UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended ~~March 31,~~June 30, 2022

or

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

Commission File Number: 0-49677

WEST BANCORPORATION, INC.

(Exact Name of Registrant as Specified in its Charter)


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 ~~April~~July 27, 2022, there were ~~16,631,413~~16,640,413 shares of common stock, no par value, outstanding.

WEST BANCORPORATION, INC.

INDEX


		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements	4

	Consolidated Balance Sheets as of ~~March 31,~~June 30, 2022 and December 31, 2021	4

	Consolidated Statements of Income for the three and six months ended ~~March 31,~~June 30, 2022 and 2021	5

	Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended ~~March 31,~~June 30, 2022 and 2021	6

	Consolidated Statements of Stockholders' Equity for the three and six months ended ~~March 31,~~June 30, 2022 and 2021	7

	Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021	89

	Notes to Consolidated Financial Statements	910

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2931

	"Safe Harbor" Concerning Forward-Looking Statements	2931

	Critical Accounting Policies	2931

	Non-GAAP Financial Measures	3032

	Overview	3134

	Results of Operations	3336

	Financial Condition	4045

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4449

Item 4.	Controls and Procedures	4449

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	4450

Item 1A.	Risk Factors	4450

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4450

Item 3.	Defaults Upon Senior Securities	4450

Item 4.	Mine Safety Disclosures	4450

Item 5.	Other Information	4450

Item 6.	Exhibits	4551

	Signatures	4652

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)	March 31, 2022		December 31, 2021		(in thousands, except share and per share data)	June 30, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	21,896	$	17,555	Cash and due from banks	$	26,174	$	17,555
Federal funds sold	Federal funds sold	122,359		175,270		Federal funds sold	766		175,270
Cash and cash equivalents	Cash and cash equivalents	144,255		192,825		Cash and cash equivalents	26,940		192,825
Securities available for sale, at fair value	Securities available for sale, at fair value	797,912		758,822		Securities available for sale, at fair value	731,970		758,822
Federal Home Loan Bank stock, at cost	Federal Home Loan Bank stock, at cost	10,269		9,965		Federal Home Loan Bank stock, at cost	15,532		9,965
Loans	Loans	2,485,366		2,456,196		Loans	2,573,129		2,456,196
Allowance for loan losses	Allowance for loan losses	(27,623)		(28,364)		Allowance for loan losses	(25,434)		(28,364)
Loans, net	Loans, net	2,457,743		2,427,832		Loans, net	2,547,695		2,427,832
Premises and equipment, net	Premises and equipment, net	40,898		34,568		Premises and equipment, net	41,807		34,568
Accrued interest receivable	Accrued interest receivable	10,083		8,890		Accrued interest receivable	9,363		8,890
Bank-owned life insurance	Bank-owned life insurance	43,836		43,609		Bank-owned life insurance	44,072		43,609
Deferred tax assets, net	Deferred tax assets, net	20,877		10,819		Deferred tax assets, net	29,861		10,819
Other assets	Other assets	21,196		12,871		Other assets	27,551		12,871
Total assets	Total assets	$	3,547,069	$	3,500,201	Total assets	$	3,474,791	$	3,500,201

LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY					LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES	LIABILITIES					LIABILITIES
Deposits:	Deposits:					Deposits:
Noninterest-bearing demand	Noninterest-bearing demand	$	710,697	$	720,136	Noninterest-bearing demand	$	690,335	$	720,136
Interest-bearing demand	Interest-bearing demand	554,235		548,242		Interest-bearing demand	472,919		548,242
Savings	Savings	1,632,690		1,550,636		Savings	1,360,020		1,550,636
Time of $250 or more	Time of $250 or more	46,486		53,019		Time of $250 or more	87,086		53,019
Other time	Other time	147,144		143,972		Other time	232,091		143,972
Total deposits	Total deposits	3,091,252		3,016,005		Total deposits	2,842,451		3,016,005
Federal funds purchased	Federal funds purchased	—		2,880		Federal funds purchased	133,000		2,880
Subordinated notes, net	Subordinated notes, net	20,468		20,465		Subordinated notes, net	79,265		20,465
Federal Home Loan Bank advances	Federal Home Loan Bank advances	125,000		125,000		Federal Home Loan Bank advances	125,000		125,000
Long-term debt	Long-term debt	51,486		51,521		Long-term debt	51,486		51,521
Accrued expenses and other liabilities	Accrued expenses and other liabilities	22,383		24,002		Accrued expenses and other liabilities	27,400		24,002
Total liabilities	Total liabilities	3,310,589		3,239,873		Total liabilities	3,258,602		3,239,873
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; no shares issued and outstanding at March 31, 2022 and December 31, 2021		—		—
Common stock, no par value; authorized 50,000,000 shares; 16,631,413 and 16,554,846 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively		3,000		3,000
Preferred stock, $0.01 par value; authorized 50,000,000 shares; no shares issued and outstanding at June 30, 2022 and December 31, 2021						Preferred stock, $0.01 par value; authorized 50,000,000 shares; no shares issued and outstanding at June 30, 2022 and December 31, 2021	—		—
Common stock, no par value; authorized 50,000,000 shares; 16,640,413 and 16,554,846 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively						Common stock, no par value; authorized 50,000,000 shares; 16,640,413 and 16,554,846 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively	3,000		3,000
Additional paid-in capital	Additional paid-in capital	29,421		30,183		Additional paid-in capital	30,283		30,183
Retained earnings	Retained earnings	246,827		237,782		Retained earnings	255,334		237,782
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(42,768)		(10,637)		Accumulated other comprehensive loss	(72,428)		(10,637)
Total stockholders' equity	Total stockholders' equity	236,480		260,328		Total stockholders' equity	216,189		260,328
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	3,547,069	$	3,500,201	Total liabilities and stockholders' equity	$	3,474,791	$	3,500,201

See Notes to Consolidated Financial Statements.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Consolidated Statements of Income

(unaudited)


		Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share data)	(in thousands, except per share data)		2022		2021			(in thousands, except per share data)	2022		2021		2022		2021
Interest income:	Interest income:							Interest income:
Loans, including fees	Loans, including fees		$	23,286	$	24,038		Loans, including fees	$	24,848	$	23,139	$	48,134	$	47,177
Securities:	Securities:							Securities:
Taxable	Taxable		2,889		1,645			Taxable	3,090		1,895		5,979		3,540
Tax-exempt	Tax-exempt		858		558			Tax-exempt	892		712		1,750		1,270
Federal funds sold	Federal funds sold		82		69			Federal funds sold	67		75		149		144
Total interest income	Total interest income		27,115		26,310			Total interest income	28,897		25,821		56,012		52,131
Interest expense:	Interest expense:							Interest expense:
Deposits	Deposits		2,151		1,877			Deposits	3,146		1,995		5,297		3,872
Federal funds purchased	Federal funds purchased		—		1			Federal funds purchased	157		1		157		2
Subordinated notes	Subordinated notes		248		249			Subordinated notes	394		251		642		500
Federal Home Loan Bank advances	Federal Home Loan Bank advances		630		983			Federal Home Loan Bank advances	635		649		1,265		1,632
Long-term debt	Long-term debt		258		79			Long-term debt	326		75		584		154
Total interest expense	Total interest expense		3,287		3,189			Total interest expense	4,658		2,971		7,945		6,160
Net interest income	Net interest income		23,828		23,121			Net interest income	24,239		22,850		48,067		45,971
Provision for loan losses	Provision for loan losses		(750)		500			Provision for loan losses	(1,750)		(2,000)		(2,500)		(1,500)
Net interest income after provision for loan losses	Net interest income after provision for loan losses		24,578		22,621			Net interest income after provision for loan losses	25,989		24,850		50,567		47,471
Noninterest income:	Noninterest income:							Noninterest income:
Service charges on deposit accounts	Service charges on deposit accounts		580		582			Service charges on deposit accounts	585		578		1,165		1,160
Debit card usage fees	Debit card usage fees		472		442			Debit card usage fees	507		511		979		953
Trust services	Trust services		629		652			Trust services	622		691		1,251		1,343
Increase in cash value of bank-owned life insurance	Increase in cash value of bank-owned life insurance		227		220			Increase in cash value of bank-owned life insurance	236		240		463		460
Loan swap fees								Loan swap fees	—		42		—		42
Realized securities gains, net	Realized securities gains, net		—		4			Realized securities gains, net	—		36		—		40
Other income	Other income		481		565			Other income	328		417		809		982
Total noninterest income	Total noninterest income		2,389		2,465			Total noninterest income	2,278		2,515		4,667		4,980
Noninterest expense:	Noninterest expense:							Noninterest expense:
Salaries and employee benefits	Salaries and employee benefits		6,298		5,608			Salaries and employee benefits	6,410		5,672		12,708		11,280
Occupancy	Occupancy		1,086		1,228			Occupancy	1,242		1,199		2,328		2,427
Data processing	Data processing		624		602			Data processing	656		617		1,280		1,219
FDIC insurance	FDIC insurance		337		404			FDIC insurance	289		426		626		830
Professional fees	Professional fees		217		283			Professional fees	202		268		419		551
Director fees	Director fees		168		191			Director fees	222		214		390		405
Other expenses	Other expenses		1,932		1,955			Other expenses	2,245		2,130		4,177		4,085
Total noninterest expense	Total noninterest expense		10,662		10,271			Total noninterest expense	11,266		10,526		21,928		20,797
Income before income taxes	Income before income taxes		16,305		14,815			Income before income taxes	17,001		16,839		33,306		31,654
Income taxes	Income taxes		3,121		3,063			Income taxes	4,334		3,600		7,455		6,663
Net income	Net income		$	13,184	$	11,752		Net income	$	12,667	$	13,239	$	25,851	$	24,991

Basic earnings per common share	Basic earnings per common share		$	0.80	$	0.71		Basic earnings per common share	$	0.76	$	0.80	$	1.56	$	1.51
Diluted earnings per common share	Diluted earnings per common share		$	0.78	$	0.70		Diluted earnings per common share	$	0.75	$	0.79	$	1.54	$	1.49

See Notes to Consolidated Financial Statements.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Consolidated Statements of Comprehensive Income (Loss)

(unaudited)


		Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	(in thousands)		2022		2021			(in thousands)	2022		2021		2022		2021
Net income	Net income		$	13,184	$	11,752		Net income	$	12,667	$	13,239	$	25,851	$	24,991
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 losses arising during the period			(54,595)		(8,338)
Unrealized holding gains (losses) arising during the period								Unrealized holding gains (losses) arising during the period	(44,413)		4,048		(99,008)		(4,290)
Plus: reclassification adjustment for net gains realized in net income	Plus: reclassification adjustment for net gains realized in net income		—		(4)			Plus: reclassification adjustment for net gains realized in net income	—		(36)		—		(40)

Income tax benefit			13,813		2,102
Other comprehensive loss on securities			(40,782)		(6,240)
Income tax (expense) benefit								Income tax (expense) benefit	11,236		(1,011)		25,049		1,091
Other comprehensive income (loss) on securities								Other comprehensive income (loss) on securities	(33,177)		3,001		(73,959)		(3,239)
Unrealized gains (losses) on derivatives:	Unrealized gains (losses) on derivatives:							Unrealized gains (losses) on derivatives:
Unrealized holding gains arising during the period			10,536		7,763
Unrealized holding gains (losses) arising during the period								Unrealized holding gains (losses) arising during the period	4,066		(2,321)		14,602		5,442
Plus: reclassification adjustment for net losses realized in net income	Plus: reclassification adjustment for net losses realized in net income		1,045		4,970			Plus: reclassification adjustment for net losses realized in net income	642		1,098		1,687		6,068

Income tax expense			(2,930)		(3,208)
Other comprehensive income on derivatives			8,651		9,525
Income tax (expense) benefit								Income tax (expense) benefit	(1,191)		308		(4,121)		(2,900)
Other comprehensive income (loss) on derivatives								Other comprehensive income (loss) on derivatives	3,517		(915)		12,168		8,610
Total other comprehensive income (loss)	Total other comprehensive income (loss)		(32,131)		3,285			Total other comprehensive income (loss)	(29,660)		2,086		(61,791)		5,371
Comprehensive income (loss)	Comprehensive income (loss)		$	(18,947)	$	15,037		Comprehensive income (loss)	$	(16,993)	$	15,325	$	(35,940)	$	30,362

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)

															Three Months Ended June 30, 2022
																								Accumulated
																				Additional				Other
															Preferred		Common Stock			Paid-In		Retained		Comprehensive
															Stock		Shares	Amount		Capital		Earnings		Income (Loss)		Total
Balance, March 31, 2022														Balance, March 31, 2022	$	—	16,631,413	$	3,000	$	29,421	$	246,827	$	(42,768)	$	236,480
Net income														Net income	—		—	—		—		12,667		—		12,667
Other comprehensive loss, net of tax														Other comprehensive loss, net of tax	—		—	—		—		—		(29,660)		(29,660)
Cash dividends declared, $0.25 per common share														Cash dividends declared, $0.25 per common share	—		—	—		—		(4,160)		—		(4,160)
Stock-based compensation costs														Stock-based compensation costs	—		—	—		862		—		—		862
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	—		9,000	—		—		—		—		—
Balance, June 30, 2022														Balance, June 30, 2022	$	—	16,640,413	$	3,000	$	30,283	$	255,334	$	(72,428)	$	216,189

															Three Months Ended June 30, 2021
																								Accumulated
																				Additional				Other
															Preferred		Common Stock			Paid-In		Retained		Comprehensive
															Stock		Shares	Amount		Capital		Earnings		Income (Loss)		Total
Balance, March 31, 2021														Balance, March 31, 2021	$	—	16,540,381	$	3,000	$	28,243	$	211,847	$	(8,561)	$	234,529
Net income														Net income	—		—	—		—		13,239		—		13,239
Other comprehensive income, net of tax														Other comprehensive income, net of tax	—		—	—		—		—		2,086		2,086
Cash dividends declared, $0.24 per common share														Cash dividends declared, $0.24 per common share	—		—	—		—		(3,973)		—		(3,973)
Stock-based compensation costs														Stock-based compensation costs	—		—	—		645		—		—		645
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	—		14,465	—		—		—		—		—
Balance, June 30, 2021														Balance, June 30, 2021	$	—	16,554,846	$	3,000	$	28,888	$	221,113	$	(6,475)	$	246,526

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

(in thousands, except share and per share data)

	Three Months Ended March 31, 2022
										Accumulated
						Additional				Other
	Preferred		Common Stock			Paid-In		Retained		Comprehensive
	Stock		Shares	Amount		Capital		Earnings		Income (Loss)		Total
Balance, December 31, 2021	$	—	16,554,846	$	3,000	$	30,183	$	237,782	$	(10,637)	$	260,328
Net income	—		—	—		—		13,184		—		13,184
Other comprehensive loss, net of tax	—		—	—		—		—		(32,131)		(32,131)
Cash dividends declared, $0.25 per common share	—		—	—		—		(4,139)		0		(4,139)
Stock-based compensation costs	—		—	—		757		—		—		757
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes	—		76,567	—		(1,519)		—		—		(1,519)
Balance, March 31, 2022	$	—	16,631,413	$	3,000	$	29,421	$	246,827	$	(42,768)	$	236,480

	Three Months Ended March 31, 2021
										Accumulated
						Additional				Other
	Preferred		Common Stock			Paid-In		Retained		Comprehensive
	Stock		Shares	Amount		Capital		Earnings		Income (Loss)		Total
Balance, December 31, 2020	$	—	16,469,272	$	3,000	$	28,823	$	203,718	$	(11,846)	$	223,695
Net income	—		—	—		—		11,752		—		11,752
Other comprehensive income, net of tax	—		—	—		—		—		3,285		3,285
Cash dividends declared, $0.22 per common share	—		—	—		—		(3,623)		—		(3,623)
Stock-based compensation costs	—		—	—		633		—		—		633
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes	—		71,109	—		(1,213)		—		—		(1,213)
Balance, March 31, 2021	$	—	16,540,381	$	3,000	$	28,243	$	211,847	$	(8,561)	$	234,529

