%	2.61	%	(0.51)	%

Federal funds sold	Federal funds sold	276,499		54,423		222,076		408.06	%	144		241		(97)		(40.25)	%	0.11	%	0.89	%	(0.78)	%	Federal funds sold		254,890		55,134		199,756		362.31	%	226		256		(30)		(11.72)	%	0.12	%	0.62	%	(0.50)	%
Total interest-earning assets (3)	Total interest-earning assets (3)	$	3,041,519	$	2,496,354	$	545,165	21.84	%	52,630		50,249		2,381		4.74	%	3.49	%	4.05	%	(0.56)	%	Total interest-earning assets (3)		$	3,099,066	$	2,544,429	$	554,637	21.80	%	80,422		75,003		5,419		7.23	%	3.47	%	3.94	%	(0.47)	%

Interest-bearing liabilities:	Interest-bearing liabilities:																							Interest-bearing liabilities:
Deposits:	Deposits:																							Deposits:
Interest-bearing demand,	Interest-bearing demand,																							Interest-bearing demand,
savings and money	savings and money																							savings and money
market	market	$	1,794,044	$	1,433,888	$	360,156	25.12	%	3,020		4,953		(1,933)		(39.03)	%	0.34	%	0.69	%	(0.35)	%	market		$	1,841,642	$	1,450,279	$	391,363	26.99	%	4,680		6,308		(1,628)		(25.81)	%	0.34	%	0.58	%	(0.24)	%
Time deposits	Time deposits	214,239		249,615		(35,376)		(14.17)	%	852		2,444		(1,592)		(65.14)	%	0.80	%	1.97	%	(1.17)	%	Time deposits		212,967		229,205		(16,238)		(7.08)	%	1,213		3,035		(1,822)		(60.03)	%	0.76	%	1.77	%	(1.01)	%
Total deposits	Total deposits	2,008,283		1,683,503		324,780		19.29	%	3,872		7,397		(3,525)		(47.65)	%	0.39	%	0.88	%	(0.49)	%	Total deposits		2,054,609		1,679,484		375,125		22.34	%	5,893		9,343		(3,450)		(36.93)	%	0.38	%	0.74	%	(0.36)	%
Other borrowed funds	Other borrowed funds	201,836		231,167		(29,331)		(12.69)	%	2,288		3,269		(981)		(30.01)	%	2.29	%	2.84	%	(0.55)	%	Other borrowed funds		190,832		229,431		(38,599)		(16.82)	%	3,266		4,801		(1,535)		(31.97)	%	2.29	%	2.80	%	(0.51)	%
Total interest-bearing	Total interest-bearing																							Total interest-bearing
liabilities	liabilities	$	2,210,119	$	1,914,670	$	295,449	15.43	%	6,160		10,666		(4,506)		(42.25)	%	0.56	%	1.12	%	(0.56)	%	liabilities		$	2,245,441	$	1,908,915	$	336,526	17.63	%	9,159		14,144		(4,985)		(35.24)	%	0.55	%	0.99	%	(0.44)	%

Net interest income (FTE) (4)	Net interest income (FTE) (4)									$	46,470	$	39,583	$	6,887	17.40	%							Net interest income (FTE) (4)										$	71,263	$	60,859	$	10,404	17.10	%
Net interest spread (FTE)	Net interest spread (FTE)																	2.93	%	2.93	%	—	%	Net interest spread (FTE)																		2.92	%	2.95	%	(0.03)	%
Net interest margin (FTE) (4)	Net interest margin (FTE) (4)																	3.08	%	3.19	%	(0.11)	%	Net interest margin (FTE) (4)																		3.07	%	3.19	%	(0.12)	%

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

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

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

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

The Company's largest component of net income is net interest income, which is the difference between interest earned on interest-earning assets, consisting primarily of loans and securities, and interest paid on interest-bearing liabilities, consisting of deposits and borrowings. Fluctuations in net interest income can result from the combination of changes in the average balances of asset and liability categories and changes in interest rates. Interest rates earned and paid are affected by general economic conditions, particularly changes in market interest rates, and by competitive factors, government policies and actions of regulatory authorities. The Federal Reserve decreased the targeted federal funds interest rate by a total of 150 basis points in March 2020, reaching its current range of 0.0 - 0.25 percent. ~~This decrease impacts the comparability of net interest income between 2020 and 2021.~~

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Net interest margin on a FTE basis, a non-GAAP financial measure, is a measure of the net return on interest-earning assets and is computed by dividing annualized tax-equivalent net interest income by total average interest-earning assets for the period. The net interest margin for the three and ~~six~~nine months ended ~~June~~September 30, 2021 decreased by 2815 and 1112 basis points, respectively, compared to the three and ~~six~~nine months ended ~~June~~September 30, 2020. The primary driver of the decrease in the net interest margin was a decrease in yield on ~~loans and~~ securities, partially offset by a decrease in the interest rates paid on deposits and other borrowed funds. The higher average balances of federal funds sold also contributed to a lower net interest margin. Tax-equivalent net interest income for the three and ~~six~~nine months ended ~~June~~September 30, 2021 increased ~~$2,180~~$3,516 and ~~$6,887,~~$10,404, respectively, compared to the same time periods in 2020. The increase in net interest income for the three and ~~six~~nine months ended ~~June~~September 30, 2021 compared to the three and ~~six~~nine months ended ~~June~~September 30, 2020 was primarily due to increases in average loans and securities balances and decreases in deposit interest rates, partially offset by increases in average deposit balances and decreases in yields on ~~loans and~~ securities.

Tax-equivalent interest income on loans increased ~~$793~~$1,811 for the three months ended ~~June~~September 30, 2021 compared to the three months ended ~~June~~September 30, 2020. Included in commercial loans were PPP loans with interest income of ~~$1,387~~$1,590 and ~~$1,073~~$1,365 and yields of ~~4.00~~9.28 percent and ~~2.47~~2.42 percent for the three months ended ~~June~~September 30, 2021 and ~~June~~September 30, 2020, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2021, tax-equivalent interest income on loans increased ~~$2,506~~$4,317 compared to the same period in 2020. Included in commercial loans were PPP loans with interest income of ~~$4,229~~$5,819 and ~~$1,073~~$2,438 and yields of ~~5.80~~6.46 percent and ~~2.47~~2.44 percent for the ~~six~~nine months ended ~~June~~September 30, 2021 and ~~June~~September 30, 2020, respectively. The PPP loan interest income in 2021 included accelerated origination fees recognized at the time of loan forgiveness. Exclusive of the PPP loans, the yield on loans was ~~4.00~~3.98 percent and ~~4.30~~4.20 percent for the three months ended ~~June~~September 30, 2021 and ~~June~~September 30, 2020, respectively, and ~~4.06~~4.03 percent and ~~4.49~~4.38 percent for the ~~six~~nine months ended ~~June~~September 30, 2021 and ~~June~~September 30, 2020, respectively. Management believes interest income on loans and the yield on loans could decline ~~during the second half of 2021~~in future periods if the low interest rate environment and strong competition persist. Average loan balances, exclusive of PPP loans, increased $263,086 and $205,062, or 13.1 percent and 10.3 percent for the three and nine months ended September 30, 2021, respectively, compared to the same time periods in 2020.

