UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended ~~September 30, 2022~~March 31, 2023

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 ~~October~~April 26, ~~2022,~~2023, there were ~~16,640,413~~16,712,257 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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022	4

	Consolidated Statements of Income for the three ~~and nine~~ months ended ~~September 30, 2022~~March 3 1 , 202 3 and ~~2021~~202 2	5

	Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 3 1 , 202 3 and ~~nine months ended September 30, 2022 and 2021~~202 2	6

	Consolidated Statements of Stockholders' Equity for the three ~~and nine~~ months ended ~~September 30, 2022~~March 3 1 , 202 3 and ~~2021~~202 2	7

	Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30, 2022~~March 3 1 , 202 3 and ~~2021~~202 2	98

	Notes to Consolidated Financial Statements	109

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	32

	"Safe Harbor" Concerning Forward-Looking Statements	32

	Critical Accounting Policies	32

	Non-GAAP Financial Measures	33

	Overview	3534

	Results of Operations	3736

	Financial Condition	4642

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5047

Item 4.	Controls and Procedures	5047

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	5148

Item 1A.	Risk Factors	5148

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5148

Item 3.	Defaults Upon Senior Securities	5148

Item 4.	Mine Safety Disclosures	5148

Item 5.	Other Information	5148

Item 6.	Exhibits	5148

	Signatures	5249

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)	September 30, 2022		December 31, 2021		(in thousands, except share and per share data)	March 31, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	58,342	$	17,555	Cash and due from banks	$	21,579	$	24,896
Federal funds sold		1,049		175,270
Interest-bearing deposits						Interest-bearing deposits	901		1,643
Cash and cash equivalents	Cash and cash equivalents	59,391		192,825		Cash and cash equivalents	22,480		26,539
Securities available for sale, at fair value	Securities available for sale, at fair value	671,752		758,822		Securities available for sale, at fair value	665,358		664,115
Federal Home Loan Bank stock, at cost	Federal Home Loan Bank stock, at cost	18,350		9,965		Federal Home Loan Bank stock, at cost	22,226		19,336
Loans	Loans	2,614,145		2,456,196		Loans	2,756,185		2,742,836
Allowance for loan losses		(25,418)		(28,364)
Allowance for credit losses						Allowance for credit losses	(27,941)		(25,473)
Loans, net	Loans, net	2,588,727		2,427,832		Loans, net	2,728,244		2,717,363
Premises and equipment, net	Premises and equipment, net	44,592		34,568		Premises and equipment, net	59,565		53,124
Accrued interest receivable	Accrued interest receivable	10,786		8,890		Accrued interest receivable	12,284		11,988
Bank-owned life insurance	Bank-owned life insurance	44,318		43,609		Bank-owned life insurance	44,830		44,573
Deferred tax assets, net	Deferred tax assets, net	38,327		10,819		Deferred tax assets, net	35,122		36,609
Other assets	Other assets	41,274		12,871		Other assets	34,834		39,571
Total assets	Total assets	$	3,517,517	$	3,500,201	Total assets	$	3,624,943	$	3,613,218

LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY					LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES	LIABILITIES					LIABILITIES
Deposits:	Deposits:					Deposits:
Noninterest-bearing demand	Noninterest-bearing demand	$	712,722	$	720,136	Noninterest-bearing demand	$	605,666	$	693,563
Interest-bearing demand	Interest-bearing demand	469,257		548,242		Interest-bearing demand	486,656		536,226
Savings and money market	Savings and money market	1,252,694		1,550,636		Savings and money market	1,295,280		1,237,954
Time	Time	388,174		196,991		Time	410,791		412,665
Total deposits	Total deposits	2,822,847		3,016,005		Total deposits	2,798,393		2,880,408
Federal funds purchased		204,500		2,880
Federal funds purchased and other short-term borrowings						Federal funds purchased and other short-term borrowings	229,290		200,000
Subordinated notes, net	Subordinated notes, net	79,303		20,465		Subordinated notes, net	79,435		79,369
Federal Home Loan Bank advances	Federal Home Loan Bank advances	125,000		125,000		Federal Home Loan Bank advances	220,000		155,000
Long-term debt	Long-term debt	51,486		51,521		Long-term debt	51,486		51,486
Accrued expenses and other liabilities	Accrued expenses and other liabilities	35,617		24,002		Accrued expenses and other liabilities	29,347		35,843
Total liabilities	Total liabilities	3,318,753		3,239,873		Total liabilities	3,407,951		3,402,106
COMMITMENTS AND CONTINGENCIES (NOTE 8)	COMMITMENTS AND CONTINGENCIES (NOTE 8)					COMMITMENTS AND CONTINGENCIES (NOTE 8)
STOCKHOLDERS' EQUITY	STOCKHOLDERS' EQUITY					STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value; authorized 50,000,000 shares; no shares issued and outstanding at September 30, 2022 and December 31, 2021		—		—
Common stock, no par value; authorized 50,000,000 shares; 16,640,413 and 16,554,846 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		3,000		3,000
Preferred stock, $0.01 par value; authorized 50,000,000 shares; no shares issued and outstanding at March 31, 2023 and December 31, 2022						Preferred stock, $0.01 par value; authorized 50,000,000 shares; no shares issued and outstanding at March 31, 2023 and December 31, 2022	—		—
Common stock, no par value; authorized 50,000,000 shares; 16,712,257 and 16,640,413 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively						Common stock, no par value; authorized 50,000,000 shares; 16,712,257 and 16,640,413 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively	3,000		3,000
Additional paid-in capital	Additional paid-in capital	31,152		30,183		Additional paid-in capital	31,797		32,021
Retained earnings	Retained earnings	262,776		237,782		Retained earnings	267,620		267,562
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(98,164)		(10,637)		Accumulated other comprehensive loss	(85,425)		(91,471)
Total stockholders' equity	Total stockholders' equity	198,764		260,328		Total stockholders' equity	216,992		211,112
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	3,517,517	$	3,500,201	Total liabilities and stockholders' equity	$	3,624,943	$	3,613,218

See Notes to Consolidated Financial Statements.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Consolidated Statements of Income

(unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(in thousands, except per share data)	(in thousands, except per share data)	2022		2021		2022		2021		(in thousands, except per share data)		2023		2022
Interest income:	Interest income:									Interest income:
Loans, including fees	Loans, including fees	$	28,102	$	24,229	$	76,236	$	71,406	Loans, including fees		$	32,948	$	23,286
Securities:	Securities:									Securities:
Taxable	Taxable	3,147		2,412		9,126		5,952		Taxable		3,316		2,889
Tax-exempt	Tax-exempt	890		762		2,640		2,032		Tax-exempt		885		858
Federal funds sold		30		82		179		226
Interest-bearing deposits										Interest-bearing deposits		30		82
Total interest income	Total interest income	32,169		27,485		88,181		79,616		Total interest income		37,179		27,115
Interest expense:	Interest expense:									Interest expense:
Deposits	Deposits	6,289		2,021		11,586		5,893		Deposits		13,339		2,151
Federal funds purchased		655		2		812		4
Federal funds purchased and other short-term borrowings										Federal funds purchased and other short-term borrowings		2,079		—
Subordinated notes	Subordinated notes	1,106		254		1,748		754		Subordinated notes		1,106		248
Federal Home Loan Bank advances	Federal Home Loan Bank advances	649		656		1,914		2,288		Federal Home Loan Bank advances		1,262		630
Long-term debt	Long-term debt	466		66		1,050		220		Long-term debt		698		258
Total interest expense	Total interest expense	9,165		2,999		17,110		9,159		Total interest expense		18,484		3,287
Net interest income	Net interest income	23,004		24,486		71,071		70,457		Net interest income		18,695		23,828
Provision for loan losses		—		—		(2,500)		(1,500)
Net interest income after provision for loan losses		23,004		24,486		73,571		71,957
Credit loss expense (benefit)										Credit loss expense (benefit)		—		(750)
Net interest income after credit loss expense (benefit)										Net interest income after credit loss expense (benefit)		18,695		24,578
Noninterest income:	Noninterest income:									Noninterest income:
Service charges on deposit accounts	Service charges on deposit accounts	553		589		1,718		1,749		Service charges on deposit accounts		462		580
Debit card usage fees	Debit card usage fees	498		490		1,477		1,443		Debit card usage fees		486		472
Trust services	Trust services	780		695		2,031		2,038		Trust services		706		629
Increase in cash value of bank-owned life insurance	Increase in cash value of bank-owned life insurance	246		230		709		690		Increase in cash value of bank-owned life insurance		257		227
Loan swap fees		835		—		835		42
Realized securities gains, net		—		11		—		51
Gain from bank-owned life insurance										Gain from bank-owned life insurance		691		—