Table of Contents

West Bancorporation, Inc. and Subsidiary

Consolidated Statements of Stockholders' Equity

(unaudited)
















(in thousands, except share and per share data)

	Six Months Ended June 30, 2022
										Accumulated
						Additional				Other
	Preferred		Common Stock			Paid-In		Retained		Comprehensive
	Stock		Shares	Amount		Capital		Earnings		Income (Loss)		Total
Balance, December 31, 2021	$	—	16,554,846	$	3,000	$	30,183	$	237,782	$	(10,637)	$	260,328
Net income	—		—	—		—		25,851		—		25,851
Other comprehensive loss, net of tax	—		—	—		—		—		(61,791)		(61,791)
Cash dividends declared, $0.50 per common share	—		—	—		—		(8,299)		—		(8,299)
Stock-based compensation costs	—		—	—		1,619		—		—		1,619
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes	—		85,567	—		(1,519)		—		—		(1,519)
Balance, June 30, 2022	$	—	16,640,413	$	3,000	$	30,283	$	255,334	$	(72,428)	$	216,189


	Six Months Ended June 30, 2021
										Accumulated
						Additional				Other
	Preferred		Common Stock			Paid-In		Retained		Comprehensive
	Stock		Shares	Amount		Capital		Earnings		Income (Loss)		Total
Balance, December 31, 2020	$	—	16,469,272	$	3,000	$	28,823	$	203,718	$	(11,846)	$	223,695
Net income	—		—	—		—		24,991		—		24,991
Other comprehensive income, net of tax	—		—	—		—		—		5,371		5,371
Cash dividends declared, $0.46 per common share	—		—	—		—		(7,596)		—		(7,596)
Stock-based compensation costs	—		—	—		1,278		—		—		1,278
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

See Notes to Consolidated Financial Statements.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Consolidated Statements of Cash Flows

(unaudited)


		Three Months Ended March 31,					Six Months Ended June 30,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2022		2021
Cash Flows from Operating Activities:	Cash Flows from Operating Activities:					Cash Flows from Operating Activities:
Net income	Net income	$	13,184	$	11,752	Net income	$	25,851	$	24,991
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	(750)		500		Provision for loan losses	(2,500)		(1,500)
Net amortization and accretion	Net amortization and accretion	666		382		Net amortization and accretion	1,409		929
Securities gains, net	Securities gains, net	—		(4)		Securities gains, net	—		(40)
Stock-based compensation	Stock-based compensation	757		633		Stock-based compensation	1,619		1,278
Increase in cash value of bank-owned life insurance	Increase in cash value of bank-owned life insurance	(227)		(220)		Increase in cash value of bank-owned life insurance	(463)		(460)

Depreciation	Depreciation	307		373		Depreciation	680		759
Provision for deferred income taxes	Provision for deferred income taxes	824		446		Provision for deferred income taxes	1,885		746
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	(1,193)		(1,477)		Increase in accrued interest receivable	(473)		(184)
(Increase) decrease in other assets		249		(2,883)
Increase in accrued expenses and other liabilities		1,702		5,547
Decrease in other assets						Decrease in other assets	1,448		3,170
Increase (decrease) in accrued expenses and other liabilities						Increase (decrease) in accrued expenses and other liabilities	4,189		(1,181)
Net cash provided by operating activities	Net cash provided by operating activities	15,519		15,049		Net cash provided by operating activities	33,645		28,508
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	—		18,775		Proceeds from sales of securities available for sale	—		28,961
Proceeds from maturities and calls of securities available for sale	Proceeds from maturities and calls of securities available for sale	25,730		18,577		Proceeds from maturities and calls of securities available for sale	46,529		43,153
Purchases of securities available for sale	Purchases of securities available for sale	(120,077)		(72,650)		Purchases of securities available for sale	(120,077)		(258,216)
Purchases of Federal Home Loan Bank stock	Purchases of Federal Home Loan Bank stock	(384)		(856)		Purchases of Federal Home Loan Bank stock	(21,003)		(861)
Proceeds from redemption of Federal Home Loan Bank stock	Proceeds from redemption of Federal Home Loan Bank stock	80		165		Proceeds from redemption of Federal Home Loan Bank stock	15,436		2,395
Net increase in loans	Net increase in loans	(29,161)		(23,352)		Net increase in loans	(117,363)		(28,846)

Purchases of premises and equipment	Purchases of premises and equipment	(6,951)		(963)		Purchases of premises and equipment	(8,548)		(3,150)

Net cash used in investing activities	Net cash used in investing activities	(130,763)		(60,304)		Net cash used in investing activities	(205,026)		(216,564)
Cash Flows from Financing Activities:	Cash Flows from Financing Activities:					Cash Flows from Financing Activities:
Net increase (decrease) in deposits	Net increase (decrease) in deposits	75,247		(18,901)		Net increase (decrease) in deposits	(173,554)		124,295
Net decrease in federal funds purchased		(2,880)		(1,315)

Net increase (decrease) in federal funds purchased						Net increase (decrease) in federal funds purchased	130,120		(1,770)
Proceeds from issuance of subordinated debt, net of issuance costs						Proceeds from issuance of subordinated debt, net of issuance costs	58,783		—
Net decrease in Federal Home Loan Bank advances						Net decrease in Federal Home Loan Bank advances	—		(50,000)
Principal payments on long-term debt	Principal payments on long-term debt	(35)		(639)		Principal payments on long-term debt	(35)		(1,272)
Common stock dividends paid	Common stock dividends paid	(4,139)		(3,623)		Common stock dividends paid	(8,299)		(7,596)
Restricted stock units withheld for payroll taxes	Restricted stock units withheld for payroll taxes	(1,519)		(1,213)		Restricted stock units withheld for payroll taxes	(1,519)		(1,213)
Net cash provided by (used in) financing activities		66,674		(25,691)
Net cash provided by financing activities						Net cash provided by financing activities	5,496		62,444
Net decrease in cash and cash equivalents	Net decrease in cash and cash equivalents	(48,570)		(70,946)		Net decrease in cash and cash equivalents	(165,885)		(125,612)
Cash and Cash Equivalents:	Cash and Cash Equivalents:					Cash and Cash Equivalents:
Beginning	Beginning	192,825		396,435		Beginning	192,825		396,435
Ending	Ending	$	144,255	$	325,489	Ending	$	26,940	$	270,823

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	$	3,218	$	3,531	Interest	$	7,526	$	6,499
Income taxes	Income taxes	—		—		Income taxes	3,890		5,530

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, 2021 filed with the SEC on February 24, 2022. In the opinion of management, the accompanying consolidated financial statements of the Company contain all adjustments necessary to fairly present its financial position as of ~~March 31,~~June 30, 2022 and December 31, 2021, ~~and~~ net income, comprehensive income (loss) and changes in stockholders' equity for the three and six months ended June 30, 2022 and 2021, and cash flows for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021. The results for these interim periods may not be indicative of results for the entire year or for any other period.

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

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

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

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.

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

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

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

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 months ended ~~March 31,~~June 30, 2022 and 2021 are presented in the following table.


		Three Months Ended March 31,			Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except per share data)	(in thousands, except per share data)		2022			2021		(in thousands, except per share data)	2022		2021		2022		2021
Net income	Net income		$	13,184		$	11,752	Net income	$	12,667	$	13,239	$	25,851	$	24,991

Weighted average common shares outstanding	Weighted average common shares outstanding		16,561			16,475		Weighted average common shares outstanding	16,638		16,551		16,599		16,513
Weighted average effect of restricted stock units outstanding	Weighted average effect of restricted stock units outstanding		279			226		Weighted average effect of restricted stock units outstanding	145		209		218		213
Diluted weighted average common shares outstanding	Diluted weighted average common shares outstanding		16,840			16,701		Diluted weighted average common shares outstanding	16,783		16,760		16,817		16,726

Basic earnings per common share	Basic earnings per common share		$	0.80		$	0.71	Basic earnings per common share	$	0.76	$	0.80	$	1.56	$	1.51
Diluted earnings per common share	Diluted earnings per common share		$	0.78		$	0.70	Diluted earnings per common share	$	0.75	$	0.79	$	1.54	$	1.49
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		18			67		Number of anti-dilutive common stock equivalents excluded from diluted earnings per share computation	182		—		88		56

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West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

3. Securities Available for Sale

The following tables show the amortized cost, gross unrealized gains and losses, and fair value of securities available for sale, by security type as of ~~March 31,~~June 30, 2022 and December 31, 2021.


		March 31, 2022									June 30, 2022
		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	$	244,668	$	384	$	(22,016)	$	223,036	State and political subdivisions	$	244,056	$	18	$	(42,286)	$	201,788
Collateralized mortgage obligations (1)	Collateralized mortgage obligations (1)	382,410		84		(24,717)		357,777		Collateralized mortgage obligations (1)	365,620		—		(39,111)		326,509
Mortgage-backed securities (1)	Mortgage-backed securities (1)	180,495		13		(14,397)		166,111		Mortgage-backed securities (1)	176,327		—		(22,159)		154,168
Collateralized loan obligations	Collateralized loan obligations	37,907		—		(200)		37,707		Collateralized loan obligations	37,948		—		(1,150)		36,798
Corporate notes	Corporate notes	13,750		3		(472)		13,281		Corporate notes	13,750		—		(1,043)		12,707
		$	859,230	$	484	$	(61,802)	$	797,912		$	837,701	$	18	$	(105,749)	$	731,970

		December 31, 2021									December 31, 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	$	231,903	$	3,161	$	(2,617)	$	232,447	State and political subdivisions	$	231,903	$	3,161	$	(2,617)	$	232,447
Collateralized mortgage obligations (1)	Collateralized mortgage obligations (1)	325,406		1,627		(6,260)		320,773		Collateralized mortgage obligations (1)	325,406		1,627		(6,260)		320,773
Mortgage-backed securities (1)	Mortgage-backed securities (1)	157,607		167		(2,714)		155,060		Mortgage-backed securities (1)	157,607		167		(2,714)		155,060

Collateralized loan obligations	Collateralized loan obligations	37,880		59		(157)		37,782		Collateralized loan obligations	37,880		59		(157)		37,782
Corporate notes	Corporate notes	12,750		62		(52)		12,760		Corporate notes	12,750		62		(52)		12,760
		$	765,546	$	5,076	$	(11,800)	$	758,822		$	765,546	$	5,076	$	(11,800)	$	758,822

(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 ~~$286,672~~$303,597 and $295,961 as of ~~March 31,~~June 30, 2022 and December 31, 2021, 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 ~~March 31,~~June 30, 2022, by contractual maturity, are shown below. Certain securities have call features that allow the issuer to call the securities prior to maturity. Expected maturities may differ from contractual maturities for collateralized mortgage obligations and mortgage-backed securities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Therefore, collateralized mortgage obligations and mortgage-backed securities are not included in the maturity categories within the following maturity summary.


		March 31, 2022					June 30, 2022
		Amortized Cost		Fair Value			Amortized Cost		Fair Value

Due after five years through ten years	Due after five years through ten years	$	65,187	$	63,263	Due after five years through ten years	$	65,839	$	61,755
Due after ten years	Due after ten years	231,138		210,761		Due after ten years	229,915		189,538
		296,325		274,024			295,754		251,293
Collateralized mortgage obligations and mortgage-backed securities	Collateralized mortgage obligations and mortgage-backed securities	562,905		523,888		Collateralized mortgage obligations and mortgage-backed securities	541,947		480,677
		$	859,230	$	797,912		$	837,701	$	731,970

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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 months ended ~~March 31,~~June 30, 2022 and 2021 are summarized in the following table.


		Three Months Ended March 31,			Three Months Ended June 30,						Six Months Ended June 30,
			2022			2021			2022		2021		2022		2021
Proceeds from sales	Proceeds from sales		$	—		$	18,775	Proceeds from sales	$	—	$	10,186	$	—	$	28,961
Gross gains on sales	Gross gains on sales		—			162		Gross gains on sales	—		110		—		272
Gross losses on sales	Gross losses on sales		—			158		Gross losses on sales	—		74		—		232

The following tables show the fair value and gross unrealized losses, aggregated by investment type and length of time that individual securities have been in a continuous loss position, as of ~~March 31,~~June 30, 2022 and December 31, 2021.


		March 31, 2022													June 30, 2022
		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	$	164,711	$	(16,085)	$	34,130	$	(5,931)	$	198,841	$	(22,016)	State and political subdivisions	$	165,330	$	(30,959)	$	35,218	$	(11,327)	$	200,548	$	(42,286)
Collateralized mortgage obligations	Collateralized mortgage obligations	336,765		(23,465)		10,131		(1,252)		346,896		(24,717)		Collateralized mortgage obligations	305,164		(35,386)		21,345		(3,725)		326,509		(39,111)
Mortgage-backed securities	Mortgage-backed securities	125,926		(10,227)		38,310		(4,170)		164,236		(14,397)		Mortgage-backed securities	102,563		(13,822)		51,605		(8,337)		154,168		(22,159)
Collateralized loan obligations	Collateralized loan obligations	37,707		(200)		—		—		37,707		(200)		Collateralized loan obligations	36,798		(1,150)		—		—		36,798		(1,150)
Corporate notes	Corporate notes	12,278		(472)		—		—		12,278		(472)		Corporate notes	12,707		(1,043)		—		—		12,707		(1,043)
		$	677,387	$	(50,449)	$	82,571	$	(11,353)	$	759,958	$	(61,802)		$	622,562	$	(82,360)	$	108,168	$	(23,389)	$	730,730	$	(105,749)


		December 31, 2021													December 31, 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	$	121,574	$	(1,223)	$	33,894	$	(1,394)	$	155,468	$	(2,617)	State and political subdivisions	$	121,574	$	(1,223)	$	33,894	$	(1,394)	$	155,468	$	(2,617)
Collateralized mortgage obligations	Collateralized mortgage obligations	241,320		(6,149)		2,352		(111)		243,672		(6,260)		Collateralized mortgage obligations	241,320		(6,149)		2,352		(111)		243,672		(6,260)
Mortgage-backed securities	Mortgage-backed securities	140,168		(2,714)		—		—		140,168		(2,714)		Mortgage-backed securities	140,168		(2,714)		—		—		140,168		(2,714)

Collateralized loan obligations	Collateralized loan obligations	22,821		(157)		—		—		22,821		(157)		Collateralized loan obligations	22,821		(157)		—		—		22,821		(157)
Corporate notes	Corporate notes	4,198		(52)		—		—		4,198		(52)		Corporate notes	4,198		(52)		—		—		4,198		(52)
		$	530,081	$	(10,295)	$	36,246	$	(1,505)	$	566,327	$	(11,800)		$	530,081	$	(10,295)	$	36,246	$	(1,505)	$	566,327	$	(11,800)

As of ~~March 31,~~June 30, 2022, securities available for sale with unrealized losses included 75114 state and political subdivision securities, 7279 collateralized mortgage obligation securities, 2527 mortgage-backed securities, 6 collateralized loan obligation securities and 78 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 ~~March 31,~~June 30, 2022, the Company only owned collateralized loan obligations that were AAA- or AA-rated. The Company believes the unrealized losses on securities available for sale as of ~~March 31,~~June 30, 2022 were due to market interest rate conditions rather than reduced estimated cash flows. At ~~March 31,~~June 30, 2022, 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 ~~March 31,~~June 30, 2022.

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West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

4. Loans and Allowance for Loan Losses

Loans consisted of the following segments as of ~~March 31,~~June 30, 2022 and December 31, 2021.