The Company continues to focus on expanding existing and entering into new customer relationships while maintaining strong credit quality. The yield on the Company's loan portfolio is affected by the portfolio's loan mix, the interest rate environment, the effects of competition, the level of nonaccrual loans and reversals of previously accrued interest on charged-off loans. The political and economic environments can also influence the volume of new loan originations and the mix of variable-rate versus fixed-rate loans. We anticipate that our interest income could be adversely affected in future periods as a result of the long-term impact of the COVID-19 pandemic, including the possibility of decreases in the size of our loan portfolio and declining credit quality, the effect of lower interest rates, and the potential for an increase in nonaccrual loans.

The average balance of interest-bearing demand, savings and money market deposits increased for the three and ~~six~~nine months ended ~~June~~September 30, 2021, compared to the three and ~~six~~nine months ended ~~June~~September 30, 2020, primarily due to an increase in average balances of money market and interest-bearing demand accounts. The increase in average balances was primarily due to changes in customer behavior as a result of the COVID-19 pandemic and our customers' desire to retain liquidity, as well as a result of additional funds provided to individuals and businesses by government relief programs. The average rate paid on interest-bearing demand, savings and money market deposits for the three and ~~six~~nine months ended ~~June~~September 30, 2021 decreased 2 and 3524 basis points, respectively, compared to the three and ~~six~~nine months ended ~~June~~September 30, 2020. The average rate paid on time deposits decreased 9957 and ~~117~~101 basis points, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, 2021 compared to the three and ~~six~~nine months ended ~~June~~September 30, 2020. The decreases were primarily due to decreasing interest rates on all deposit products in response to the unprecedented decrease in the targeted federal funds rate that occurred in March 2020.

The average balance of other borrowed funds decreased ~~$47,957~~$56,812 and ~~$29,331,~~$38,599, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, 2021 compared to the three and ~~six~~nine months ended ~~June~~September 30, 2020. The rate paid on borrowed funds declined by 5841 and 5551 basis points, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, 2021 compared to the three and ~~six~~nine months ended ~~June~~September 30, 2020. These declines ~~are~~were primarily due to the repayment of $50,000 of FHLB advances in the second quarter of 2021 and the maturity of long-term, high rate FHLB advances in the second and third quarters of 2020.

As a result of the historically low interest rate environment, we expect that our net interest income and net interest margin could decrease in future periods.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Provision for Loan Losses and the Related Allowance for Loan Losses

The provision for loan losses represents a charge made to earnings to maintain an adequate allowance for loan losses. The adequacy of the allowance for loan losses is evaluated quarterly by management and reviewed by the Board of Directors. The allowance for loan losses is management's best estimate of probable losses inherent in the loan portfolio as of the balance sheet date. The ~~provision~~provisions for loan losses were ~~negative $2,000~~zero and negative $1,500 for the three and ~~six~~nine months ended ~~June~~September 30, 2021, compared to a provision of ~~$3,000~~$4,000 and ~~$4,000~~$8,000 for the three and ~~six~~nine months ended ~~June~~September 30, 2020. The provisions in 2020 were due primarily to uncertainty surrounding economic conditions as a result of the COVID-19 pandemic, while the negative ~~provisions~~provision recorded in 2021 ~~were~~was primarily due to the improvement in economic ~~conditions and removal of pandemic-related restrictions~~conditions. In 2021, reductions in certain qualitative factors used in the allowance for ~~businesses, in addition to the lack of~~ loan losses ~~for the Company since the onset of the COVID-19 pandemic.~~calculation related to economic improvement were partially offset by loan growth.

Factors ~~considered~~management considers in establishing an appropriate allowance include: the borrower's financial condition; the value and adequacy of loan collateral; the condition of the local economy and the borrower's specific industry; the levels and trends of loans by segment; and a review of delinquent and classified loans. In response to COVID-19, the Company increased its monitoring efforts of certain segments of the loan portfolio that management believed were under increased stress, including hotel ~~and movie theater~~ exposures. Ongoing communication with customers regarding revenue and cash flow expectations continue to be used to monitor risks and stress in the loan portfolio. For example, customers in the hotel industry provide monthly updates on occupancy rates.

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

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

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

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

West Bank's policy is to charge off loans when, in management's opinion, a loan or a portion of a loan is deemed uncollectible. ~~Concerted~~Commercially reasonable efforts are made to maximize subsequent recoveries. The following table summarizes the activity in the Company's allowance for loan losses for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 and related ratios.


		Three Months Ended June 30,								Six Months Ended June 30,									Three Months Ended September 30,								Nine Months Ended September 30,
		2021			2020			Change		2021			2020			Change			2021			2020			Change		2021			2020			Change
Balance at beginning of period	Balance at beginning of period	$	30,008		$	18,332		$	11,676	$	29,436		$	17,235		$	12,201	Balance at beginning of period	$	28,042		$	21,363		$	6,679	$	29,436		$	17,235		$	12,201
Charge-offs	Charge-offs	—			—			—		—			(1)			1		Charge-offs	—			—			—		—			(1)			1
Recoveries	Recoveries	34			31			3		106			129			(23)		Recoveries	56			40			16		162			169			(7)
Net recoveries	Net recoveries	34			31			3		106			128			(22)		Net recoveries	56			40			16		162			168			(6)
Provision for loan losses charged to operations	Provision for loan losses charged to operations	(2,000)			3,000			(5,000)		(1,500)			4,000			(5,500)		Provision for loan losses charged to operations	—			4,000			(4,000)		(1,500)			8,000			(9,500)
Balance at end of period	Balance at end of period	$	28,042		$	21,363		$	6,679	$	28,042		$	21,363		$	6,679	Balance at end of period	$	28,098		$	25,403		$	2,695	$	28,098		$	25,403		$	2,695