Other income	Other income	364		386		1,173		1,368		Other income		355		481
Total noninterest income	Total noninterest income	3,276		2,401		7,943		7,381		Total noninterest income		2,957		2,389
Noninterest expense:	Noninterest expense:									Noninterest expense:
Salaries and employee benefits	Salaries and employee benefits	6,578		6,018		19,286		17,298		Salaries and employee benefits		6,867		6,298
Occupancy		1,315		1,203		3,643		3,630
Occupancy and equipment										Occupancy and equipment		1,327		1,086
Data processing	Data processing	644		616		1,924		1,835		Data processing		635		624
Technology and software										Technology and software		513		476
FDIC insurance	FDIC insurance	127		528		753		1,358		FDIC insurance		416		337
Professional fees	Professional fees	250		212		669		763		Professional fees		250		217
Director fees	Director fees	209		176		599		581		Director fees		205		168
Other expenses	Other expenses	2,335		1,959		6,512		6,044		Other expenses		1,858		1,456
Total noninterest expense	Total noninterest expense	11,458		10,712		33,386		31,509		Total noninterest expense		12,071		10,662
Income before income taxes	Income before income taxes	14,822		16,175		48,128		47,829		Income before income taxes		9,581		16,305
Income taxes	Income taxes	3,220		3,469		10,675		10,132		Income taxes		1,737		3,121
Net income	Net income	$	11,602	$	12,706	$	37,453	$	37,697	Net income		$	7,844	$	13,184

Basic earnings per common share	Basic earnings per common share	$	0.70	$	0.77	$	2.25	$	2.28	Basic earnings per common share		$	0.47	$	0.80
Diluted earnings per common share	Diluted earnings per common share	$	0.69	$	0.76	$	2.23	$	2.25	Diluted earnings per common share		$	0.47	$	0.78

See Notes to Consolidated Financial Statements.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Consolidated Statements of Comprehensive Income (Loss)

(unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)		2023		2022
Net income	Net income	$	11,602	$	12,706	$	37,453	$	37,697	Net income		$	7,844	$	13,184
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		(42,621)		(6,172)		(141,629)		(10,462)
Plus: reclassification adjustment for net gains realized in net income		—		(11)		—		(51)
Unrealized holding gains (losses) arising during the period										Unrealized holding gains (losses) arising during the period		11,667		(54,595)

Other		(11)		—		(11)		—
Income tax benefit		10,569		1,558		35,618		2,649
Other comprehensive loss on securities		(32,063)		(4,625)		(106,022)		(7,864)

Income tax (expense) benefit										Income tax (expense) benefit		(2,911)		13,813
Other comprehensive income (loss) on securities										Other comprehensive income (loss) on securities		8,756		(40,782)
Unrealized gains (losses) on derivatives:	Unrealized gains (losses) on derivatives:									Unrealized gains (losses) on derivatives:
Unrealized holding gains arising during the period		8,637		359		23,239		5,801
Unrealized holding gains (losses) arising during the period										Unrealized holding gains (losses) arising during the period		(1,634)		10,536
Plus: reclassification adjustment for net (gains) losses realized in net income	Plus: reclassification adjustment for net (gains) losses realized in net income	(259)		1,105		1,428		7,173		Plus: reclassification adjustment for net (gains) losses realized in net income		(1,958)		1,045

Income tax expense		(2,051)		(369)		(6,172)		(3,269)
Other comprehensive income on derivatives		6,327		1,095		18,495		9,705
Income tax (expense) benefit										Income tax (expense) benefit		882		(2,930)
Other comprehensive income (loss) on derivatives										Other comprehensive income (loss) on derivatives		(2,710)		8,651
Total other comprehensive income (loss)	Total other comprehensive income (loss)	(25,736)		(3,530)		(87,527)		1,841		Total other comprehensive income (loss)		6,046		(32,131)
Comprehensive income (loss)	Comprehensive income (loss)	$	(14,134)	$	9,176	$	(50,074)	$	39,538	Comprehensive income (loss)		$	13,890	$	(18,947)