		March 31, 2022		December 31, 2021			June 30, 2022		December 31, 2021
Commercial	Commercial	$	466,874	$	492,815	Commercial	$	475,704	$	492,815
Real estate:	Real estate:					Real estate:
Construction, land and land development	Construction, land and land development	388,424		359,258		Construction, land and land development	390,137		359,258
1-4 family residential first mortgages	1-4 family residential first mortgages	65,978		66,216		1-4 family residential first mortgages	69,829		66,216
Home equity	Home equity	9,213		8,422		Home equity	8,564		8,422
Commercial	Commercial	1,555,001		1,530,218		Commercial	1,627,150		1,530,218
Consumer and other	Consumer and other	4,068		3,797		Consumer and other	5,912		3,797
		2,489,558		2,460,726			2,577,296		2,460,726
Net unamortized fees and costs	Net unamortized fees and costs	(4,192)		(4,530)		Net unamortized fees and costs	(4,167)		(4,530)
		$	2,485,366	$	2,456,196		$	2,573,129	$	2,456,196

Included in commercial loans at ~~March 31,~~June 30, 2022 and December 31, 2021, were ~~$9,398~~$3,196 and $22,206, 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 ~~$1,170,000~~$1,220,000 and $1,190,000 were pledged as security for Federal Home Loan Bank (FHLB) advances as of ~~March 31,~~June 30, 2022 and December 31, 2021, 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 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.

1314

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West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

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 ~~$8,458~~$0 and $8,599 as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively, and were included in the nonaccrual category. There were no loan modifications considered to be TDR that occurred during the three and six months ended ~~March 31,~~June 30, 2022 and 2021. A specific reserve of $0 and $2,500 related to TDR loans was recorded at ~~March 31,~~June 30, 2022 and December 31, ~~2021.~~2021, respectively. No TDR loans that were modified within the 12 months preceding ~~March 31,~~June 30, 2022 and 2021 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.

1415

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 ~~March 31,~~June 30, 2022 and December 31, 2021.


		March 31, 2022						December 31, 2021							June 30, 2022						December 31, 2021
		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	$	—	$	—	$	—	$	—	$	—	$	—	Commercial	$	—	$	—	$	—	$	—	$	—	$	—
Real estate:	Real estate:													Real estate:
Construction, land and land development	Construction, land and land development	—		—		—		—		—		—		Construction, land and land development	—		—		—		—		—		—
1-4 family residential first mortgages	1-4 family residential first mortgages	342		342		—		349		349		—		1-4 family residential first mortgages	335		335		—		349		349		—
Home equity	Home equity	—		—		—		—		—		—		Home equity	—		—		—		—		—		—
Commercial	Commercial	—		—		—		—		—		—		Commercial	—		—		—		—		—		—
Consumer and other	Consumer and other	—		—		—		—		—		—		Consumer and other	—		—		—		—		—		—
		342		342		—		349		349		—			335		335		—		349		349		—
With an allowance recorded:	With an allowance recorded:													With an allowance recorded:
Commercial	Commercial	—		—		—		—		—		—		Commercial	—		—		—		—		—		—
Real estate:	Real estate:													Real estate:
Construction, land and land development	Construction, land and land development	—		—		—		—		—		—		Construction, land and land development	—		—		—		—		—		—
1-4 family residential first mortgages	1-4 family residential first mortgages	—		—		—		—		—		—		1-4 family residential first mortgages	—		—		—		—		—		—
Home equity	Home equity	—		—		—		—		—		—		Home equity	—		—		—		—		—		—
Commercial	Commercial	8,458		8,458		2,500		8,599		8,599		2,500		Commercial	—		—		—		8,599		8,599		2,500
Consumer and other	Consumer and other	—		—		—		—		—		—		Consumer and other	—		—		—		—		—		—
		8,458		8,458		2,500		8,599		8,599		2,500			—		—		—		8,599		8,599		2,500
Total:	Total:													Total:
Commercial	Commercial	—		—		—		—		—		—		Commercial	—		—		—		—		—		—
Real estate:	Real estate:													Real estate:
Construction, land and land development	Construction, land and land development	—		—		—		—		—		—		Construction, land and land development	—		—		—		—		—		—
1-4 family residential first mortgages	1-4 family residential first mortgages	342		342		—		349		349		—		1-4 family residential first mortgages	335		335		—		349		349		—
Home equity	Home equity	—		—		—		—		—		—		Home equity	—		—		—		—		—		—
Commercial	Commercial	8,458		8,458		2,500		8,599		8,599		2,500		Commercial	—		—		—		8,599		8,599		2,500
Consumer and other	Consumer and other	—		—		—		—		—		—		Consumer and other	—		—		—		—		—		—
		$	8,800	$	8,800	$	2,500	$	8,948	$	8,948	$	2,500		$	335	$	335	$	—	$	8,948	$	8,948	$	2,500

~~The balance of impaired loans at March 31, 2022 and December 31, 2021 was composed of 2 different borrowers.~~ The Company has no commitments to advance additional funds on any of the impaired loans.

1516

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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 months ended ~~March 31,~~June 30, 2022 and 2021.


		Three Months Ended March 31,				Three Months Ended June 30,											Six Months Ended June 30,
			2022	2021					2022						2021				2022				2021
				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			$	—		$	—		$	—	$	—	Commercial	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Real estate:	Real estate:													Real estate:
Construction, land and land development	Construction, land and land development			—			—			—		—		Construction, land and land development	—		—		—		—		—		—		—		—
1-4 family residential first mortgages	1-4 family residential first mortgages			345			—			374		—		1-4 family residential first mortgages	339		—		367		—		342		—		370		—
Home equity	Home equity			—			—			—		—		Home equity	—		—		—		—		—		—		—		—
Commercial	Commercial			—			—			—		—		Commercial	—		—		—		—		—		—		—		—
Consumer and other	Consumer and other			—			—			—		—		Consumer and other	—		—		—		—		—		—		—		—
				345			—			374		—			339		—		367		—		342		—		370		—
With an allowance recorded:	With an allowance recorded:													With an allowance recorded:
Commercial	Commercial			—			—			—		—		Commercial	—		—		—		—		—		—		—		—
Real estate:	Real estate:													Real estate:
Construction, land and land development	Construction, land and land development			—			—			—		—		Construction, land and land development	—		—		—		—		—		—		—		—
1-4 family residential first mortgages	1-4 family residential first mortgages			—			—			—		—		1-4 family residential first mortgages	—		—		—		—		—		—		—		—
Home equity	Home equity			—			—			—		—		Home equity	—		—		—		—		—		—		—		—
Commercial	Commercial			8,529			—			15,817		—		Commercial	6,310		—		14,688		—		7,271		—		15,172		—
Consumer and other	Consumer and other			—			—			—		—		Consumer and other	—		—		—		—		—		—		—		—
				8,529			—			15,817		—			6,310		—		14,688		—		7,271		—		15,172		—
Total:	Total:													Total:
Commercial	Commercial			—			—			—		—		Commercial	—		—		—		—		—		—		—		—
Real estate:	Real estate:													Real estate:
Construction, land and land development	Construction, land and land development			—			—			—		—		Construction, land and land development	—		—		—		—		—		—		—		—
1-4 family residential first mortgages	1-4 family residential first mortgages			345			—			374		—		1-4 family residential first mortgages	339		—		367		—		342		—		370		—
Home equity	Home equity			—			—			—		—		Home equity	—		—		—		—		—		—		—		—
Commercial	Commercial			8,529			—			15,817		—		Commercial	6,310		—		14,688		—		7,271		—		15,172		—
Consumer and other	Consumer and other			—			—			—		—		Consumer and other	—		—		—		—		—		—		—		—
				$	8,874		$	—		$	16,191	$	—		$	6,649	$	—	$	15,055	$	—	$	7,613	$	—	$	15,542	$	—

1617

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 ~~March 31,~~June 30, 2022 and December 31, 2021.


		March 31, 2022															June 30, 2022
		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	$	—	$	—	$	—	$	—	$	466,874	$	—	$	466,874	Commercial	$	—	$	—	$	—	$	—	$	475,704	$	—	$	475,704
Real estate:	Real estate:															Real estate:
Construction, land and	Construction, land and															Construction, land and
land development	land development	—		—		—		—		388,424		—		388,424		land development	—		—		—		—		390,137		—		390,137
1-4 family residential	1-4 family residential															1-4 family residential
first mortgages	first mortgages	—		—		—		—		65,636		342		65,978		first mortgages	—		—		—		—		69,494		335		69,829
Home equity	Home equity	—		—		—		—		9,213		—		9,213		Home equity	—		—		—		—		8,564		—		8,564
Commercial	Commercial	—		—		—		—		1,546,543		8,458		1,555,001		Commercial	—		—		—		—		1,627,150		—		1,627,150
Consumer and other	Consumer and other	—		—		—		—		4,068		—		4,068		Consumer and other	—		—		—		—		5,912		—		5,912
Total	Total	$	—	$	—	$	—	$	—	$	2,480,758	$	8,800	$	2,489,558	Total	$	—	$	—	$	—	$	—	$	2,576,961	$	335	$	2,577,296


	December 31, 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
Commercial	$	—	$	—	$	—	$	—	$	492,815	$	—	$	492,815
Real estate:
Construction, land and
land development	—		—		—		—		359,258		—		359,258
1-4 family residential
first mortgages	—		—		—		—		65,867		349		66,216
Home equity	—		—		—		—		8,422		—		8,422
Commercial	—		—		—		—		1,521,619		8,599		1,530,218
Consumer and other	—		—		—		—		3,797		—		3,797
Total	$	—	$	—	$	—	$	—	$	2,451,778	$	8,948	$	2,460,726

1718

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 ~~March 31,~~June 30, 2022 and December 31, 2021.


		March 31, 2022											June 30, 2022
		Pass		Watch		Substandard		Doubtful		Total			Pass		Watch		Substandard		Doubtful		Total
Commercial	Commercial	$	466,615	$	259	$	—	$	—	$	466,874	Commercial	$	475,704	$	—	$	—	$	—	$	475,704
Real estate:	Real estate:											Real estate:
Construction, land and land development	Construction, land and land development	388,370		54		—		—		388,424		Construction, land and land development	390,085		52		—		—		390,137
1-4 family residential first mortgages	1-4 family residential first mortgages	65,367		154		457		—		65,978		1-4 family residential first mortgages	69,243		152		434		—		69,829
Home equity	Home equity	9,213		—		—		—		9,213		Home equity	8,564		—		—		—		8,564
Commercial	Commercial	1,486,246		60,297		8,458		—		1,555,001		Commercial	1,581,240		45,910		—		—		1,627,150
Consumer and other	Consumer and other	4,068		—		—		—		4,068		Consumer and other	5,912		—		—		—		5,912
Total	Total	$	2,419,879	$	60,764	$	8,915	$	—	$	2,489,558	Total	$	2,530,748	$	46,114	$	434	$	—	$	2,577,296


	December 31, 2021
	Pass		Watch		Substandard		Doubtful		Total
Commercial	$	492,545	$	270	$	—	$	—	$	492,815
Real estate:
Construction, land and land development	359,203		55		—		—		359,258
1-4 family residential first mortgages	65,596		156		464		—		66,216
Home equity	8,422		—		—		—		8,422
Commercial	1,458,075		63,544		8,599		—		1,530,218
Consumer and other	3,797		—		—		—		3,797
Total	$	2,387,638	$	64,025	$	9,063	$	—	$	2,460,726

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.

1819

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~~approved 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.

1920

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 months ended ~~March 31,~~June 30, 2022 and 2021.


		Three Months Ended March 31, 2022															Three Months Ended June 30, 2022
				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	$	4,776	$	3,646	$	339	$	91	$	19,466	$	46	$	28,364	Beginning balance	$	4,708	$	3,998	$	348	$	101	$	18,417	$	51	$	27,623
Charge-offs	Charge-offs	—		—		—		—		—		—		—		Charge-offs	—		—		—		—		(451)		—		(451)
Recoveries	Recoveries	4		—		1		1		3		—		9		Recoveries	8		—		—		1		3		—		12
Provision (1)	Provision (1)	(72)		352		8		9		(1,052)		5		(750)		Provision (1)	(55)		45		25		(7)		(1,780)		22		(1,750)
Ending balance	Ending balance	$	4,708	$	3,998	$	348	$	101	$	18,417	$	51	$	27,623	Ending balance	$	4,661	$	4,043	$	373	$	95	$	16,189	$	73	$	25,434

		Three Months Ended March 31, 2021															Three Months Ended June 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	$	4,618	$	2,743	$	430	$	90	$	22,057	$	70	$	30,008
Charge-offs	Charge-offs	—		—		—		—		—		—		—		Charge-offs	—		—		—		—		—		—		—
Recoveries	Recoveries	67		—		1		1		3		—		72		Recoveries	30		—		—		1		3		—		34
Provision (1)	Provision (1)	(167)		109		69		(25)		519		(5)		500		Provision (1)	(184)		207		(71)		—		(1,931)		(21)		(2,000)
Ending balance	Ending balance	$	4,618	$	2,743	$	430	$	90	$	22,057	$	70	$	30,008	Ending balance	$	4,464	$	2,950	$	359	$	91	$	20,129	$	49	$	28,042

																	Six Months Ended June 30, 2022
																			Real Estate
																	Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Beginning balance																Beginning balance	$	4,776	$	3,646	$	339	$	91	$	19,466	$	46	$	28,364
Charge-offs																Charge-offs	—		—		—		—		(451)		—		(451)
Recoveries																Recoveries	12		—		1		2		6		—		21
Provision (1)																Provision (1)	(127)		397		33		2		(2,832)		27		(2,500)
Ending balance																Ending balance	$	4,661	$	4,043	$	373	$	95	$	16,189	$	73	$	25,434

																	Six Months Ended June 30, 2021
																			Real Estate
																	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
Charge-offs																Charge-offs	—		—		—		—		—		—		—
Recoveries																Recoveries	97		—		1		2		6		—		106
Provision (1)																Provision (1)	(351)		316		(2)		(25)		(1,412)		(26)		(1,500)
Ending balance																Ending balance	$	4,464	$	2,950	$	359	$	91	$	20,129	$	49	$	28,042

(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.

2021

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 ~~March 31,~~June 30, 2022 and December 31, 2021.


		March 31, 2022															June 30, 2022
				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	$	—	$	—	$	—	$	—	$	2,500	$	—	$	2,500	Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment	Collectively evaluated for impairment	4,708		3,998		348		101		15,917		51		25,123		Collectively evaluated for impairment	4,661		4,043		373		95		16,189		73		25,434
Total	Total	$	4,708	$	3,998	$	348	$	101	$	18,417	$	51	$	27,623	Total	$	4,661	$	4,043	$	373	$	95	$	16,189	$	73	$	25,434

		December 31, 2021															December 31, 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	$	—	$	—	$	—	$	—	$	2,500	$	—	$	2,500	Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	2,500	$	—	$	2,500
Collectively evaluated for impairment	Collectively evaluated for impairment	4,776		3,646		339		91		16,966		46		25,864		Collectively evaluated for impairment	4,776		3,646		339		91		16,966		46		25,864
Total	Total	$	4,776	$	3,646	$	339	$	91	$	19,466	$	46	$	28,364	Total	$	4,776	$	3,646	$	339	$	91	$	19,466	$	46	$	28,364

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 ~~March 31,~~June 30, 2022 and December 31, 2021.


		March 31, 2022															June 30, 2022
				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	$	—	$	—	$	342	$	—	$	8,458	$	—	$	8,800	Individually evaluated for impairment	$	—	$	—	$	335	$	—	$	—	$	—	$	335
Collectively evaluated for impairment	Collectively evaluated for impairment	466,874		388,424		65,636		9,213		1,546,543		4,068		2,480,758		Collectively evaluated for impairment	475,704		390,137		69,494		8,564		1,627,150		5,912		2,576,961
Total	Total	$	466,874	$	388,424	$	65,978	$	9,213	$	1,555,001	$	4,068	$	2,489,558	Total	$	475,704	$	390,137	$	69,829	$	8,564	$	1,627,150	$	5,912	$	2,577,296


	December 31, 2021
			Real Estate
	Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Ending balance:
Individually evaluated for impairment	$	—	$	—	$	349	$	—	$	8,599	$	—	$	8,948
Collectively evaluated for impairment	492,815		359,258		65,867		8,422		1,521,619		3,797		2,451,778
Total	$	492,815	$	359,258	$	66,216	$	8,422	$	1,530,218	$	3,797	$	2,460,726

2122

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 at ~~March 31,~~June 30, 2022 and December 31, 2021. As of ~~March 31,~~June 30, 2022, 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 ~~March 31,~~June 30, 2022, 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 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 ~~March 31,~~June 30, 2022 and December 31, 2021.