Average loans outstanding	Average loans outstanding	$	2,307,711		$	2,147,972				$	2,291,917		$	2,056,652				Average loans outstanding	$	2,337,355		$	2,230,608				$	2,307,229		$	2,115,061

Ratio of annualized net (charge-offs) recoveries during the period to average loans outstanding	Ratio of annualized net (charge-offs) recoveries during the period to average loans outstanding	0.01		%	0.01		%			0.01		%	0.02		%			Ratio of annualized net (charge-offs) recoveries during the period to average loans outstanding	0.01		%	0.01		%			0.01		%	0.01		%

Ratio of allowance for loan losses to average loans outstanding	Ratio of allowance for loan losses to average loans outstanding	1.22		%	0.99		%			1.22		%	1.04		%			Ratio of allowance for loan losses to average loans outstanding	1.20		%	1.14		%			1.22		%	1.20		%

Ratio of allowance for loan losses to total loans at end of period	Ratio of allowance for loan losses to total loans at end of period	1.21		%	0.97		%			1.21		%	0.97		%			Ratio of allowance for loan losses to total loans at end of period	1.19		%	1.13		%			1.19		%	1.13		%

Ratio of allowance for loan losses to total loans at end of period, excluding PPP loans(1)	Ratio of allowance for loan losses to total loans at end of period, excluding PPP loans(1)	1.26		%	1.08		%			1.26		%	1.08		%			Ratio of allowance for loan losses to total loans at end of period, excluding PPP loans(1)	1.22		%	1.26		%			1.22		%	1.26		%

(1) A non-GAAP financial measure. For further information, refer to the Non-GAAP Financial Measures section of this report.

In 2020, the U.S. economy deteriorated rapidly and significantly as a result of the COVID-19 pandemic and the impact of economic uncertainties. The national unemployment rate jumped from 4.4 percent in March 2020 to 14.8 percent in April 2020 amid nationwide shutdowns and other restrictions in the interest of public health and safety. In 2021, the economy has begun to recover; however some economic measures still lag pre-pandemic levels. Additionally, certain industries, including travel, hospitality and entertainment, ~~had~~have been particularly impacted by shutdowns, capacity restrictions, and social distancing requirements that occurred in response to COVID-19. There remains uncertainty about recovery times and the long term impact on local businesses as well as the travel, hospitality and entertainment industries. The Company increased ~~the economic~~certain qualitative factors ~~within~~used in the allowance for loan losses evaluation in 2020 in response to the COVID-19 pandemic. Based on the continued improvement in national and local economic performances measures, the relative success of vaccination efforts and the lifting of pandemic-related restrictions in the Company's market areas, the Company decreased ~~the economic~~certain qualitative factors ~~within~~used in the allowance for loan losses evaluation in the second ~~quarter~~and third quarters of 2021. However, the qualitative factors overall remain higher at September 30, 2021 than they were prior to the 2020 COVID-19 pandemic related adjustments.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Noninterest Income

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


		Three Months Ended June 30,									Three Months Ended September 30,
Noninterest income:	Noninterest income:	2021		2020		Change		Change %		Noninterest income:	2021		2020		Change		Change %
Service charges on deposit accounts	Service charges on deposit accounts	$	578	$	531	$	47	8.85	%	Service charges on deposit accounts	$	589	$	609	$	(20)	(3.28)	%
Debit card usage fees	Debit card usage fees	511		391		120		30.69	%	Debit card usage fees	490		432		58		13.43	%
Trust services	Trust services	691		461		230		49.89	%	Trust services	695		553		142		25.68	%
Increase in cash value of bank-owned life insurance	Increase in cash value of bank-owned life insurance	240		136		104		76.47	%	Increase in cash value of bank-owned life insurance	230		133		97		72.93	%
Loan swap fees	Loan swap fees	42		3		39		1,300.00	%	Loan swap fees	—		983		(983)		(100.00)	%
Realized securities gains (losses), net		36		(69)		105		152.17	%
Realized securities gains, net										Realized securities gains, net	11		156		(145)		(92.95)	%
Other income:	Other income:									Other income:
All other income	All other income	417		322		95		29.50	%	All other income	386		337		49		14.54	%
Total other income	Total other income	417		322		95		29.50	%	Total other income	386		337		49		14.54	%
Total noninterest income	Total noninterest income	$	2,515	$	1,775	$	740	41.69	%	Total noninterest income	$	2,401	$	3,203	$	(802)	(25.04)	%

		Six Months Ended June 30,									Nine Months Ended September 30,
Noninterest income:	Noninterest income:	2021		2020		Change		Change %		Noninterest income:	2021		2020		Change		Change %
Service charges on deposit accounts	Service charges on deposit accounts	$	1,160	$	1,134	$	26	2.29	%	Service charges on deposit accounts	$	1,749	$	1,743	$	6	0.34	%
Debit card usage fees	Debit card usage fees	953		773		180		23.29	%	Debit card usage fees	1,443		1,205		238		19.75	%
Trust services	Trust services	1,343		924		419		45.35	%	Trust services	2,038		1,477		561		37.98	%
Increase in cash value of bank-owned life insurance	Increase in cash value of bank-owned life insurance	460		294		166		56.46	%	Increase in cash value of bank-owned life insurance	690		427		263		61.59	%
Loan swap fees	Loan swap fees	42		589		(547)		(92.87)	%	Loan swap fees	42		1,572		(1,530)		(97.33)	%
Realized securities gains (losses), net		40		(75)		115		153.33	%
Realized securities gains, net										Realized securities gains, net	51		81		(30)		(37.04)	%
Other income:	Other income:									Other income:
All other income	All other income	982		656		326		49.70	%	All other income	1,368		993		375		37.76	%
Total other income	Total other income	982		656		326		49.70	%	Total other income	1,368		993		375		37.76	%
Total noninterest income	Total noninterest income	$	4,980	$	4,295	$	685	15.95	%	Total noninterest income	$	7,381	$	7,498	$	(117)	(1.56)	%

Debit card usage fees increased for the three and ~~six~~nine months months ended ~~June~~September 30, 2021 when compared to the same periods ended ~~June~~September 30, 2020, due to an increase in transaction volume as consumers ~~respond~~responded to the reopening of the economy. Revenue from trust services increased for the three and ~~six~~nine months ended ~~June~~September 30, 2021 when compared to the same periods ended ~~June~~September 30, 2020, primarily as a result of an increase in the value of trust assets in 2021 compared to 2020. The increase in cash value of bank-owned life insurance was driven by the purchase of additional life insurance in the third quarter of 2020, increasing total life insurance investments for the three and ~~six~~nine months ended ~~June~~September 30, 2021 in comparison to the three and ~~six~~nine months ended ~~June~~September 30, 2020. The Company offers loan level interest rate swaps to its customers and offsets its exposure from such contracts by entering into mirror image swaps with a swap counterparty (back-to-back swap program). Loan swap fees consist of fees earned in the back-to-back swap program at contract origination and are dependent on the timing and volume of customer activity.