		March 31, 2022			December 31, 2021				June 30, 2022			December 31, 2021
Cash Flow Hedges:	Cash Flow Hedges:							Cash Flow Hedges:
Gross notional amount	Gross notional amount	$	255,000		$	255,000		Gross notional amount	$	255,000		$	255,000
Fair value in other assets	Fair value in other assets	4,065			—			Fair value in other assets	8,772			—
Fair value in other liabilities	Fair value in other liabilities	—			(7,517)			Fair value in other liabilities	—			(7,517)
Weighted-average floating rate received	Weighted-average floating rate received	0.66		%	0.39		%	Weighted-average floating rate received	1.70		%	0.39		%
Weighted-average fixed rate paid	Weighted-average fixed rate paid	2.09		%	2.09		%	Weighted-average fixed rate paid	2.09		%	2.09		%
Weighted-average maturity in years	Weighted-average maturity in years	3.9			4.2			Weighted-average maturity in years	3.7			4.2

Non-Hedging Derivatives:	Non-Hedging Derivatives:							Non-Hedging Derivatives:
Gross notional amount	Gross notional amount	$	170,992		$	172,008		Gross notional amount	$	170,001		$	172,008
Fair value in other assets	Fair value in other assets	8,396			3,887			Fair value in other assets	11,241			3,887
Fair value in other liabilities	Fair value in other liabilities	(8,396)			(3,887)			Fair value in other liabilities	(11,241)			(3,887)

2223

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 three and six months ended ~~March 31,~~June 30, 2022 and 2021.


		Three Months Ended March 31,			Three Months Ended June 30,						Six Months Ended June 30,
			2022			2021			2022			2021		2022		2021
Pre-tax gain recognized in other comprehensive income			$	10,536		$	7,763
Pre-tax gain (loss) recognized in other comprehensive income								Pre-tax gain (loss) recognized in other comprehensive income	$	4,066		$	(2,321)	$	14,602	$	5,442
Reclassification from AOCI into income:	Reclassification from AOCI into income:							Reclassification from AOCI into income:
Increase in interest expense	Increase in interest expense		$	(1,045)		$	(1,370)	Increase in interest expense	$	(642)		$	(1,098)	$	(1,687)	$	(2,468)
Decrease in noninterest income, swap termination fees	Decrease in noninterest income, swap termination fees		—			(3,600)		Decrease in noninterest income, swap termination fees	—			—		—		(3,600)

The Company estimates there will be approximately ~~$3,651~~$992 reclassified from accumulated other comprehensive income to interest expense through the 12 months ending ~~March 31,~~June 30, 2023 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 ~~March 31,~~June 30, 2022 and December 31, 2021, the Company pledged $0 and $4,500, respectively, of collateral to the counterparties in the form of cash on deposit with third parties. As of ~~March 31,~~June 30, 2022 and December 31, 2021, the Company's counterparties pledged ~~$12,580~~$22,060 and $0, respectively, of collateral to the Company in the form of cash on deposit. The interest rate swap product with the borrower is cross-collateralized with the underlying loan and therefore there is no pledged cash collateral under swap contracts with customers.

~~6. Income Taxes~~

~~Net deferred tax assets consisted of the following as of March 31, 2022 and December 31, 2021.~~

March 31, 2022 December 31, 2021
Deferred tax assets:
Allowance for loan losses $ 6,988 $ 7,176
Net unrealized losses on securities available for sale 15,514 1,701
Net unrealized losses on interest rate swaps — 1,903
Lease liabilities 1,423 1,502
Accrued expenses 235 395
Restricted stock unit compensation 465 821
State net operating loss carryforward 1,296 1,276
Other 151 139
26,072 14,913
Deferred tax liabilities:
Right-of-use assets 1,372 1,450
Net deferred loan fees and costs 250 247
Net unrealized gains on interest rate swaps 1,027 —
Premises and equipment 926 809
Other 324 312
3,899 2,818
Net deferred tax assets before valuation allowance 22,173 12,095
Valuation allowance (1,296) (1,276)
Net deferred tax assets $ 20,877 $ 10,819

2324

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

6. Income Taxes

Net deferred tax assets consisted of the following as of June 30, 2022 and December 31, 2021.


	June 30, 2022		December 31, 2021
Deferred tax assets:
Allowance for loan losses	$	6,206	$	7,176
Net unrealized losses on securities available for sale	26,221		1,701
Net unrealized losses on interest rate swaps	—		1,903
Lease liabilities	1,295		1,502
Accrued expenses	297		395
Restricted stock unit compensation	610		821
State net operating loss carryforward	1,333		1,276

Other	149		139
	36,111		14,913
Deferred tax liabilities:
Right-of-use assets	1,248		1,450
Net deferred loan fees and costs	243		247

Net unrealized gains on interest rate swaps	2,148		—
Premises and equipment	940		809
Other	338		312
	4,917		2,818
Net deferred tax assets before valuation allowance	31,194		12,095
Valuation allowance	(1,333)		(1,276)
Net deferred tax assets	$	29,861	$	10,819

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 2022 and thereafter.

In the second quarter of 2022, the Company's income tax expense included a one-time increase in state income tax expense related to the June 2022 enactment of changes in the Iowa bank franchise tax rates. This legislation reduces the Iowa bank franchise tax rate applied to apportioned income for 2023 and future years. This future reduction in the state tax rate required the Company to reduce net deferred tax assets as of June 30, 2022 by $671 and in turn caused the one-time increase in 2022 tax expense. The effective tax rate for the three and six months ended June 30, 2022 was 25.49 percent and 22.38 percent, respectively. Excluding this one-time state tax expense, the effective tax rates for the three and six months ended June 30, 2022 would have been 21.55 percent and 20.37 percent, respectively.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

7. Accumulated Other Comprehensive Income (Loss)

The following table summarizes the changes in the balances of each component of accumulated other comprehensive income (loss), net of tax, for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021.


		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, 2021	Balance, December 31, 2021	$	(5,021)	$	(5,616)	$	(10,637)	Balance, December 31, 2021	$	(5,021)	$	(5,616)	$	(10,637)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	(40,782)		7,870		(32,912)		Other comprehensive income (loss) before reclassifications	(73,959)		10,908		(63,051)
Amounts reclassified from accumulated other comprehensive income	Amounts reclassified from accumulated other comprehensive income	—		781		781		Amounts reclassified from accumulated other comprehensive income	—		1,260		1,260
Net current period other comprehensive income (loss)	Net current period other comprehensive income (loss)	(40,782)		8,651		(32,131)		Net current period other comprehensive income (loss)	(73,959)		12,168		(61,791)
Balance, March 31, 2022		$	(45,803)	$	3,035	$	(42,768)
Balance, June 30, 2022								Balance, June 30, 2022	$	(78,980)	$	6,552	$	(72,428)

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	(6,237)		5,807		(430)		Other comprehensive income (loss) before reclassifications	(3,209)		4,072		863
Amounts reclassified from accumulated other comprehensive income	Amounts reclassified from accumulated other comprehensive income	(3)		3,718		3,715		Amounts reclassified from accumulated other comprehensive income	(30)		4,538		4,508
Net current period other comprehensive income (loss)	Net current period other comprehensive income (loss)	(6,240)		9,525		3,285		Net current period other comprehensive income (loss)	(3,239)		8,610		5,371
Balance, March 31, 2021		$	(246)	$	(8,315)	$	(8,561)
Balance, June 30, 2021								Balance, June 30, 2021	$	2,755	$	(9,230)	$	(6,475)

8. Commitments and Contingencies

Financial instruments with off-balance-sheet risk: The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations that it uses for on-balance-sheet instruments. The Company's commitments consisted of the following amounts as of ~~March 31,~~June 30, 2022 and December 31, 2021.


		March 31, 2022		December 31, 2021			June 30, 2022		December 31, 2021
Commitments to fund real estate construction loans	Commitments to fund real estate construction loans	$	290,261	$	294,580	Commitments to fund real estate construction loans	$	295,076	$	294,580
Other commitments to extend credit	Other commitments to extend credit	735,200		585,678		Other commitments to extend credit	699,040		585,678
Standby letters of credit	Standby letters of credit	17,130		17,391		Standby letters of credit	19,350		17,391
		$	1,042,591	$	897,649		$	1,013,466	$	897,649

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 ~~$26,676~~$25,271 and $31,552 at ~~March 31,~~June 30, 2022 and December 31, 2021, respectively.

2426

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 ~~$3,947~~$3,720 and $3,986 as of ~~March 31,~~June 30, 2022 and December 31, 2021, 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 no transfers between levels of the fair value hierarchy during the ~~three~~six months ended ~~March 31,~~June 30, 2022.

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.

2527

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 ~~March 31,~~June 30, 2022 and December 31, 2021.


		March 31, 2022									June 30, 2022
		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	$	223,036	$	—	$	223,036	$	—	State and political subdivisions	$	201,788	$	—	$	201,788	$	—
Collateralized mortgage obligations	Collateralized mortgage obligations	357,777		—		357,777		—		Collateralized mortgage obligations	326,509		—		326,509		—
Mortgage-backed securities	Mortgage-backed securities	166,111		—		166,111		—		Mortgage-backed securities	154,168		—		154,168		—
Collateralized loan obligations	Collateralized loan obligations	37,707		—		37,707		—		Collateralized loan obligations	36,798		—		36,798		—
Corporate notes	Corporate notes	13,281		—		13,281		—		Corporate notes	12,707		—		12,707		—
Derivative instruments, interest rate swaps	Derivative instruments, interest rate swaps	12,461		—		12,461		—		Derivative instruments, interest rate swaps	20,013		—		20,013		—

Financial liabilities:	Financial liabilities:									Financial liabilities:
Derivative instruments, interest rate swaps	Derivative instruments, interest rate swaps	$	8,396	$	—	$	8,396	$	—	Derivative instruments, interest rate swaps	$	11,241	$	—	$	11,241	$	—


	December 31, 2021
	Total		Level 1		Level 2		Level 3
Financial assets:
Securities available for sale:
State and political subdivisions	$	232,447	$	—	$	232,447	$	—
Collateralized mortgage obligations	320,773		—		320,773		—
Mortgage-backed securities	155,060		—		155,060		—

Collateralized loan obligations	37,782		—		37,782		—
Corporate notes	12,760		—		12,760		—
Derivative instruments, interest rate swaps	3,887		—		3,887		—

Financial liabilities:
Derivative instruments, interest rate swaps	$	11,404	$	—	$	11,404	$	—

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 ~~$5,958 and~~ $6,099 for which a fair value adjustment was recorded were classified as Level 3 as of ~~March 31, 2022 and~~ December 31, ~~2021, respectively. As of March 31, 2022, impaired loans with a carrying value of $8,458 were reduced by a specific reserve of $2,500, resulting in a reported fair value of $5,958.~~2021. As of December 31, 2021, impaired loans with a carrying value of $8,599 were reduced by a specific reserve of $2,500, resulting in a reported fair value of $6,099. As of June 30, 2022, there were no loans for which a fair value adjustment was recorded.

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.

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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)

~~March 31,~~June 30, 2022

Impaired loans

~~Appraisal of collateral~~—

~~Appraisal adjustment~~—

~~50%, including selling costs~~—

December 31, 2021

Impaired loans

Appraisal of collateral

Appraisal adjustment

50%, including 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 ~~March 31,~~June 30, 2022 and December 31, 2021.


		March 31, 2022											June 30, 2022
		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	$	21,896	$	21,896	$	21,896	$	—	$	—	Cash and due from banks	$	26,174	$	26,174	$	26,174	$	—	$	—
Federal funds sold	Federal funds sold	122,359		122,359		122,359		—		—		Federal funds sold	766		766		766		—		—
Securities available for sale	Securities available for sale	797,912		797,912		—		797,912		—		Securities available for sale	731,970		731,970		—		731,970		—
Federal Home Loan Bank stock	Federal Home Loan Bank stock	10,269		10,269		10,269		—		—		Federal Home Loan Bank stock	15,532		15,532		15,532		—		—
Loans, net	Loans, net	2,457,743		2,399,078		—		2,393,120		5,958		Loans, net	2,547,695		2,461,582		—		2,461,582		—
Accrued interest receivable	Accrued interest receivable	10,083		10,083		10,083		—		—		Accrued interest receivable	9,363		9,363		9,363		—		—
Interest rate swaps	Interest rate swaps	12,461		12,461		—		12,461		—		Interest rate swaps	20,013		20,013		—		20,013		—
Financial liabilities:	Financial liabilities:											Financial liabilities:
Deposits	Deposits	$	3,091,252	$	3,091,479	$	—	$	3,091,479	$	—	Deposits	$	2,842,451	$	2,843,224	$	—	$	2,843,224	$	—
Federal funds purchased	Federal funds purchased	—		—		—		—		—		Federal funds purchased	133,000		133,000		133,000		—		—
Subordinated notes, net	Subordinated notes, net	20,468		15,788		—		15,788		—		Subordinated notes, net	79,265		68,229		—		68,229		—
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	51,486		51,486		—		51,486		—		Long-term debt	51,486		51,486		—		51,486		—
Accrued interest payable	Accrued interest payable	588		588		588		—		—		Accrued interest payable	938		938		938		—		—
Interest rate swaps	Interest rate swaps	8,396		8,396		—		8,396		—		Interest rate swaps	11,241		11,241		—		11,241		—
Off-balance sheet financial instruments:	Off-balance sheet financial instruments:											Off-balance sheet financial instruments:
Commitments to extend credit	Commitments to extend credit	—		—		—		—		—		Commitments to extend credit	—		—		—		—		—
Standby letters of credit	Standby letters of credit	—		—		—		—		—		Standby letters of credit	—		—		—		—		—

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West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)


	December 31, 2021
	Carrying Amount		Approximate Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and due from banks	$	17,555	$	17,555	$	17,555	$	—	$	—
Federal funds sold	175,270		175,270		175,270		—		—
Securities available for sale	758,822		758,822		—		758,822		—
Federal Home Loan Bank stock	9,965		9,965		9,965		—		—
Loans, net	2,427,832		2,453,081		—		2,446,982		6,099
Accrued interest receivable	8,890		8,890		8,890		—		—
Interest rate swaps	3,887		3,887		—		3,887		—
Financial liabilities:
Deposits	$	3,016,005	$	3,016,305	$	—	$	3,016,305	$	—
Federal funds purchased	2,880		2,880		2,880		—		—
Subordinated notes, net	20,465		17,122		—		17,122		—
Federal Home Loan Bank advances	125,000		125,000		—		125,000		—
Long-term debt	51,521		51,521		—		51,521		—
Accrued interest payable	519		519		519		—		—
Interest rate swaps	11,404		11,404		—		11,404		—
Off-balance sheet financial instruments:
Commitments to extend credit	—		—		—		—		—
Standby letters of credit	—		—		—		—		—

10. Subordinated Notes

On June 14, 2022, the Company issued $60,000 of subordinated notes (the Notes). The Notes initially bear interest at 5.25 percent per annum, with interest payable semi-annually for the first five years of the Notes. Beginning June 15, 2027, the interest rate will reset quarterly to a floating rate per annum that is expected to be three-month term Secured Overnight Financing Rate (SOFR) plus 2.41 percent with payments due quarterly. The Company may redeem the Notes, in whole or in part, on and after June 15, 2027 at a price equal to 100 percent of the principal amount of the Notes being redeemed plus accrued and unpaid interest. The Notes will mature on June 15, 2032 if they are not earlier redeemed. Proceeds from this debt issuance were used to make a $58,650 capital injection into the Company's subsidiary, West Bank.

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 continuing effects of the COVID-19 pandemic, including its potential effects on the economic environment, our customers and our operations, including due to supply chain disruptions, 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, including from non-bank competitors such as "fintech" companies; pricing pressures on loans and deposits; changes in credit and other risks posed by the Company’s loan 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; changes in local, national and international economic conditions, including rising rates of inflation; changes in legal and regulatory requirements, limitations and costs; changes in customers’ acceptance of the Company’s products and services; cyber-attacks; unexpected outcomes of existing or new litigation involving the Company; the monetary, trade and other regulatory policies of the U.S. government, including recent and anticipated interest rate increases; acts of war or terrorism, including the Russian invasion of Ukraine, widespread disease or pandemics, such as the COVID-19 pandemic, or other adverse external events; developments and uncertainty related to the future use and availability of some reference rates, such as the London Interbank Offered Rate, as well as other alternative reference rates; changes to U.S. tax laws, regulations and guidance; ~~liquidity risk due to excess liquidity at the Company's bank subsidiary;~~ talent and labor shortages; 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, 2021, as filed with the SEC on February 24, 2022. There have been no significant changes in the critical accounting policies or the assumptions and judgments utilized in applying these policies since December 31, 2021.

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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 March 31,													Three Months Ended June 30,										Six Months Ended June 30,
								2022					2021						2022					2021						2022					2021
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)							$	23,828				$	23,121				Net interest income (GAAP)	$	24,239				$	22,850					$	48,067				$	45,971
Tax-equivalent adjustment (1)	Tax-equivalent adjustment (1)							329					229					Tax-equivalent adjustment (1)	326					270						655					499
Net interest income on a FTE basis (non-GAAP)	Net interest income on a FTE basis (non-GAAP)							24,157					23,350					Net interest income on a FTE basis (non-GAAP)	24,565					23,120						48,722					46,470
Average interest-earning assets	Average interest-earning assets							3,432,114					2,979,710					Average interest-earning assets	3,362,313					3,102,649						3,397,021					3,041,519
Net interest margin on a FTE basis (non-GAAP)	Net interest margin on a FTE basis (non-GAAP)							2.85		%			3.17		%			Net interest margin on a FTE basis (non-GAAP)	2.93		%			2.99		%				2.89		%			3.08		%

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)							$	24,157				$	23,350				Net interest income on a FTE basis (non-GAAP)	$	24,565				$	23,120					$	48,722				$	46,470
Noninterest income	Noninterest income							2,389					2,465					Noninterest income	2,278					2,515						4,667					4,980
Adjustment for realized securities gains, net	Adjustment for realized securities gains, net							—					(4)					Adjustment for realized securities gains, net	—					(36)						—					(40)
Adjustment for losses on disposal of premises and equipment, net	Adjustment for losses on disposal of premises and equipment, net							18					24					Adjustment for losses on disposal of premises and equipment, net	9					5						27					29
Adjusted income	Adjusted income							26,564					25,835					Adjusted income	26,852					25,604						53,416					51,439
Noninterest expense	Noninterest expense							10,662					10,271					Noninterest expense	11,266					10,526						21,928					20,797
Efficiency ratio on an adjusted and FTE basis (non-GAAP) (2)	Efficiency ratio on an adjusted and FTE basis (non-GAAP) (2)							40.14		%			39.75		%			Efficiency ratio on an adjusted and FTE basis (non-GAAP) (2)	41.96		%			41.11		%				41.05		%			40.43		%

				March 31, 2022				December 31, 2021					March 31, 2021											June 30, 2022						December 31, 2021					June 30, 2021
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:
Loans outstanding (GAAP)	Loans outstanding (GAAP)			$	2,485,366			$	2,456,196				$	2,303,999				Loans outstanding (GAAP)						$	2,573,129					$	2,456,196				$	2,309,527
Less: PPP loans	Less: PPP loans			(9,398)				(22,206)					(151,122)					Less: PPP loans						(3,196)						(22,206)					(84,573)
Loans, net of PPP loans (non-GAAP)	Loans, net of PPP loans (non-GAAP)			2,475,968				2,433,990					2,152,877					Loans, net of PPP loans (non-GAAP)						2,569,933						2,433,990					2,224,954
Allowance for loan losses	Allowance for loan losses			27,623				28,364					30,008					Allowance for loan losses						25,434						28,364					28,042
Allowance for loan losses ratio, excluding PPP loans (non-GAAP) (3)	Allowance for loan losses ratio, excluding PPP loans (non-GAAP) (3)	1.12	%			1.17	%				1.39	%				Allowance for loan losses ratio, excluding PPP loans (non-GAAP) (3)						0.99	%					1.17	%				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.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

(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.

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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 months ended ~~March 31,~~June 30, 2022 are compared to the results for the same ~~period~~periods in 2021, and the consolidated financial condition of the Company as of ~~March 31,~~June 30, 2022 is compared to that as of December 31, 2021. 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, 2021, filed with the SEC on February 24, 2022.

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

Net income for the three months ended ~~March 31,~~June 30, 2022 was ~~$13,184,~~$12,667, or ~~$0.78~~$0.75 per diluted common share, compared to ~~$11,752,~~$13,239, or ~~$0.70~~$0.79 per diluted common share, for the three months ended ~~March 31,~~June 30, 2021. The Company's annualized return on average assets and return on average equity for the three months ended ~~March 31,~~June 30, 2022 were ~~1.51~~1.45 percent and ~~20.96~~22.81 percent, respectively, compared to ~~1.53~~1.65 percent and ~~20.77~~22.20 percent, respectively, for the three months ended ~~March 31,~~June 30, 2021.

The ~~increase~~decrease in net income for the three months ended ~~March 31,~~June 30, 2022 compared to the same period in 2021 was primarily due to a ~~decrease~~one-time increase in state income tax expense, a smaller negative provision for loan losses and an increase in salaries and employee benefits, partially offset by an increase in net interest income.

Net interest income for the three months ended June 30, 2022 grew $1,389, or 6.1 percent, compared to the three months ended June 30, 2021. The increase in net interest income was primarily due to the increase in interest income on securities and loans, partially offset by an increase in interest expense on deposits and borrowed funds. The Company recorded a negative provision for loan losses of $1,750 during the three months ended June 30, 2022, compared to a negative provision of $2,000 for the three months ended June 30, 2021. The negative provision recorded in 2021 was due to improvements in economic conditions and removal of pandemic-related restrictions for businesses, in addition to lack of loan losses for the Company since the onset of the COVID-19 pandemic. The negative provision in 2022 was due primarily to the reversal of a specific reserve on an impaired loan.

Noninterest expense increased $740 during the three months ended June 30, 2022 compared to the three months ended June 30, 2021, primarily due to an increase in salaries and employee benefits expense. Income tax expense increased due to the revaluation of net deferred tax assets as a result of enacted changes in Iowa bank franchise tax rates.

Net income for the six months ended June 30, 2022 was $25,851, or $1.54 per diluted common share, compared to $24,991, or $1.49 per diluted common share, for the six months ended June 30, 2021. The Company's annualized return on average assets and return on average equity for the six months ended June 30, 2022 were 1.48 percent and 21.83 percent, respectively, compared to 1.59 percent and 21.50 percent, respectively, for the six months ended June 30, 2021.

The increase in net income for the six months ended June 30, 2022 compared to the same period in 2021 was primarily due to a larger negative provision for loan losses and an increase in net interest income, partially offset by an increase in noninterest expense.

Net interest income for the ~~three~~six months ended ~~March 31,~~June 30, 2022 grew ~~$707,~~$2,096, or ~~3.1~~4.6 percent, compared to the ~~three~~six months ended ~~March 31,~~June 30, 2021. The increase in net interest income was primarily due to the increase in interest income on securities and loans and the decrease in interest expense on FHLB advances, partially offset by ~~a decrease in interest income on loans and~~an increase in interest expense on deposits and ~~long-term debt.~~other borrowings. The Company recorded a negative provision for loan losses of ~~$750~~$2,500 during the ~~three~~six months ended ~~March 31,~~June 30, 2022, compared to a negative provision of ~~$500~~$1,500 for the ~~three~~six months ended ~~March 31,~~June 30, 2021. The negative provision in 2021 was due to ~~uncertainty surrounding~~the improvement in economic conditions ~~as a result~~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 and an increase in loan balances.~~pandemic. The negative provision in 2022 was due to the reversal of a specific reserve on an impaired loan and the sustained performance of loans after the expiration of COVID modifications and sustained improvement in classified loans.

Noninterest expense increased ~~$391~~$1,131 during the ~~three~~six months ended ~~March 31,~~June 30, 2022 compared to the ~~three~~six months ended ~~March 31,~~June 30, 2021, primarily due to an increase in salaries and employee benefits expense, partially offset by a decrease in FDIC insurance expense.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Total loans outstanding increased ~~$29,170,~~$116,933, or ~~1.2~~4.8 percent, during the first ~~three~~six months of 2022. Excluding the impact of PPP loan activity, total loans outstanding increased ~~$41,978,~~$135,944, or ~~1.7~~5.6 percent, during the first ~~three~~six months of 2022. As of ~~March 31,~~June 30, 2022, the allowance for loan losses was ~~1.11~~0.99 percent of total outstanding loans, compared to 1.15 percent as of December 31, 2021. At ~~March 31,~~June 30, 2022, the allowance for loan losses was ~~1.12~~0.99 percent of total outstanding loans, excluding ~~$9,398~~$3,196 of PPP loans (a non-GAAP financial measure), which are 100 percent guaranteed by the SBA, compared to 1.17 percent of outstanding loans, excluding $22,206 of PPP loans, as of December 31, 2021. Management believed the allowance for loan losses at ~~March 31,~~June 30, 2022 was adequate to absorb any losses inherent in the loan portfolio as of that date.

31On June 14, 2022, the Company issued $60,000 of subordinated notes. The net proceeds were used to make a capital injection into West Bank.

~~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 2022 consists of 2019 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, Mercantile Bank Corporation, MidWestOne Financial Group, Inc., Nicolet Bankshares, Inc., Peoples Bancorp, Inc., and Southern Missouri Bancorp, Inc. Level One Bancorp, Inc., previously included in the peer group, was acquired in April 2022. The Company is in the middle of the group in terms of asset size. The Company's goal is to perform at or near the top of this peer group relative to what we consider to be three key metrics: return on average equity, efficiency ratio and nonperforming assets to total assets. We believe these measures encompass the factors that define the performance of a community bank. Company and peer results for the key financial performance measures are summarized below.


		West Bancorporation, Inc.		Peer Group Range(2)		West Bancorporation, Inc.		Peer Group Range(2)
		As of and for the three months ended March 31, 2022	As of and for the year ended December 31, 2021	As of and for the year ended December 31, 2021		As of and for the six months ended June 30, 2022	As of and for the three months ended March 31, 2022	As of and for the three months ended March 31, 2022
Return on average equity	Return on average equity	20.96%	20.33%	7.24% - 17.69%	Return on average equity	21.83%	20.96%	4.88% - 15.16%
Efficiency ratio(1)	Efficiency ratio(1)	40.14%	40.91%	43.01% - 64.81%	Efficiency ratio(1)	41.05%	40.14%	43.69% - 67.47%
Nonperforming assets to total assets	Nonperforming assets to total assets	0.25%	0.26%	0.17% - 1.32%	Nonperforming assets to total assets	0.01%	0.25%	0.13% - 1.13%

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

(2) Latest data available.

At its meeting on ~~April~~July 27, 2022, the Company's Board of Directors declared a quarterly cash dividend of $0.25 per common share. The dividend is payable on ~~May 25,~~August 24, 2022, to stockholders of record on ~~May 11,~~August 10, 2022.

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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 months ended ~~March 31,~~June 30, 2022 compared with the same ~~period~~periods in 2021.


		Three Months Ended March 31,							Three Months Ended June 30,															Six Months Ended June 30,
					2022					2021					Change			Change %			2022			2021			Change			Change %				2022					2021					Change			Change %
Net income	Net income				$	13,184				$	11,752				$	1,432		12.19	%	Net income	$	12,667		$	13,239		$	(572)		(4.32)	%			$	25,851				$	24,991				$	860		3.44	%
Average assets	Average assets				3,544,564					3,109,852					434,712			13.98	%	Average assets	3,503,686			3,224,318			279,368			8.66	%			3,524,012					3,167,401					356,611			11.26	%
Average stockholders' equity	Average stockholders' equity				255,130					229,473					25,657			11.18	%	Average stockholders' equity	222,731			239,218			(16,487)			(6.89)	%			238,841					234,372					4,469			1.91	%

Return on average assets	Return on average assets				1.51		%			1.53		%			(0.02)		%			Return on average assets	1.45		%	1.65		%	(0.20)		%					1.48		%			1.59		%			(0.11)		%
Return on average equity	Return on average equity				20.96		%			20.77		%			0.19		%			Return on average equity	22.81		%	22.20		%	0.61		%					21.83		%			21.50		%			0.33		%
Net interest margin (1)	Net interest margin (1)				2.85		%			3.17		%			(0.32)		%			Net interest margin (1)	2.93		%	2.99		%	(0.06)		%					2.89		%			3.08		%			(0.19)		%
Efficiency ratio (1) (2)	Efficiency ratio (1) (2)				40.14		%			39.75		%			0.39		%			Efficiency ratio (1) (2)	41.96		%	41.11		%	0.85		%					41.05		%			40.43		%			0.62		%
Dividend payout ratio	Dividend payout ratio				31.39		%			30.83		%			0.56		%			Dividend payout ratio	32.84		%	30.01		%	2.83		%					32.10		%			30.40		%			1.70		%
Average equity to average assets ratio	Average equity to average assets ratio				7.20		%			7.38		%			(0.18)		%			Average equity to average assets ratio	6.36		%	7.42		%	(1.06)		%					6.78		%			7.40		%			(0.62)		%

					As of March 31,																													As of June 30,
					2022					2021					Change																			2022					2021					Change
Nonperforming assets to total assets (2)	Nonperforming assets to total assets (2)				0.25		%			0.78		%			(0.53)		%			Nonperforming assets to total assets (2)														0.01		%			0.45		%			(0.44)		%
Equity to assets ratio	Equity to assets ratio				6.67		%			7.39		%			(0.72)		%			Equity to assets ratio														6.22		%			7.54		%			(1.32)		%
Tangible common equity ratio	Tangible common equity ratio		6.67	%				7.39	%				(0.72)	%				Tangible common equity ratio														6.22	%				7.54	%				(1.32)	%

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

(2) A lower ratio is more desirable.

Definitions of ratios:

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

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

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

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

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

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

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

•Equity to assets ratio - equity divided by assets.

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

3336

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Net Interest Income

The following ~~table presents~~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 a FTE basis.