The increase in other income for the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the ~~six~~nine months ended ~~June~~September 30, 2020 was primarily due to the recognition of net swap termination gains totaling $181 in March 2021. Interest rate swaps with a total notional amount of $150,000 were terminated and the pre-tax gains and losses were recorded in other noninterest income. Refer to Note 5 to the financial statements for additional information.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Noninterest Expense

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


		Three Months Ended June 30,									Three Months Ended September 30,
Noninterest expense:	Noninterest expense:	2021		2020		Change		Change %		Noninterest expense:	2021		2020		Change		Change %
Salaries and employee benefits	Salaries and employee benefits	$	5,672	$	5,318	$	354	6.66	%	Salaries and employee benefits	$	6,018	$	5,412	$	606	11.20	%
Occupancy	Occupancy	1,199		1,217		(18)		(1.48)	%	Occupancy	1,203		1,221		(18)		(1.47)	%
Data processing	Data processing	617		554		63		11.37	%	Data processing	616		572		44		7.69	%
FDIC insurance	FDIC insurance	426		292		134		45.89	%	FDIC insurance	528		351		177		50.43	%
Professional fees	Professional fees	268		200		68		34.00	%	Professional fees	212		230		(18)		(7.83)	%
Director fees	Director fees	214		194		20		10.31	%	Director fees	176		236		(60)		(25.42)	%
Other expenses:	Other expenses:									Other expenses:
Marketing	Marketing	57		44		13		29.55	%	Marketing	54		57		(3)		(5.26)	%
Business development	Business development	261		137		124		90.51	%	Business development	229		158		71		44.94	%
Insurance expense	Insurance expense	123		110		13		11.82	%	Insurance expense	127		110		17		15.45	%
Charitable contributions	Charitable contributions	60		45		15		33.33	%	Charitable contributions	60		45		15		33.33	%
Subscriptions and service contracts	Subscriptions and service contracts	467		317		150		47.32	%	Subscriptions and service contracts	424		351		73		20.80	%
Trust	Trust	137		103		34		33.01	%	Trust	181		117		64		54.70	%
Consulting fees	Consulting fees	78		89		(11)		(12.36)	%	Consulting fees	70		67		3		4.48	%
Low income housing projects amortization	Low income housing projects amortization	192		102		90		88.24	%	Low income housing projects amortization	203		110		93		84.55	%
New markets tax credit project amortization and management fees	New markets tax credit project amortization and management fees	229		229		—		—	%	New markets tax credit project amortization and management fees	230		230		—		—	%
All other	All other	526		466		60		12.88	%	All other	381		792		(411)		(51.89)	%
Total other expenses	Total other expenses	2,130		1,642		488		29.72	%	Total other expenses	1,959		2,037		(78)		(3.83)	%
Total noninterest expense	Total noninterest expense	$	10,526	$	9,417	$	1,109	11.78	%	Total noninterest expense	$	10,712	$	10,059	$	653	6.49	%

		Six Months Ended June 30,									Nine Months Ended September 30,
Noninterest expense:	Noninterest expense:	2021		2020		Change		Change %		Noninterest expense:	2021		2020		Change		Change %
Salaries and employee benefits	Salaries and employee benefits	$	11,280	$	10,602	$	678	6.40	%	Salaries and employee benefits	$	17,298	$	16,014	$	1,284	8.02	%
Occupancy	Occupancy	2,427		2,430		(3)		(0.12)	%	Occupancy	3,630		3,651		(21)		(0.58)	%
Data processing	Data processing	1,219		1,184		35		2.96	%	Data processing	1,835		1,756		79		4.50	%
FDIC insurance	FDIC insurance	830		529		301		56.90	%	FDIC insurance	1,358		880		478		54.32	%
Professional fees	Professional fees	551		439		112		25.51	%	Professional fees	763		669		94		14.05	%
Director fees	Director fees	405		428		(23)		(5.37)	%	Director fees	581		664		(83)		(12.50)	%
Other expenses:	Other expenses:									Other expenses:
Marketing	Marketing	102		88		14		15.91	%	Marketing	156		145		11		7.59	%
Business development	Business development	447		404		43		10.64	%	Business development	676		562		114		20.28	%
Insurance expense	Insurance expense	244		214		30		14.02	%	Insurance expense	371		324		47		14.51	%
Charitable contributions	Charitable contributions	120		90		30		33.33	%	Charitable contributions	180		135		45		33.33	%
Subscriptions and service contracts	Subscriptions and service contracts	845		631		214		33.91	%	Subscriptions and service contracts	1,269		982		287		29.23	%
Trust	Trust	278		220		58		26.36	%	Trust	459		337		122		36.20	%
Consulting fees	Consulting fees	153		166		(13)		(7.83)	%	Consulting fees	223		233		(10)		(4.29)	%
Low income housing projects amortization	Low income housing projects amortization	326		205		121		59.02	%	Low income housing projects amortization	529		315		214		67.94	%
New markets tax credit project amortization and management fees	New markets tax credit project amortization and management fees	459		459		—		—	%	New markets tax credit project amortization and management fees	689		689		—		—	%
All other	All other	1,111		991		120		12.11	%	All other	1,492		1,783		(291)		(16.32)	%
Total other expenses	Total other expenses	4,085		3,468		617		17.79	%	Total other expenses	6,044		5,505		539		9.79	%
Total noninterest expense	Total noninterest expense	$	20,797	$	19,080	$	1,717	9.00	%	Total noninterest expense	$	31,509	$	29,139	$	2,370	8.13	%

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Salaries and employee benefits increased for the three and ~~six~~nine months ended ~~June~~September 30, 2021 when compared to the three and ~~six~~nine months ended ~~June~~September 30, 2020, primarily due to an increase in ~~expenses~~expense related to restricted stock ~~units.~~units and the addition of three commercial bankers in the Des Moines market in the third quarter of 2021. FDIC insurance expense increased during the three and ~~six~~nine months ended ~~June~~September 30, 2021 when compared to the same time periods in 2020 due to increases in both the Company's average assets and assessment rate.