~~Three Months Ended June 30~~


Data for the three months ended June 30:																							Data for the three months ended June 30:
		Three Months Ended March 31,
		Average Balance								Interest Income/Expense								Yield/Rate							Average Balance								Interest Income/Expense								Yield/Rate
		2022		2021		Change		Change- %		2022		2021		Change		Change- %		2022		2021		Change			2022		2021		Change		Change- %		2022		2021		Change		Change- %		2022		2021		Change
Interest-earning assets:	Interest-earning assets:																							Interest-earning assets:
Loans: (1) (2)	Loans: (1) (2)																							Loans: (1) (2)
Commercial	Commercial	$	470,105	$	566,621	$	(96,516)	(17.03)	%	$	4,658	$	6,810	$	(2,152)	(31.60)	%	4.02	%	4.87	%	(0.85)	%	Commercial	$	470,486	$	553,401	$	(82,915)	(14.98)	%	$	4,949	$	5,383	$	(434)	(8.06)	%	4.22	%	3.90	%	0.32	%
Real estate (3)	Real estate (3)	1,975,858		1,703,943		271,915		15.96	%	18,725		17,273		1,452		8.41	%	3.84	%	4.11	%	(0.27)	%	Real estate (3)	2,061,700		1,750,198		311,502		17.80	%	19,972		17,807		2,165		12.16	%	3.89	%	4.08	%	(0.19)	%
Consumer and other	Consumer and other	3,558		5,383		(1,825)		(33.90)	%	34		54		(20)		(37.04)	%	3.90	%	4.09	%	(0.19)	%	Consumer and other	4,966		4,112		854		20.77	%	53		53		—		—	%	4.23	%	5.13	%	(0.90)	%
Total loans	Total loans	2,449,521		2,275,947		173,574		7.63	%	23,417		24,137		(720)		(2.98)	%	3.88	%	4.30	%	(0.42)	%	Total loans	2,537,152		2,307,711		229,441		9.94	%	24,974		23,243		1,731		7.45	%	3.95	%	4.04	%	(0.09)	%

Securities:	Securities:																							Securities:
Taxable	Taxable	633,654		326,731		306,923		93.94	%	2,889		1,645		1,244		75.62	%	1.82	%	2.01	%	(0.19)	%	Taxable	617,104		376,165		240,939		64.05	%	3,090		1,895		1,195		63.06	%	2.00	%	2.01	%	(0.01)	%
Tax-exempt (3)	Tax-exempt (3)	170,898		100,994		69,904		69.22	%	1,056		688		368		53.49	%	2.47	%	2.73	%	(0.26)	%	Tax-exempt (3)	156,788		141,819		14,969		10.56	%	1,092		879		213		24.23	%	2.78	%	2.47	%	0.31	%
Total securities	Total securities	804,552		427,725		376,827		88.10	%	3,945		2,333		1,612		69.10	%	1.96	%	2.18	%	(0.22)	%	Total securities	773,892		517,984		255,908		49.40	%	4,182		2,774		1,408		50.76	%	2.16	%	2.14	%	0.02	%

Federal funds sold	Federal funds sold	178,041		276,038		(97,997)		(35.50)	%	82		69		13		18.84	%	0.19	%	0.10	%	0.09	%	Federal funds sold	51,269		276,955		(225,686)		(81.49)	%	67		75		(8)		(10.67)	%	0.52	%	0.11	%	0.41	%
Total interest-earning assets (3)	Total interest-earning assets (3)	$	3,432,114	$	2,979,710	$	452,404	15.18	%	27,444		26,539		905		3.41	%	3.24	%	3.61	%	(0.37)	%	Total interest-earning assets (3)	$	3,362,313	$	3,102,650	$	259,663	8.37	%	29,223		26,092		3,131		12.00	%	3.49	%	3.37	%	0.12	%
																																											��
Interest-bearing liabilities:	Interest-bearing liabilities:																							Interest-bearing liabilities:
Deposits:	Deposits:																							Deposits:
Interest-bearing demand	Interest-bearing demand	$	546,237	$	452,426	$	93,811	20.74	%	250		169		81		47.93	%	0.19	%	0.15	%	0.04	%	Interest-bearing demand	$	517,707	$	471,845	$	45,862	9.72	%	324		184		140		76.09	%	0.25	%	0.16	%	0.09	%
Savings and money market	Savings and money market	1,610,639		1,306,886		303,753		23.24	%	1,620		1,315		305		23.19	%	0.41	%	0.41	%	—	%	Savings and money market	1,582,033		1,356,549		225,484		16.62	%	2,439		1,352		1,087		80.40	%	0.62	%	0.40	%	0.22	%
Time deposits	Time deposits	195,638		187,192		8,446		4.51	%	281		393		(112)		(28.50)	%	0.58	%	0.85	%	(0.27)	%	Time deposits	204,755		240,988		(36,233)		(15.04)	%	383		459		(76)		(16.56)	%	0.75	%	0.76	%	(0.01)	%
Total deposits	Total deposits	2,352,514		1,946,504		406,010		20.86	%	2,151		1,877		274		14.60	%	0.37	%	0.39	%	(0.02)	%	Total deposits	2,304,495		2,069,382		235,113		11.36	%	3,146		1,995		1,151		57.69	%	0.55	%	0.39	%	0.16	%
Borrowed funds:
Borrowed Funds:																							Borrowed Funds:
Federal funds purchased	Federal funds purchased	1,506		5,387		(3,881)		(72.04)	%	—		1		(1)		(100.00)	%	0.05	%	0.10	%	(0.05)	%	Federal funds purchased	44,309		4,098		$	40,211	981.23	%	157		1		156		15,600.00	%	1.42	%	0.10	%	1.32	%
Subordinated notes, net	Subordinated notes, net	20,467		20,453		14		0.07	%	248		249		(1)		(0.40)	%	4.91	%	4.93	%	(0.02)	%	Subordinated notes, net	31,469		20,457		11,012		53.83	%	394		251		143		56.97	%	5.02	%	4.93	%	0.09	%
Federal Home Loan Bank	Federal Home Loan Bank																							Federal Home Loan Bank
advances	advances	125,000		175,000		(50,000)		(28.57)	%	630		983		(353)		(35.91)	%	2.04	%	2.28	%	(0.24)	%	advances	125,000		136,813		(11,813)		(8.63)	%	635		649		(14)		(2.16)	%	2.04	%	1.90	%	0.14	%
Long-term debt	Long-term debt	51,497		21,164		30,333		143.32	%	258		79		179		226.58	%	2.03	%	1.51	%	0.52	%	Long-term debt	51,486		20,522		30,964		150.88	%	326		75		251		334.67	%	2.54	%	1.48	%	1.06	%
Total borrowed funds	Total borrowed funds	198,470		222,004		(23,534)		(10.60)	%	1,136		1,312		(176)		(13.41)	%	2.32	%	2.40	%	(0.08)	%	Total borrowed funds	252,264		181,890		70,374		38.69	%	1,512		976		536		54.92	%	2.40	%	2.15	%	0.25	%
Total interest-bearing	Total interest-bearing																							Total interest-bearing
liabilities	liabilities	$	2,550,984	$	2,168,508	$	382,476	17.64	%	3,287		3,189		98		3.07	%	0.52	%	0.60	%	(0.08)	%	liabilities	$	2,556,759	$	2,251,272	$	305,487	13.57	%	4,658		2,971		2,223		56.78	%	0.73	%	0.53	%	0.20	%

Net interest income (FTE) (4)	Net interest income (FTE) (4)									$	24,157	$	23,350	$	807	3.46	%							Net interest income (FTE) (4)									$	24,565	$	23,121	$	1,444	6.25	%
Net interest spread (FTE)	Net interest spread (FTE)																	2.72	%	3.01	%	(0.29)	%	Net interest spread (FTE)																	2.76	%	2.84	%	(0.08)	%
Net interest margin (FTE) (4)	Net interest margin (FTE) (4)																	2.85	%	3.17	%	(0.32)	%	Net interest margin (FTE) (4)																	2.93	%	2.99	%	(0.06)	%

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:

	Average Balance								Interest Income/Expense								Yield/Rate
	2022		2021		Change		Change- %		2022		2021		Change		Change- %		2022		2021		Change
Interest-earning assets:
Loans: (1) (2)
Commercial	$	470,296	$	559,975	$	(89,679)	(16.01)	%	$	9,607	$	12,193	$	(2,586)	(21.21)	%	4.12	%	4.39	%	(0.27)	%
Real estate (3)	2,019,017		1,727,198		291,819		16.90	%	38,697		35,080		3,617		10.31	%	3.87	%	4.10	%	(0.23)	%
Consumer and other	4,266		4,744		(478)		(10.08)	%	87		107		(20)		(18.69)	%	4.09	%	4.55	%	(0.46)	%
Total loans	2,493,579		2,291,917		201,662		8.80	%	48,391		47,380		1,011		2.13	%	3.91	%	4.17	%	(0.26)	%

Securities:
Taxable	625,333		351,584		273,749		77.86	%	5,979		3,540		2,439		68.90	%	1.91	%	2.01	%	(0.10)	%
Tax-exempt (3)	163,804		121,519		42,285		34.80	%	2,148		1,566		582		37.16	%	2.62	%	2.58	%	0.04	%
Total securities	789,137		473,103		316,034		66.80	%	8,127		5,106		3,021		59.17	%	2.06	%	2.16	%	(0.10)	%

Federal funds sold	114,305		276,499		(162,194)		(58.66)	%	149		144		5		3.47	%	0.26	%	0.11	%	0.15	%
Total interest-earning assets (3)	$	3,397,021	$	3,041,519	$	355,502	11.69	%	56,667		52,630		4,037		7.67	%	3.36	%	3.49	%	(0.13)	%

Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	531,893	$	462,189	$	69,704	15.08	%	574		353		221		62.61	%	0.22	%	0.15	%	0.07	%
Savings and money market	1,596,257		1,331,855		264,402		19.85	%	4,059		2,667		1,392		52.19	%	0.51	%	0.40	%	0.11	%
Time deposits	200,221		214,239		(14,018)		(6.54)	%	664		852		(188)		(22.07)	%	0.67	%	0.80	%	(0.13)	%
Total deposits	2,328,371		2,008,283		320,088		15.94	%	5,297		3,872		1,425		36.80	%	0.46	%	0.39	%	0.07	%
Borrowed funds:
Federal funds purchased	23,026		4,739		18,287		385.88	%	157		2		155		7,750.00	%	1.38	%	0.10	%	1.28	%
Subordinated notes, net	25,998		20,455		5,543		27.10	%	642		500		142		28.40	%	4.98	%	4.93	%	0.05	%
Federal Home Loan Bank
advances	125,000		155,801		(30,801)		(19.77)	%	1,265		1,632		(367)		(22.49)	%	2.04	%	2.11	%	(0.07)	%
Long-term debt	51,492		20,841		30,651		147.07	%	584		154		430		279.22	%	2.29	%	1.49	%	0.80	%
Total borrowed funds	225,516		201,836		23,680		11.73	%	2,648		2,288		360		15.73	%	2.37	%	2.29	%	0.08	%
Total interest-bearing
liabilities	$	2,553,887	$	2,210,119	$	343,768	15.55	%	7,945		6,160		1,785		28.98	%	0.63	%	0.56	%	0.07	%

Net interest income (FTE) (4)									$	48,722	$	46,470	$	2,252	4.85	%
Net interest spread (FTE)																	2.73	%	2.93	%	(0.20)	%
Net interest margin (FTE) (4)																	2.89	%	3.08	%	(0.19)	%

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

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

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

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

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

The Company's largest component of net income is net interest income, which is the difference between interest earned on interest-earning assets, consisting primarily of loans and securities, and interest paid on interest-bearing liabilities, consisting of deposits and borrowings. Fluctuations in net interest income can result from the combination of changes in the average balances of asset and liability categories and changes in interest rates. Interest rates earned and paid are affected by general economic conditions, particularly changes in market interest rates, and by competitive factors, government policies and actions of regulatory authorities. The Federal Reserve increased the target federal funds interest rate by a total of 150 basis points in the first six months of 2022 and is expected to continue to raise the target federal funds rate throughout the rest of 2022. These increases will have an impact on the Company's net interest income and net interest margin and will impact the comparability of net interest income between 2022 and 2021.

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 months ended ~~March 31,~~June 30, 2022 decreased by 326 and 19 basis points, respectively, compared to the three and six months ended ~~March 31,~~June 30, 2021. 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~~increase in ~~the interest~~ rates paid on deposits and borrowed funds. ~~The higher average balances of securities also contributed to a lower net interest margin.~~ Tax-equivalent net interest income for the three and six months ended ~~March 31,~~June 30, 2022 increased ~~$807~~$1,444 and $2,252, respectively, compared to the same time ~~period~~periods in 2021. The increase in net interest income for the three and six months ended June 30, 2022 compared to the three and six months ended June 30, 2021 was primarily due to increases in loans and securities balances, partially offset by decreases in yields on loans and increases in rates paid on deposits and borrowed funds.

Tax-equivalent interest income on loans ~~decreased $720~~increased $1,731 and $1,011 for the three and six months ended ~~March 31,~~June 30, 2022 compared to the three and six months ended ~~March 31,~~June 30, 2021. This increase in interest income was primarily driven by the increase in the average balance of commercial real estate loans. The comparability of the net interest margin between 2022 and 2021 is also impacted by the interest income from PPP loans, which is included in commercial loans. Included in commercial loans were PPP loans with interest income of ~~$439~~$213 and ~~$2,842~~$1,387 and yields of ~~12.60~~16.10 percent and ~~7.41~~4.00 percent for the three months ended ~~March 31,~~June 30, 2022 and ~~March 31,~~June 30, 2021, respectively. ~~This decrease in interest income from PPP loans was the largest driver of the overall decrease of interest income from loans. The~~ PPP loan interest income inwas $653 and $4,229 with yields of 13.56 percent and 5.80 percent for the six months ended June 30, 2022 and June 30, 2021, ~~included accelerated origination fees recognized at the time of loan forgiveness.~~respectively. Exclusive of the PPP loans, the yield on loans was ~~3.83~~3.91 percent and ~~4.07~~4.00 percent for the three months ended ~~March 31,~~June 30, 2022 and ~~March 31,~~June 30, 2021, respectively, and 3.86 percent and 4.06 percent for the six months ended June 30, 2022 and June 30, 2021, respectively. The decrease in loan ~~yield~~yields was due to lower rates on new and renewed loans in 2021 and first quarter 2022 resulting from ~~low~~lower market rates and competitive pressures on loan ~~pricing.~~pricing, partially offset by rate increases in variable-rate loans in response to federal funds rate increases in 2022.

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.

The average balance of ~~securities available for sale was $376,827 higher~~deposits increased $235,113 and $320,088 for the three and six months months ended ~~March 31,~~June 30, 2022, compared to the three and six months months ended ~~March 31,~~June 30, 2021. ~~This was the result of securities purchased during 2021 and 2022 to improve the yield~~The rate paid on excess liquidity. Due to the interest rate environment during 2021 and the first three months of 2022, securities added to the portfolio have been at significantly lower yields than the existing portfolio holdings, resulting in an overall decline in the securities portfolio yield.

~~The average balance of~~ deposits increased ~~$406,010~~16 and 7 basis points for the three and six months ended ~~March 31,~~June 30, 2022 compared to the ~~three months ended March 31,~~same periods in 2021. The ~~increase was~~increases were primarily due to ~~an increase~~increases in certain deposit rates in response to the increases in the ~~average balance of money market accounts. The growth in these deposit balances was primarily due to customers' desire to retain liquidity, as well as a result of additional~~target federal funds ~~provided to individuals and businesses by government relief programs in 2021.~~rate.

The average balance of borrowed funds ~~decreased $23,534~~increased $70,374 and $23,680 for the three and six months ended ~~March 31,~~June 30, 2022 compared to the three and six months ended ~~March 31,~~June 30, 2021. The rate paid on borrowed funds ~~declined to 2.32 percent~~increased 25 and 8 basis points for the three and six months ended ~~March 31,~~June 30, 2022 ~~from 2.40 percent for~~compared to the three and six months ended ~~March 31,~~June 30, 2021. These ~~declines~~increases were primarily due to increases in subordinated notes and long-term debt. The increase in long-term debt was due to the ~~repayment~~Company's long-term debt borrowing of ~~$50,000~~$40,000 in December 2021 which bears interest at a variable rate. The cost of ~~FHLB advances~~borrowed funds may increase in the second ~~quarter~~half of ~~2021, partially offset by~~2022 as the ~~$34,500 increase in variable-rate~~variable rate on long-term debt may increase if market rates increase, and due to the addition of the subordinated notes in ~~December 2021.~~June 2022.

In ~~March~~the first six months of 2022, the Federal Reserve increased the target federal funds rate by 25a total of 150 basis points, and isthey are expected to make additional rate increases throughout the remainder of 2022. These rate increases could improve reinvestment rates on loans and securities, but could also increase the Company's cost of deposits and borrowed funds and increase the unrealized losses in the Company's securities portfolio.

3539

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~~negative provisions for loan losses ~~was negative $750~~were $1,750 and $2,500 for the three and six months ended ~~March 31,~~June 30, 2022, respectively, compared to ~~a provision~~negative provisions of ~~$500~~$2,000 and $1,500 for the three and six months ended ~~March 31, 2021.~~June 30, 2021, respectively. The ~~provision~~negative provisions recorded in 2021 ~~was~~were due ~~primarily~~ to ~~uncertainty surrounding~~improvements in economic conditions ~~as a result~~and removal of pandemic-related restrictions for businesses, in addition to lack of loan losses for the Company since the onset of the COVID-19 ~~pandemic and an increase in loan balances, while the~~pandemic. The negative ~~provision recorded~~provisions in 2022 ~~was~~were due to the sustained performance of loans after the expiration of the COVID modifications, ~~and sustained~~continued improvement in classified ~~loans.~~loans and the reversal of a specific reserve on an impaired loan. The impaired loan had a specific reserve of $2,500 and settled in the second quarter of 2022, resulting in a charge-off of $451.

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

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

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

3640

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

West Bank's policy is to charge off loans when, in management's opinion, a loan or a portion of a loan is deemed uncollectible. Commercially reasonable efforts are made to maximize subsequent recoveries. The following table summarizes the activity in the Company's allowance for loan losses for the three and six months ended ~~March 31,~~June 30, 2022 and 2021 and related ratios.


		Three Months Ended March 31,				Three Months Ended June 30,										Six Months Ended June 30,
			2022				2021			Change			2022			2021			Change		2022			2021			Change
Balance at beginning of period	Balance at beginning of period		$	28,364			$	29,436		$	(1,072)	Balance at beginning of period	$	27,623		$	30,008		$	(2,385)	$	28,364		$	29,436		$	(1,072)
Charge-offs	Charge-offs		—				—			—		Charge-offs	(451)			—			(451)		(451)			—			(451)
Recoveries	Recoveries		9				72			(63)		Recoveries	12			34			(22)		21			106			(85)
Net recoveries			9				72			(63)
Net (charge-offs) recoveries												Net (charge-offs) recoveries	(439)			34			(473)		(430)			106			(536)
Provision for loan losses charged to operations	Provision for loan losses charged to operations		(750)				500			(1,250)		Provision for loan losses charged to operations	(1,750)			(2,000)			250		(2,500)			(1,500)			(1,000)
Balance at end of period	Balance at end of period		$	27,623			$	30,008		$	(2,385)	Balance at end of period	$	25,434		$	28,042		$	(2,608)	$	25,434		$	28,042		$	(2,608)

Average loans outstanding	Average loans outstanding		$	2,449,521			$	2,275,947				Average loans outstanding	$	2,537,152		$	2,307,711				$	2,493,578		$	2,291,917

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		%			Ratio of annualized net (charge-offs) recoveries during the period to average loans outstanding	(0.07)		%	0.01		%			(0.03)		%	0.01		%

Ratio of allowance for loan losses to average loans outstanding	Ratio of allowance for loan losses to average loans outstanding		1.13		%		1.32		%			Ratio of allowance for loan losses to average loans outstanding	1.00		%	1.22		%			1.02		%	1.22		%

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		1.11		%		1.30		%			Ratio of allowance for loan losses to total loans at end of period	0.99		%	1.21		%			0.99		%	1.21		%

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)		1.12		%		1.39		%			Ratio of allowance for loan losses to total loans at end of period, excluding PPP loans(1)	0.99		%	1.26		%			0.99		%	1.26		%

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

The U.S. economy continues to be affected by the Federal Reserve's accommodative monetary policies initiated during the COVID-19 pandemic. Current economic concerns include inflationary trends, continuing supply chain issues and labor shortages, wage pressures, and ~~anticipated~~expectations of further increases in the Federal Reserve ~~targeted~~target federal funds rate. Monthly job growth for the first three months of 2022 averaged approximately 562,000 based on preliminary estimates and the national unemployment rate decreased to 3.6 percent, which is only 0.1 percent higher than the rate in February 2020, prior to the COVID-19 pandemic. Gross domestic product increased at an annual rate of 6.9 percent in the fourth quarter of 2021. In response to increasing inflation rates, the Federal Reserve increased the ~~targeted~~target federal funds rate by 25a total of 150 basis points in ~~March~~the first six months of 2022. It is expected that additional rate increases will occur throughout the second half of 2022. The Company decreased certain qualitative factors used in the allowance for loan losses evaluation in the first ~~quarter~~six months of 2022 based upon the sustained performance of loans after the expiration of COVID modifications and sustained improvement in classified loans, ~~resulting~~no past due loans over 30 days, and the settlement of an impaired loan in June 2022 that previously had a $2,500 specific reserve. This resulted in a negative provision for the ~~quarter.~~three and six months ended June 30, 2022. Management believes the resulting allowance for loan losses as of ~~March 31,~~June 30, 2022 was adequate to absorb any losses inherent in the loan portfolio at the end of the quarter.

3741

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 March 31,									Three Months Ended June 30,
Noninterest income:	Noninterest income:	2022		2021		Change		Change %		Noninterest income:	2022		2021		Change		Change %
Service charges on deposit accounts	Service charges on deposit accounts	$	580	$	582	$	(2)	(0.34)	%	Service charges on deposit accounts	$	585	$	578	$	7	1.21	%
Debit card usage fees	Debit card usage fees	472		442		30		6.79	%	Debit card usage fees	507		511		(4)		(0.78)	%
Trust services	Trust services	629		652		(23)		(3.53)	%	Trust services	622		691		(69)		(9.99)	%
Increase in cash value of bank-owned life insurance	Increase in cash value of bank-owned life insurance	227		220		7		3.18	%	Increase in cash value of bank-owned life insurance	236		240		(4)		(1.67)	%

Loan swap fees										Loan swap fees	—		42		(42)		(100.00)	%
Realized securities gains, net	Realized securities gains, net	—		4		(4)		(100.00)	%	Realized securities gains, net	—		36		(36)		(100.00)	%
Other income:	Other income:									Other income:
All other income	All other income	481		565		(84)		(14.87)	%	All other income	328		417		(89)		(21.34)	%
Total other income	Total other income	481		565		(84)		(14.87)	%	Total other income	328		417		(89)		(21.34)	%
Total noninterest income	Total noninterest income	$	2,389	$	2,465	$	(76)	(3.08)	%	Total noninterest income	$	2,278	$	2,515	$	(237)	(9.42)	%

											Six Months Ended June 30,
Noninterest income:										Noninterest income:	2022		2021		Change		Change %
Service charges on deposit accounts										Service charges on deposit accounts	$	1,165	$	1,160	$	5	0.43	%
Debit card usage fees										Debit card usage fees	979		953		26		2.73	%
Trust services										Trust services	1,251		1,343		(92)		(6.85)	%
Increase in cash value of bank-owned life insurance										Increase in cash value of bank-owned life insurance	463		460		3		0.65	%
Loan swap fees										Loan swap fees	—		42		(42)		(100.00)	%
Realized securities gains, net										Realized securities gains, net	—		40		(40)		(100.00)	%
Other income:										Other income:
All other income										All other income	809		982		(173)		(17.62)	%
Total other income										Total other income	809		982		(173)		(17.62)	%
Total noninterest income										Total noninterest income	$	4,667	$	4,980	$	(313)	(6.29)	%

The decrease in other income for the ~~three~~six months ended ~~March 31,~~June 30, 2022 compared to the ~~three~~six months ended ~~March 31,~~June 30, 2021 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. In the first quarter of 2022, the Company also recognized other income of $97 related to the purchase of discounted transferable state income tax credits.

3842

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 expenses” category that represent a significant portion of the total or a significant variance are shown below.


		Three Months Ended March 31,									Three Months Ended June 30,
Noninterest expense:	Noninterest expense:	2022		2021		Change		Change %		Noninterest expense:	2022		2021		Change		Change %
Salaries and employee benefits	Salaries and employee benefits	$	6,298	$	5,608	$	690	12.30	%	Salaries and employee benefits	$	6,410	$	5,672	$	738	13.01	%
Occupancy	Occupancy	1,086		1,228		(142)		(11.56)	%	Occupancy	1,242		1,199		43		3.59	%
Data processing	Data processing	624		602		22		3.65	%	Data processing	656		617		39		6.32	%
FDIC insurance	FDIC insurance	337		404		(67)		(16.58)	%	FDIC insurance	289		426		(137)		(32.16)	%
Professional fees	Professional fees	217		283		(66)		(23.32)	%	Professional fees	202		268		(66)		(24.63)	%
Director fees	Director fees	168		191		(23)		(12.04)	%	Director fees	222		214		8		3.74	%
Other expenses:	Other expenses:									Other expenses:
Subscriptions and service contracts	Subscriptions and service contracts	476		378		98		25.93	%	Subscriptions and service contracts	492		467		25		5.35	%
Business development	Business development	236		186		50		26.88	%	Business development	291		261		30		11.49	%
Insurance expense	Insurance expense	151		121		30		24.79	%	Insurance expense	156		123		33		26.83	%
Trust	Trust	137		141		(4)		(2.84)	%	Trust	138		137		1		0.73	%
Consulting fees										Consulting fees	125		78		47		60.26	%
Marketing	Marketing	54		45		9		20.00	%	Marketing	70		57		13		22.81	%
Consulting fees		50		75		(25)		(33.33)	%
Charitable contributions	Charitable contributions	—		60		(60)		(100.00)	%	Charitable contributions	—		60		(60)		(100.00)	%
Low income housing projects amortization	Low income housing projects amortization	142		134		8		5.97	%	Low income housing projects amortization	130		192		(62)		(32.29)	%
New markets tax credit project amortization and management fees	New markets tax credit project amortization and management fees	230		230		—		—	%	New markets tax credit project amortization and management fees	229		229		—		—	%
All other	All other	456		585		(129)		(22.05)	%	All other	614		526		88		16.73	%
Total other expenses	Total other expenses	1,932		1,955		(23)		(1.18)	%	Total other expenses	2,245		2,130		115		5.40	%
Total noninterest expense	Total noninterest expense	$	10,662	$	10,271	$	391	3.81	%	Total noninterest expense	$	11,266	$	10,526	$	740	7.03	%

											Six Months Ended June 30,
Noninterest expense:										Noninterest expense:	2022		2021		Change		Change %
Salaries and employee benefits										Salaries and employee benefits	$	12,708	$	11,280	$	1,428	12.66	%
Occupancy										Occupancy	2,328		2,427		(99)		(4.08)	%
Data processing										Data processing	1,280		1,219		61		5.00	%
FDIC insurance										FDIC insurance	626		830		(204)		(24.58)	%
Professional fees										Professional fees	419		551		(132)		(23.96)	%
Director fees										Director fees	390		405		(15)		(3.70)	%
Other expenses:										Other expenses:
Subscriptions and service contracts										Subscriptions and service contracts	968		845		123		14.56	%
Business development										Business development	527		447		80		17.90	%
Insurance expense										Insurance expense	307		244		63		25.82	%
Trust										Trust	275		278		(3)		(1.08)	%
Consulting fees										Consulting fees	175		153		22		14.38	%
Marketing										Marketing	124		102		22		21.57	%
Charitable contributions										Charitable contributions	—		120		(120)		(100.00)	%
Low income housing projects amortization										Low income housing projects amortization	272		326		(54)		(16.56)	%
New markets tax credit project amortization and management fees										New markets tax credit project amortization and management fees	459		459		—		—	%
All other										All other	1,070		1,111		(41)		(3.69)	%
Total other expenses										Total other expenses	4,177		4,085		92		2.25	%
Total noninterest expense										Total noninterest expense	$	21,928	$	20,797	$	1,131	5.44	%

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 months ended ~~March 31,~~June 30, 2022 when compared to the three and six months ended ~~March 31,~~June 30, 2021, primarily due to an increase in expense related to restricted stock units, the addition of ~~four~~two commercial bankers in the third quarter of 2021 and two commercial bankers in the first quarter of 2022, and normal operating increases. FDIC insurance expense decreased during the three and six months ended ~~March 31,~~June 30, 2022 when compared to the same time ~~period~~periods in 2021 primarily due to reductions in the assessment ~~rate.~~rate resulting from capital injections into the Bank in December 2021 and June 2022. Occupancy expense increased for the three months ended June 30, 2022 compared to the same period in 2021 due primarily to depreciation expense related to the new bank building in St. Cloud, Minnesota that opened in March 2022, partially offset by a reduction in rent expenses. Occupancy expense decreased for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily due to the ~~closure~~reduction in rent expense from the consolidation of leased ~~branches.~~branches in the Des Moines market, partially offset by the increase in depreciation expense related to the new building in St. Cloud, Minnesota.

Subscriptions and service contracts increased for the three and six months ended June 30, 2022 when compared to the same time periods in 2021, primarily due to increases in information technology and information security solutions. ~~All other~~Business development expenses ~~were lower for~~increased in 2022 as business development efforts have normalized with increased in person activities, and the ~~three months ended March 31, 2022 when compared to the three months ended March 31, 2021, due primarily to the settlement~~addition of ~~a loss on a check fraud scheme in 2021.~~four commercial bankers.

Income Tax Expense

The Company recorded income tax expense of ~~$3,121 (19.1~~$4,334 (25.5 percent of pre-tax income) and $7,455 (22.4 percent of pre-tax income) for the three and six months months ended ~~March 31,~~June 30, 2022, compared with ~~$3,063 (20.7~~$3,600 (21.4 percent of pre-tax income) and $6,663 (21.0 percent of pre-tax income) for the three and six months ended ~~March 31,~~June 30, 2021. 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 three and six months ended June 30, 2022, income tax expense included a one-time increase in state income tax expense related to the June 2022 enactment of changes in the Iowa bank franchise tax rates. This legislation reduces the Iowa bank franchise tax rate applied to apportioned income for 2023 and future years. This future reduction in the state tax rate required the Company to reduce net deferred tax assets as of June 30, 2022 by $671 and in turn caused the one-time increase in 2022 tax expense.

Additionally, for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021, a tax benefit of ~~$377~~$385 and ~~$199,~~$233, respectively, was recorded as a result of the increase in fair value of restricted stock over the vesting period. The tax rates for the first ~~three~~six months of 2022 and 2021 were also impacted by year-to-date federal low income housing tax credits and a new markets tax credit of approximately ~~$367~~$734 and ~~$310,~~$684, respectively.

3944

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 ~~$3,547,069~~$3,474,791 as of ~~March 31,~~June 30, 2022, compared to total assets of $3,500,201 as of December 31, 2021. Fluctuations in the balance sheet included increases in ~~securities,~~ loans, ~~deposits,~~ deferred tax assets, ~~and~~ other assets, federal funds purchased and subordinated debt and decreases in federal funds ~~sold.~~sold, securities and deposits.

Securities

Securities available for sale ~~increased~~decreased by ~~$39,090~~$26,852 during the ~~three~~six months ended ~~March 31,~~June 30, 2022. In the first three months of 2022, the Company ~~continued to grow the securities portfolio, purchasing~~purchased securities to improve the yield on excess liquidity while monitoring duration and interest rate risk. ~~Additionally,~~The impact of these purchases was offset by principal paydowns and the decline in ~~the first quarter of 2022,~~ the fair value of the ~~securities~~ portfolio, which declined ~~$54,594.~~$99,008 in the first six months of 2022. The decline in fair value was the result of increases in market interest rates and is not an indication of declining credit quality. These are unrealized losses that are recorded in accumulated other comprehensive loss, net of tax. Future increases in market interest rates could result in an increase of the unrealized losses in the securities portfolio.

As of ~~March 31,~~June 30, 2022, approximately 66 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 acceptable yields, have little to no credit risk and provide fairly consistent cash flows.

Loans and Nonperforming Assets

Loans outstanding increased ~~$29,170~~$116,933 from $2,456,196 as of December 31, 2021 to ~~$2,485,366~~$2,573,129 as of ~~March 31,~~June 30, 2022. Changes in the loan portfolio during the first ~~three~~six months of 2022 included increases of ~~$24,783~~$96,932 in commercial real estate loans and ~~$29,166~~$30,879 in construction, land and land development loans. Commercial loans declined ~~$25,941,~~$17,111, which included a ~~$12,808~~$19,010 decline in PPP loans. As of ~~March 31,~~June 30, 2022, PPP loans outstanding totaled ~~$9,398.~~$3,196. The Company continues to focus on business development efforts in all of its markets. Exclusive of PPP loans, loan growth in the first ~~three~~six months of 2022 was ~~$41,978,~~$135,944, or ~~1.7~~5.6 percent.

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, 2021 was presented in the Company's Form 10-K filed with the SEC on February 24, 2022, and the Company has not experienced any material changes to that portfolio since December 31, 2021.