Business development expense increased for the three and nine months ended ~~June~~September 30, 2021 in comparison to the three and nine months ended ~~June~~September 30, 2020. ~~Business development activities have increased in the second quarter of 2021 as local economies return to normal activities.~~ Business development activities were significantly limited ~~during~~as a result of COVID-19 shutdowns and social distancing guidelines that began in the second quarter of 2020. Business development activities have increased in the second and third quarters of 2021 as local economies return to normal activities. Subscriptions and service contracts increased primarily due to increases in information technology and information security solutions. All other expenses were ~~higher~~lower for the ~~six~~three and nine months ended ~~June~~September 30, 2021 when compared to the ~~six~~three and nine months ended ~~June~~September 30, 2020, due primarily to ~~the settlement of a loss on~~losses in 2020 from a check fraud ~~scheme.~~incident.

Income Tax Expense

The Company recorded income tax expense of ~~$3,600~~$3,469 (21.4 percent of pre-tax income) and ~~$6,663 (21.1~~$10,132 (21.2 percent of pre-tax income) for the three and ~~six~~nine months ended ~~June~~September 30, 2021, compared with ~~$2,136 (21.1~~$2,176 (21.2 percent of pre-tax income) and ~~$4,368 (21.4~~$6,544 (21.3 percent of pre-tax income) for the three and ~~six~~nine months ended ~~June~~September 30, 2020. The Company's consolidated income tax rate differs from the federal statutory income tax rate in each period, primarily due to tax-exempt interest income, the tax-exempt increase in cash value of bank-owned life insurance, disallowed interest expense, and state income taxes. In addition, for the ~~six~~nine months ended ~~June~~September 30, 2021, a tax benefit of $233 was recorded as a result of the increase in fair value of restricted stock over the vesting period. Comparatively, for the ~~six~~nine months ended ~~June~~September 30, 2020, a tax expense of $116 was recorded as a result of the decrease in fair value of restricted stock over the vesting period. The tax rates for the first ~~six~~nine months of 2021 and 2020 were also impacted by year-to-date federal low income housing tax credits and a new markets tax credit of approximately ~~$684~~$1,026 and ~~$620,~~$930, respectively.

~~Table of Contents~~

~~West Bancorporation, Inc.~~

~~Management's Discussion and Analysis~~

~~(in thousands, except share and per share data)~~

FINANCIAL CONDITION

The Company had total assets of ~~$3,268,760~~$3,249,700 as of ~~June~~September 30, 2021, compared to total assets of $3,185,744 as of December 31, 2020. Fluctuations in the balance sheet included increases in securities, loans, ~~securities~~deposits, federal funds purchased and ~~deposits~~other liabilities and decreases in Federal Home Loan Bank advances, federal funds sold and ~~other liabilities.~~long-term debt.

Securities

The balance of securities available for sale increased by ~~$180,891~~$342,826 during the ~~six~~nine months ended ~~June~~September 30, 2021. In the first ~~six~~nine months of 2021, securities were purchased to improve the yield on excess liquidity. As of ~~June~~September 30, 2021, approximately 5862 percent of the available for sale securities portfolio consisted of government agency guaranteed collateralized mortgage obligations and mortgage-backed securities. Management currently believes these securities provide relatively good yields, have little to no credit risk and provide fairly consistent cash flows.

Loans and Nonperforming Assets

Loans outstanding increased ~~$28,952~~$78,992 from $2,280,575 as of December 31, 2020 to ~~$2,309,527~~$2,359,567 as of ~~June~~September 30, 2021. Changes in the loan portfolio during the first ~~six~~nine months of 2021 included increases of ~~$72,505~~$98,163 in commercial real estate loans and ~~$45,661~~$89,562 in construction, land and land development loans. Commercial loans declined ~~$92,652,~~$112,255, which included a ~~$96,184~~$133,341 decline in PPP loans. As of ~~June~~September 30, 2021, PPP loans outstanding totaled ~~$84,573,~~$47,416, which was made up of ~~$13,431~~$6,812 from round one of the program in 2020 and ~~$71,142~~$40,604 from round two in 2021. The Company continues to focus on business development efforts in all of its markets. ~~We believe that~~Exclusive of PPP loans, loan growth ~~may be lower~~ in the first nine months of 2021 ~~compared to 2020 as a result of the ongoing effects of the COVID-19 pandemic and the related economic impact in our market areas.~~was 10.1 percent.

Nonaccrual loans decreased ~~$1,608~~$7,114 from December 31, 2020 to ~~June~~September 30, ~~2021.~~2021 due to payments received on outstanding balances. The Company's Texas ratio, which is computed by dividing total nonperforming assets by tangible common equity plus the allowance for loan losses, was ~~5.31~~3.24 percent as of ~~June~~September 30, 2021, compared to 6.40 percent as of December 31, 2020.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

The watch classification of loans increased to ~~$90,693~~$91,325 as of ~~June~~September 30, 2021 from $26,715 as of December 31, 2020. The increase was primarily due to the addition of ~~$68,424~~$69,078 of hotel, restaurant and other commercial real estate loans related to one borrowing group. This relationship was downgraded to watch classification in the first quarter of 2021 primarily due to a slower rebound in ~~their~~its hotel occupancy rates compared to other market data. The loans in this downgraded borrowing group are considered well collateralized with a weighted average loan to value ratio of 6370 percent.

Even though we have seen improvement in economic conditions, we believe ~~the long-term effects of~~ the COVID-19 pandemic could have further adverse affects on the credit quality of our loan portfolio. The duration of business disruptions to our customers in the hotel, restaurant and movie theater industries could result in increased loan delinquencies and defaults. Management believes impaired loans could increase in the future as a result of the long-term economic effects of the COVID-19 pandemic, including the risk of future shutdowns in response to new COVID-19 variants. No credit issues are anticipated with PPP loans at this time, as they are 100 percent guaranteed by the SBA.

In accordance with regulatory guidelines, the Company exercises heightened risk management practices when non-owner occupied commercial real estate lending exceeds 300 percent of total risk-based capital or construction, land development, and other land loans exceed 100 percent of total risk-based capital. Although the Company's loan portfolio is heavily concentrated in real estate and its real estate portfolio levels exceed these regulatory guidelines, it has established risk management policies and procedures to regularly monitor the commercial real estate portfolio. An analysis of the Company's non-owner occupied commercial real estate portfolio as of December 31, 2020 was presented in the Company's Form 10-K filed with the SEC on March 1, 2021, and the Company has not experienced any material changes to that analysis since December 31, 2020.