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


		March 31, 2022			December 31, 2021			Change				June 30, 2022			December 31, 2021			Change
Nonaccrual loans	Nonaccrual loans	$	8,800		$	8,948		$	(148)		Nonaccrual loans	$	335		$	8,948		$	(8,613)
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	8,800			8,948			(148)			Total nonperforming loans	335			8,948			(8,613)
Other real estate owned	Other real estate owned	—			—			—			Other real estate owned	—			—			—
Total nonperforming assets	Total nonperforming assets	$	8,800		$	8,948		$	(148)		Total nonperforming assets	$	335		$	8,948		$	(8,613)

Nonperforming loans to total loans	Nonperforming loans to total loans	0.35		%	0.36		%	(0.01)		%	Nonperforming loans to total loans	0.01		%	0.36		%	(0.35)		%
Nonperforming assets to total assets	Nonperforming assets to total assets	0.25		%	0.26		%	(0.01)		%	Nonperforming assets to total assets	0.01		%	0.26		%	(0.25)		%

(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 no TDR loans categorized as nonaccrual as of June 30, 2022. There were six TDR loans related to one borrower as of ~~March 31, 2022 and~~ December 31, 2021, categorized as nonaccrual.

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West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Premises and Equipment

In 2020, the Company began construction of a new office for its St. Cloud, Minnesota branch. Construction was completed in the first quarter of 2022 and the new building opened in March. At that time, the previously leased location was vacated. Additionally, the Company purchased land in the first quarter of 2022 for its new corporate headquarters to be located in West Des Moines, Iowa and ~~development planning is underway.~~construction began in the second quarter of 2022. Construction of a new office in Mankato, Minnesota began in the first quarter of 2022.

Deposits

Deposits ~~increased $75,247~~decreased $173,554 during the first ~~three~~six months of 2022. ~~Savings accounts, which include money~~Deposit inflows and outflows are influenced by prevailing market ~~accounts, increased~~interest rates, competition, local and national economic conditions, and fluctuations in our business customers' own liquidity needs. The decline in deposit balances was not due to the loss of significant customer relationships, but was primarily attributable to customers using their own liquidity to fund business transactions, instead of using debt, and customers seeking higher yielding investment options. During the second quarter of 2022, a large corporate customer completed a significant business transaction that was funded by existing cash balances, accounting for a ~~total~~significant portion of ~~$82,054 from~~the decrease in deposits.

At June 30, 2022, the Company had $196,477 in brokered deposits, compared to $130,032 at December 31, ~~2021 to March 31, 2022. Interest-bearing demand accounts increased $5,993 from~~2021. Brokered deposits included overnight funding, fixed rate deposits with terms through December ~~31, 2021 to March 31,~~ 2022 ~~while noninterest-bearing demand accounts decreased $9,439 during~~and variable rate deposits with terms through February 2024.

Subordinated Debt

On June 14, 2022, the ~~same period. Balance fluctuations were primarily due to normal customer activity, as corporate customers' liquidity needs vary~~Company issued $60,000 of subordinated notes (the "Notes"). The Notes initially bear interest at ~~any given time. We believe that deposit balances could decrease in 2022 as a result~~5.25 percent per annum, with interest payable semi-annually for the first five years of the ~~end~~Notes. Beginning June 15, 2027, the interest rate will reset quarterly to a floating rate per annum that is expected to be three-month term Secured Overnight Financing Rate (SOFR) plus 241 basis points, with payments due quarterly. The Company may redeem the Notes, in whole or in part, on and after June 15, 2027 at a price equal to 100 percent of ~~broad government stimulus programs related~~the principal amount of the Notes being redeemed plus accrued and unpaid interest. The Notes will mature on June 15, 2032 if they are not earlier redeemed. Proceeds from this debt issuance were used to make a $58,650 capital injection into West Bank, the ~~COVID-19 pandemic and increasing inflation.~~Company's subsidiary.

Derivatives

At ~~March 31,~~June 30, 2022 and December 31, 2021, the Company had interest rate swap contracts associated with loans, borrowed funds and deposits with a total notional amount of ~~$425,992~~$425,001 and $427,008, respectively. The fair value of these derivative contracts are reported in other assets or other liabilities on the balance sheet. Changes in the fair values of the interest rate swap contracts resulted in a ~~$8,574~~$16,126 increase in other assets and ~~$3,008~~$163 decrease in other liabilities from December 31, 2021 to ~~March 31,~~June 30, 2022 due to projected increases in long-term interest rates.

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 ~~$144,255~~$26,940 as of ~~March 31,~~June 30, 2022 compared with $192,825 as of December 31, 2021.

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West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Our deposit growth strategy emphasizes core deposit growth. Deposit inflows and outflows can vary widely and are influenced by prevailing market interest rates, competition, local and national economic conditions and fluctuations in our corporate customers' and municipal customers' own liquidity needs. The Company may utilize brokered deposits to supplement core deposit fluctuations. Brokered deposits are obtained through various programs administered by IntraFi, including IntraFi Network Deposits and IntraFi Funding, and through other third parties. At June 30, 2022, the Company had $196,477 in brokered deposits, which included overnight funding, fixed rate deposits with terms through December 2022 and variable rate deposits with terms through February 2024.

As of ~~March 31,~~June 30, 2022, West Bank had additional borrowing capacity available from the FHLB of approximately ~~$548,000,~~$490,000, as well as approximately ~~$15,000~~$4,000 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 ~~$15,519~~$33,645 to liquidity for the ~~three~~six months ended ~~March 31,~~June 30, 2022. Management believed that the combination of high levels of potentially liquid assets, cash flows from operations, and additional borrowing capacity ~~provided the~~are sufficient to meet our liquidity and capital needs.

The Company ~~with strong liquidity~~had remaining commitments to invest in qualified affordable housing projects totaling $3,720 and $3,986 as of ~~March~~June 30, 2022 and December 31, ~~2022.~~2021, respectively.

Capital

The Company's total stockholders' equity decreased to ~~$236,480~~$216,189 at ~~March 31,~~June 30, 2022 from $260,328 at December 31, 2021. The decrease was primarily the result of the increase in accumulated other comprehensive loss, partially offset by net income less dividends paid. At ~~March 31,~~June 30, 2022, the Company's tangible common equity as a percent of tangible assets was ~~6.67~~6.22 percent compared to 7.44 percent as of December 31, 2021. The increase in accumulated other comprehensive loss is primarily the result of ~~$32,131, resulting primarily from~~ the ~~decline in fair~~negative effect that rising interest rates have had on the unrealized market value adjustment of ~~securities during the first quarter of 2022, reduced~~our available for sale investment portfolio. While accumulated other comprehensive losses reduce tangible common equity, ~~however~~ it has no impact on regulatory capital.

~~The Company had remaining commitments to invest in qualified affordable housing projects totaling $3,947 and $3,986 as of March 31, 2022 and December 31, 2021, respectively.~~

~~Table of Contents~~

~~West Bancorporation, Inc.~~

~~Management's Discussion and Analysis~~

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

The Company and West Bank are subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements (as shown in the following table) can result in certain mandatory and possibly additional discretionary actions by regulators, which, if undertaken, could have a direct material effect on the Company's consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and West Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Company's and West Bank's capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Management believed the Company and West Bank met all capital adequacy requirements to which they were subject as of ~~March 31,~~June 30, 2022.

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West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

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


		Actual				For Capital Adequacy Purposes				For Capital Adequacy Purposes With Capital Conservation Buffer				To Be Well-Capitalized					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 March 31, 2022:
As of June 30, 2022:																		As of June 30, 2022:
Total Capital (to Risk-Weighted Assets)	Total Capital (to Risk-Weighted Assets)																	Total Capital (to Risk-Weighted Assets)
Consolidated	Consolidated	$	326,871	10.72	%	$	244,000	8.00	%	$	320,249	10.50	%	$	304,999	10.00	%	Consolidated	$	394,051	12.53	%	$	251,667	8.00	%	$	330,313	10.50	%	$	314,584	10.00	%
West Bank	West Bank	362,312		11.88	%	243,926		8.00	%	320,153		10.50	%	304,908		10.00	%	West Bank	428,127		13.62	%	251,556		8.00	%	330,167		10.50	%	314,445		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	299,248		9.81	%	183,000		6.00	%	259,249		8.50	%	244,000		8.00	%	Consolidated	308,617		9.81	%	188,750		6.00	%	267,396		8.50	%	251,667		8.00	%
West Bank	West Bank	334,689		10.98	%	182,945		6.00	%	259,172		8.50	%	243,926		8.00	%	West Bank	402,693		12.81	%	188,667		6.00	%	267,278		8.50	%	251,556		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	279,248		9.16	%	137,250		4.50	%	213,500		7.00	%	198,250		6.50	%	Consolidated	288,617		9.17	%	141,563		4.50	%	220,208		7.00	%	204,479		6.50	%
West Bank	West Bank	334,689		10.98	%	137,209		4.50	%	213,435		7.00	%	198,190		6.50	%	West Bank	402,693		12.81	%	141,500		4.50	%	220,111		7.00	%	204,389		6.50	%

Tier 1 Capital (to Average Assets)	Tier 1 Capital (to Average Assets)																	Tier 1 Capital (to Average Assets)
Consolidated	Consolidated	299,248		8.39	%	142,645		4.00	%	142,645		4.00	%	178,306		5.00	%	Consolidated	308,617		8.59	%	143,643		4.00	%	143,643		4.00	%	179,553		5.00	%
West Bank	West Bank	334,689		9.39	%	142,604		4.00	%	142,604		4.00	%	178,255		5.00	%	West Bank	402,693		11.22	%	143,584		4.00	%	143,584		4.00	%	179,480		5.00	%

As of December 31, 2021:	As of December 31, 2021:																	As of December 31, 2021:
Total Capital (to Risk-Weighted Assets)	Total Capital (to Risk-Weighted Assets)																	Total Capital (to Risk-Weighted Assets)
Consolidated	Consolidated	$	319,329	10.89	%	$	234,670	8.00	%	$	308,004	10.50	%	$	293,337	10.00	%	Consolidated	$	319,329	10.89	%	$	234,670	8.00	%	$	308,004	10.50	%	$	293,337	10.00	%
West Bank	West Bank	354,846		12.10	%	234,621		8.00	%	307,941		10.50	%	293,277		10.00	%	West Bank	354,846		12.10	%	234,621		8.00	%	307,941		10.50	%	293,277		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	290,965		9.92	%	176,002		6.00	%	249,337		8.50	%	234,670		8.00	%	Consolidated	290,965		9.92	%	176,002		6.00	%	249,337		8.50	%	234,670		8.00	%
West Bank	West Bank	326,482		11.13	%	175,966		6.00	%	249,284		8.50	%	234,621		8.00	%	West Bank	326,482		11.13	%	175,966		6.00	%	249,284		8.50	%	234,621		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	270,965		9.24	%	132,002		4.50	%	205,336		7.00	%	190,669		6.50	%	Consolidated	270,965		9.24	%	132,002		4.50	%	205,336		7.00	%	190,669		6.50	%
West Bank	West Bank	326,482		11.13	%	131,975		4.50	%	205,294		7.00	%	190,630		6.50	%	West Bank	326,482		11.13	%	131,975		4.50	%	205,294		7.00	%	190,630		6.50	%

Tier 1 Capital (to Average Assets)	Tier 1 Capital (to Average Assets)																	Tier 1 Capital (to Average Assets)
Consolidated	Consolidated	290,965		8.49	%	137,065		4.00	%	137,065		4.00	%	171,331		5.00	%	Consolidated	290,965		8.49	%	137,065		4.00	%	137,065		4.00	%	171,331		5.00	%
West Bank	West Bank	326,482		9.53	%	137,011		4.00	%	137,011		4.00	%	171,264		5.00	%	West Bank	326,482		9.53	%	137,011		4.00	%	137,011		4.00	%	171,264		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 ~~March 31,~~June 30, 2022, 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

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

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

The Company has an Asset Liability Committee which meets quarterly to review the interest rate sensitivity position and to review and develop various strategies for managing interest rate risk. Measuring and maintaining interest rate risk is a dynamic process that management performs with the ~~change~~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, ~~may adversely affect~~this analysis measures the ~~Company's~~estimated change in net interest income. ~~Management continually develops~~The simulations allow for ongoing assessment of interest rate sensitivity and ~~implements strategies to mitigate this risk.~~can include the impact of potential new business strategies. The ~~analysis~~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 ~~Company's~~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 ~~risk as of December 31, 2021 was presented~~changes for the rate shock levels shown. The net interest income in each scenario is based on parallel and permanent changes in the ~~Company's Form 10-K filed with~~interest rates.



Scenario			% Change
300 basis points rising			(2.91)%
200 basis points rising			(1.95)%
100 basis points rising			(1.11)%
Base			—
100 basis points falling			1.07%

As of June 30, 2022, the ~~Securities and Exchange Commission on February 24, 2022. The Company has not experienced any material changes to its~~estimated effect of a 300 basis point increase in interest rates would be a decrease of the Company’s net interest income by approximately 2.91 percent, or $2,847 over the twelve months ended June 30, 2023.

Computations of the prospective effects of hypothetical interest rate ~~risk position since December 31, 2021. Management does~~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 ~~believe that~~contemplate any actions the ~~Company's primary market risk exposure and management of that exposure~~Company may undertake in ~~the first three months of 2022 materially changed compared~~response to ~~those~~changes in ~~the year ended December 31, 2021.~~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 period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

Management does not believe there have been any material changes in the risk factors that were disclosed in the Company's Form 10-K filed with the Securities and Exchange Commission on February 24, 2022.

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
3.1			Restatement of the Restated Articles of Incorporation of West Bancorporation, Inc. (incorporated herein by reference to Exhibit 3.1 filed with the Form 10-K on March 1, 2017)
3.2			Amended and Restated Bylaws of West Bancorporation, Inc. as of January 23, 2019 (incorporated herein by reference to Exhibit 3.1 filed with the Form 8-K on January 24, 2019)
4.1			Indenture, dated June 14, 2022, between West Bancorporation, Inc. and Wilmington Trust, National Association, as trustee (incorporated herein by reference to Exhibit 4.1 filed with the Form 8-K on June 14, 2022)
4.2			First Supplemental Indenture, dated June 14, 2022, between West Bancorporation, Inc. and Wilmington Trust, National Association, as trustee (incorporated herein by reference to Exhibit 4.2 filed with the Form 8-K on June 14, 2022)
4.3			Form of 5.25% Fixed-to-Floating Rate Subordinated Notes due 2032 (incorporated herein by reference to Exhibit 4.3 filed with the Form 8-K on June 14, 2022)
10.1			Credit Agreement, dated as of December 15, 2021, by and between West Bancorporation, Inc. and National Exchange Bank & Trust (incorporated herein by reference to Exhibit 10.1 filed with the Form 8-K on June 6, 2022)
10.2			Promissory Note, dated as of December 15, 2021, made by West Bancorporation, Inc., to and in favor of National Exchange Bank & Trust (incorporated herein by reference to Exhibit 10.2 filed with the Form 8-K on June 6, 2022)
10.3			Commercial Pledge Agreement, dated as of December 15, 2021, by and between West Bancorporation, Inc. and National Exchange Bank & Trust (incorporated herein by reference to Exhibit 10.3 filed with the Form 8-K on June 6, 2022)
31.1			Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002
31.2			Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002
32.1			Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2			Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS			Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH			Inline XBRL Taxonomy Extension Schema Document
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document
104			Cover Page Interactive Data File (formatted as Inline XBRL and combined in Exhibit 101)

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SIGNATURES

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


West Bancorporation, Inc.
(Registrant)


~~April~~July 28, 2022	By:	/s/ David D. Nelson
Date		David D. Nelson
		Chief Executive Officer and President
		(Principal Executive Officer)

~~April~~July 28, 2022	By:	/s/ Jane M. Funk
Date		Jane M. Funk
		Executive Vice President, Treasurer and Chief Financial Officer
		(Principal Financial and Accounting Officer)

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