~~Table of Contents~~

~~West Bancorporation, Inc.~~

~~Management's Discussion and Analysis~~

~~(in thousands, except share and per share data)~~

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


		June 30, 2021			December 31, 2020			Change				September 30, 2021			December 31, 2020			Change
Nonaccrual loans	Nonaccrual loans	$	14,586		$	16,194		$	(1,608)		Nonaccrual loans	$	9,080		$	16,194		$	(7,114)
Loans past due 90 days and still accruing interest	Loans past due 90 days and still accruing interest	—			—			—			Loans past due 90 days and still accruing interest	—			—			—
Troubled debt restructured loans (1)	Troubled debt restructured loans (1)	—			—			—			Troubled debt restructured loans (1)	—			—			—
Total nonperforming loans	Total nonperforming loans	14,586			16,194			(1,608)			Total nonperforming loans	9,080			16,194			(7,114)
Other real estate owned	Other real estate owned	—			—			—			Other real estate owned	—			—			—
Total nonperforming assets	Total nonperforming assets	$	14,586		$	16,194		$	(1,608)		Total nonperforming assets	$	9,080		$	16,194		$	(7,114)

Nonperforming loans to total loans	Nonperforming loans to total loans	0.63		%	0.71		%	(0.08)		%	Nonperforming loans to total loans	0.38		%	0.71		%	(0.33)		%
Nonperforming assets to total assets	Nonperforming assets to total assets	0.45		%	0.51		%	(0.06)		%	Nonperforming assets to total assets	0.28		%	0.51		%	(0.23)		%

(1)While TDR loans are commonly reported by the industry as nonperforming, those not classified in the nonaccrual category are accruing interest due to payment performance. TDR loans on nonaccrual status are categorized as nonaccrual. There were six TDR loans related to one borrower as of September 30, 2021 categorized as nonaccrual. There were no TDR loans as of ~~June 30, 2021 and~~ December 31, 2020 categorized as nonaccrual.

Deposits

Deposits increased ~~$124,295~~$35,929 during the first ~~six~~nine months of 2021. Savings accounts, which include money market accounts, increased by a total of ~~$116,977~~$105,067 from December 31, 2020 to ~~June~~September 30, 2021. Interest-bearing demand accounts decreased a total of ~~$66,239~~$95,716 from December 31, 2020 to ~~June~~September 30, 2021. Balance fluctuations were primarily due to normal customer activity, as corporate customers' liquidity needs vary at any given time. We believe that deposit levels could decrease in future periods as a result of the end of broad government stimulus programs relating to the COVID-19 pandemic and low interest rates.

Borrowed Funds

The Company had ~~$128,605~~$125,000 of ~~overnight federal funds purchased and~~ short-term FHLB advances outstanding at ~~June~~September 30, 2021, compared to ~~$180,375~~$175,000 as of December 31, 2020. The Company repaid $50,000 of FHLB advances at maturity in the second quarter of 2021 to reduce unneeded funding as a result of high deposit balances and excess liquidity. Federal funds balances fluctuate based on customer loan and deposit activity and the Company's balance sheet management objectives.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Derivatives

At ~~June~~September 30, 2021 and December 31, 2020, the Company had interest rate swap contracts associated with borrowed funds and deposits with a total notional amount of $255,000 and $305,000, respectively. The fair value of these derivative contracts, which is reported in other liabilities on the balance sheet, increased ~~$11,508~~$12,974 from December 31, 2020 to ~~June~~September 30, 2021 due to the increases in projected long-term market interest rates. ~~See Note 5 to the financial statements for additional information on the impact of the change in derivative fair values on AOCI.~~

In March 2021, the Company terminated interest rate swaps with a total notional amount of $150,000. Of the total notional amount of $150,000, $100,000 were forward-starting interest rate swaps originated in January 2021 and $50,000 were interest rate swaps hedging the interest cash flows of FHLB advances. The net termination gains were recorded in other noninterest income.

~~Table of Contents~~Other Liabilities

~~West Bancorporation, Inc.~~Other liabilities at September 30, 2021 included $30,151 of pending security settlements.

~~Management's Discussion and Analysis~~

~~(in thousands, except share and per share data)~~

Liquidity and Capital Resources

The objectives of liquidity management are to ensure the availability of sufficient cash flows to meet all financial commitments and to capitalize on opportunities for profitable business expansion. The Company's principal source of funds is deposits. Other sources include loan principal repayments, proceeds from the maturity and sale of securities, principal payments on collateralized mortgage obligations and mortgage-backed securities, federal funds purchased, advances from the FHLB, and funds provided by operations. Liquidity management is conducted on both a daily and a long-term basis. Investments in liquid assets are adjusted based on expected loan demand, projected loan and securities maturities and payments, expected deposit flows and the objectives set by the Company's asset-liability management policy. The Company had liquid assets (cash and cash equivalents) of ~~$270,823~~$32,469 as of ~~June~~September 30, 2021 compared with $396,435 as of December 31, 2020.

As of ~~June~~September 30, 2021, West Bank had additional borrowing capacity available from the FHLB of approximately ~~$575,000,~~$553,000, as well as approximately ~~$20,000~~$18,000 through the Federal Reserve discount window and $67,000 through unsecured federal funds lines of credit with correspondent banks. Net cash from operating activities contributed ~~$28,508~~$72,585 to liquidity for the ~~six~~nine months ended ~~June~~September 30, 2021. Management believed that the combination of high levels of potentially liquid assets, cash flows from operations, and additional borrowing capacity provided the Company with strong liquidity as of ~~June~~September 30, 2021.

The Company's total stockholders' equity increased to ~~$246,526~~$252,376 at ~~June~~September 30, 2021 from $223,695 at December 31, 2020. The increase was primarily the result of net income less dividends paid and an increase in fair value of derivatives, partially offset by a decrease in the fair value of securities. At ~~June~~September 30, 2021, the Company's tangible common equity as a percent of tangible assets was ~~7.54~~7.77 percent compared to 7.02 percent as of December 31, 2020.

The Company had remaining commitments to invest in qualified affordable housing projects totaling ~~$3,294~~$3,992 and $3,505 as of ~~June~~September 30, 2021 and December 31, 2020, respectively. During 2020, the Company began construction on a new office in Sartell, Minnesota, which had a remaining construction commitment of ~~$5,729~~$3,477 and $8,324 as of ~~June~~September 30, 2021 and December 31, 2020, respectively.

The Company and West Bank are subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements (as shown in the following table) can result in certain mandatory and possibly additional discretionary actions by regulators, which, if undertaken, could have a direct material effect on the Company's consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and West Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Company's and West Bank's capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Management believed the Company and West Bank met all capital adequacy requirements to which they were subject as of ~~June~~September 30, 2021.

4645

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

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


		Actual				For Capital Adequacy Purposes				For Capital Adequacy Purposes With Capital Conservation Buffer				To Be Well-Capitalized					Actual				For Capital Adequacy Purposes				For Capital Adequacy Purposes With Capital Conservation Buffer				To Be Well-Capitalized
		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio			Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
As of June 30, 2021:
As of September 30, 2021:																		As of September 30, 2021:
Total Capital (to Risk-Weighted Assets)	Total Capital (to Risk-Weighted Assets)																	Total Capital (to Risk-Weighted Assets)
Consolidated	Consolidated	$	301,043	11.32	%	$	212,746	8.00	%	$	279,230	10.50	%	$	265,933	10.00	%	Consolidated	$	310,479	11.12	%	$	223,376	8.00	%	$	293,181	10.50	%	$	279,220	10.00	%
West Bank	West Bank	305,420		11.49	%	212,670		8.00	%	279,130		10.50	%	265,838		10.00	%	West Bank	312,109		11.18	%	223,315		8.00	%	293,101		10.50	%	279,144		10.00	%

Tier 1 Capital (to Risk-Weighted Assets)	Tier 1 Capital (to Risk-Weighted Assets)																	Tier 1 Capital (to Risk-Weighted Assets)
Consolidated	Consolidated	273,001		10.27	%	159,560		6.00	%	226,043		8.50	%	212,746		8.00	%	Consolidated	282,381		10.11	%	167,532		6.00	%	237,337		8.50	%	223,376		8.00	%
West Bank	West Bank	277,378		10.43	%	159,503		6.00	%	225,962		8.50	%	212,670		8.00	%	West Bank	284,011		10.17	%	167,486		6.00	%	237,272		8.50	%	223,315		8.00	%

Common Equity Tier 1 Capital (to Risk-Weighted Assets)	Common Equity Tier 1 Capital (to Risk-Weighted Assets)																	Common Equity Tier 1 Capital (to Risk-Weighted Assets)
Consolidated	Consolidated	253,001		9.51	%	119,670		4.50	%	186,153		7.00	%	172,856		6.50	%	Consolidated	262,381		9.40	%	125,649		4.50	%	195,454		7.00	%	181,493		6.50	%
West Bank	West Bank	277,378		10.43	%	119,627		4.50	%	186,087		7.00	%	172,795		6.50	%	West Bank	284,011		10.17	%	125,615		4.50	%	195,401		7.00	%	181,444		6.50	%

Tier 1 Capital (to Average Assets)	Tier 1 Capital (to Average Assets)																	Tier 1 Capital (to Average Assets)
Consolidated	Consolidated	273,001		8.47	%	128,896		4.00	%	128,896		4.00	%	161,120		5.00	%	Consolidated	282,381		8.51	%	132,785		4.00	%	132,785		4.00	%	165,981		5.00	%
West Bank	West Bank	277,378		8.61	%	128,817		4.00	%	128,817		4.00	%	161,022		5.00	%	West Bank	284,011		8.56	%	132,685		4.00	%	132,685		4.00	%	165,856		5.00	%

As of December 31, 2020:	As of December 31, 2020:																	As of December 31, 2020:
Total Capital (to Risk-Weighted Assets)	Total Capital (to Risk-Weighted Assets)																	Total Capital (to Risk-Weighted Assets)
Consolidated	Consolidated	$	284,977	11.45	%	$	199,092	8.00	%	$	261,308	10.50	%	$	248,865	10.00	%	Consolidated	$	284,977	11.45	%	$	199,092	8.00	%	$	261,308	10.50	%	$	248,865	10.00	%
West Bank	West Bank	290,677		11.69	%	198,995		8.00	%	261,181		10.50	%	248,744		10.00	%	West Bank	290,677		11.69	%	198,995		8.00	%	261,181		10.50	%	248,744		10.00	%

Tier 1 Capital (to Risk-Weighted Assets)	Tier 1 Capital (to Risk-Weighted Assets)																	Tier 1 Capital (to Risk-Weighted Assets)
Consolidated	Consolidated	255,541		10.27	%	149,319		6.00	%	211,535		8.50	%	199,092		8.00	%	Consolidated	255,541		10.27	%	149,319		6.00	%	211,535		8.50	%	199,092		8.00	%
West Bank	West Bank	261,241		10.50	%	149,246		6.00	%	211,431		8.50	%	198,995		8.00	%	West Bank	261,241		10.50	%	149,246		6.00	%	211,431		8.50	%	198,995		8.00	%

Common Equity Tier 1 Capital (to Risk-Weighted Assets)	Common Equity Tier 1 Capital (to Risk-Weighted Assets)																	Common Equity Tier 1 Capital (to Risk-Weighted Assets)
Consolidated	Consolidated	235,541		9.46	%	111,989		4.50	%	174,205		7.00	%	161,762		6.50	%	Consolidated	235,541		9.46	%	111,989		4.50	%	174,205		7.00	%	161,762		6.50	%
West Bank	West Bank	261,241		10.50	%	111,935		4.50	%	174,120		7.00	%	161,683		6.50	%	West Bank	261,241		10.50	%	111,935		4.50	%	174,120		7.00	%	161,683		6.50	%

Tier 1 Capital (to Average Assets)	Tier 1 Capital (to Average Assets)																	Tier 1 Capital (to Average Assets)
Consolidated	Consolidated	255,541		8.66	%	118,053		4.00	%	118,053		4.00	%	147,567		5.00	%	Consolidated	255,541		8.66	%	118,053		4.00	%	118,053		4.00	%	147,567		5.00	%
West Bank	West Bank	261,241		8.86	%	117,946		4.00	%	117,946		4.00	%	147,433		5.00	%	West Bank	261,241		8.86	%	117,946		4.00	%	117,946		4.00	%	147,433		5.00	%

The Company and West Bank are subject to the rules of the Basel III regulatory capital framework and related Dodd-Frank Wall Street Reform and Consumer Protection Act. The rules include the implementation of a 2.5 percent capital conservation buffer that is added to the minimum requirements for capital adequacy purposes. A banking organization with a capital conservation buffer of less than the required amount will be subject to limitations on capital distributions, including dividend payments, and certain discretionary bonus payments to executive officers. At ~~June~~September 30, 2021, the capital ratios for the Company and West Bank were sufficient to meet the conservation buffer.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company's market risk is composed primarily of interest rate risk arising from its core banking activities of lending and deposit taking. Interest rate risk refers to the exposure arising from changes in interest rates. Fluctuations in interest rates have a significant impact not only upon net income, but also upon the cash flows and market values of assets and liabilities. Our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our interest-earning assets and interest-bearing liabilities. Management continually develops and applies strategies to mitigate this risk. Management does not believe that the Company's primary market risk exposure and management of that exposure in the first ~~six~~nine months of 2021 have materially changed compared to those in the year ~~ended~~ 2020.

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

The Company maintains an Asset Liability Committee which meets quarterly to review the interest rate sensitivity position and to review and develop various strategies for managing interest rate risk. Measuring and managing interest rate risk is a dynamic process that management performs with the objective of maximizing net interest margin while maintaining interest rate risk within acceptable tolerances. This process relies primarily on the simulation of net interest income over multiple interest rate scenarios. The Company engages a third party that utilizes a modeling program to measure the Company’s exposure to potential interest rate changes. For various assumed hypothetical changes in market interest rates, this analysis measures the estimated change in net interest income. The simulations allow for ongoing assessment of interest rate sensitivity and can include the impact of potential new business strategies. The modeled scenarios begin with a base case in which rates are unchanged and include parallel and nonparallel rate shocks. The 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. 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 net interest income in each scenario is based on parallel and permanent changes in the interest rates.


Scenario			% Change
300 basis points rising			~~4.23%~~1.24%
200 basis points rising			~~3.05%~~1.03%
100 basis points rising			~~1.73%~~0.76%
Base			—

As of ~~June~~September 30, 2021, the estimated effect of a 300 basis point increase in interest rates would be an increase of the Company's net interest income by approximately ~~4.23~~1.24 percent, or ~~$3,746 in 2021.~~$1,144 over the twelve months ending September 30, 2022. The estimated effect of a decrease in rates is not reasonably calculable due to the current low interest rate environment.

Computations of the prospective effects of hypothetical interest rate changes are based on numerous assumptions. The assumptions used in our interest rate sensitivity simulation discussed above are inherently uncertain and, as a result, the simulations cannot precisely measure net interest income or precisely predict the impact of changes in interest rates on net interest income. Actual values 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. Further, the computations do not contemplate any actions the Company may undertake in response to changes in interest rates.

Item 4. Controls and Procedures

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

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b. Changes in internal control over financial reporting. There were no changes in the Company's internal control over financial reporting that occurred during the quarter ended ~~June~~September 30, 2021, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Neither the Company nor West Bank is a party, and no property of these entities is subject, to any material pending legal proceedings, other than ordinary routine litigation incidental to West Bank's business. The Company does not know of any proceeding contemplated by a governmental authority against the Company or West Bank.

Item 1A. Risk Factors

Management does not believe there have been any material changes in the risk factors that were disclosed in the Company's Form 10-K filed with the Securities and Exchange Commission on March 1, 2021.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

The following exhibits are filed as part of this report:


Exhibits			Description
~~10.1~~3.1			Restatement of the Restated Articles of Incorporation of West Bancorporation, Inc. ~~2021 Equity Incentive Plan~~ (~~incorporated~~(incorporated herein by reference to Exhibit ~~4.3~~3.1 filed with the Form ~~S-8~~10-K on ~~April 30, 2021~~)March 1, 2017)
~~10.2~~3.2			F ~~orm~~Amended and Restated Bylaws of West Bancorporation, Inc. ~~2021 Equity Incentive Plan Restricted Stock Unit Award Agreement (with holding period)~~as of January 23, 2019 (~~incorporated~~(incorporated herein by reference to Exhibit ~~4.4 filed with the Form S-8 on April 30, 2021~~)
~~10.3~~			~~Form of West Bancorporation, Inc. 2021 Equity Incentive Plan Restricted Stock Unit Award Agreement (without holding period)~~ (~~incorporated herein by reference to Exhibit 4.5 filed with the Form S-8 on April 30, 2021~~)
~~10.4~~			F ~~orm of West Bancorporation, Inc. 2021 Equity Incentive Plan Performance-Based Restricted Stock Unit Award Agreement~~ (~~incorporated herein by reference to Exhibit 4.6 filed with the Form S-8 on April 30, 2021~~)
~~10.5~~			~~Form of West Bancorporation, Inc. 2021 Equity Incentive Plan Cash-Settled Restricted Stock Unit Award Agreement~~ (~~incorporated herein by reference to Exhibit 4.7 filed with the Form S-8 on April 30, 2021~~)
~~10.6~~			F ~~orm of West Bancorporation, Inc. 2021 Equity Incentive Plan Director Restricted Stock Unit Award Agreement~~ (~~incorporated herein by reference to Exhibit 4.8 filed with the Form S-8 on April 30, 2021~~)
~~10.7~~			~~Employment Agreement dated April~~ ~~29, 2021, between West Bancorporation, Inc. and Bradley P. Peters~~ (~~incorporated herein by reference to Exhibit 10.2~~3.1 filed with the Form 8-K on ~~April 30, 2021~~)
~~10.8~~			T ~~ransitional Employment Agreement dated May 27, 2021, between West Bancorporation, Inc. and Douglas R. Gulling~~ (~~incorporated herein by reference to Exhibit 10.1 filed with the Form 8-K on May 27, 2021~~)
~~10.9~~			E ~~mployment Agreement dated May 27, 2021, between West Bancorporation, Inc. and Jane M. Funk~~ (~~incorporated herein by reference to Exhibit 10.2 filed with the Form 8-K on May 27, 2021~~)January 24, 2019)
31.1			Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002
31.2			Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002
32.1			Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2			Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS			Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH			Inline XBRL Taxonomy Extension Schema Document
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document
104			Cover Page Interactive Data File (formatted as Inline XBRL and combined in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


West Bancorporation, Inc.
(Registrant)


~~July 29,~~October 28, 2021	By:	/s/ David D. Nelson
Date		David D. Nelson
		Chief Executive Officer and President
		(Principal Executive Officer)

~~July 29,~~October 28, 2021	By:	/s/ Douglas R. Gulling
Date		Douglas R. Gulling
		Executive Vice President, Treasurer and Chief Financial Officer
		(Principal Financial Officer)

~~July 29,~~October 28, 2021	By:	/s/ Jane M. Funk
Date		Jane M. Funk
		Senior Vice President, Controller and Chief Accounting Officer
		(Principal Accounting Officer)

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