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)
Three Months Ended September 30, 2022
Accumulated
Additional Other
Preferred Common Stock Paid-In Retained Comprehensive
Stock Shares Amount Capital Earnings Income (Loss) Total
Balance, June 30, 2022 $ — 16,640,413 $ 3,000 $ 30,283 $ 255,334 $ (72,428) $ 216,189
Net income — — — — 11,602 — 11,602
Other comprehensive loss, net of tax — — — — — (25,736) (25,736)
Cash dividends declared, $0.25 per common share — — — — (4,160) — (4,160)
Stock-based compensation costs — — — 869 — — 869
Balance, September 30, 2022 $ — 16,640,413 $ 3,000 $ 31,152 $ 262,776 $ (98,164) $ 198,764
Three Months Ended September 30, 2021
Accumulated
Additional Other
Preferred Common Stock Paid-In Retained Comprehensive
Stock Shares Amount Capital Earnings Income (Loss) Total
Balance, June 30, 2021 $ — 16,554,846 $ 3,000 $ 28,888 $ 221,113 $ (6,475) $ 246,526
Net income — — — — 12,706 — 12,706
Other comprehensive loss, net of tax — — — — — (3,530) (3,530)
Cash dividends declared, $0.24 per common share — — — — (3,974) — (3,974)
Stock-based compensation costs — — — 648 — — 648
Balance, September 30, 2021 $ — 16,554,846 $ 3,000 $ 29,536 $ 229,845 $ (10,005) $ 252,376
See Notes to Consolidated Financial Statements.


(in thousands, except share and per share data)


























































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


	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)		—		(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

(1)

~~Table~~Cumulative effect adjustment pursuant to adoption of ~~Contents~~ASU 2016-13,

~~West Bancorporation, Inc. and Subsidiary~~

~~Consolidated Statements~~Financial Instruments - Credit Losses (Topic 326): Measurement of ~~Stockholders' Equity~~

~~(unaudited)~~

(in thousands, except share and per share data)
Nine Months Ended September 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 — — — — 37,453 — 37,453
Other comprehensive loss,
net of tax
— — — — — (87,527) (87,527)
Cash dividends declared, $0.75 per common share — — — — (12,459) — (12,459)
Stock-based compensation costs — — — 2,488 — — 2,488
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes — 85,567 — (1,519) — — (1,519)
Balance, September 30, 2022 $ — 16,640,413 $ 3,000 $ 31,152 $ 262,776 $ (98,164) $ 198,764
Nine Months Ended September 30, 2021
Accumulated
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 — — — — 37,697 — 37,697
Other comprehensive income, net of tax — — — — — 1,841 1,841
Cash dividends declared, $0.70 per common share — — — — (11,570) — (11,570)
Stock-based compensation costs — — — 1,926 — — 1,926
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes — 85,574 — (1,213) — — (1,213)
Balance, September 30, 2021 $ — 16,554,846 $ 3,000 $ 29,536 $ 229,845 $ (10,005) $ 252,376
Credit Losses on Financial Instruments. See Note 1 for additional information.

See Notes to Consolidated Financial Statements.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Consolidated Statements of Cash Flows

(unaudited)


		Nine Months Ended September 30,					Three Months Ended March 31,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022
Cash Flows from Operating Activities:	Cash Flows from Operating Activities:					Cash Flows from Operating Activities:
Net income	Net income	$	37,453	$	37,697	Net income	$	7,844	$	13,184
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		(2,500)		(1,500)
Credit loss expense (benefit)						Credit loss expense (benefit)	—		(750)
Net amortization and accretion	Net amortization and accretion	2,247		1,459		Net amortization and accretion	829		666
Securities gains, net		—		(51)

Stock-based compensation	Stock-based compensation	2,488		1,926		Stock-based compensation	711		757
Increase in cash value of bank-owned life insurance	Increase in cash value of bank-owned life insurance	(709)		(690)		Increase in cash value of bank-owned life insurance	(257)		(227)

Depreciation	Depreciation	1,091		1,143		Depreciation	404		307
Provision for deferred income taxes	Provision for deferred income taxes	1,928		380		Provision for deferred income taxes	635		824
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	(1,896)		(541)		Increase in accrued interest receivable	(296)		(1,193)
Decrease in other assets		930		2,299
Increase in accrued expenses and other liabilities		7,889		312
(Increase) decrease in other assets						(Increase) decrease in other assets	(1,322)		249
Increase (decrease) in accrued expenses and other liabilities						Increase (decrease) in accrued expenses and other liabilities	(6,054)		1,702
Net cash provided by operating activities	Net cash provided by operating activities	48,921		42,434		Net cash provided by operating activities	2,494		15,519
Cash Flows from Investing Activities:	Cash Flows from Investing Activities:					Cash Flows from Investing Activities:
Proceeds from sales of securities available for sale		—		30,374
Proceeds from maturities and calls of securities available for sale		63,353		65,784

Proceeds from principal paydowns, maturities and calls of securities available for sale						Proceeds from principal paydowns, maturities and calls of securities available for sale	9,661		25,730
Purchases of securities available for sale	Purchases of securities available for sale	(120,077)		(420,744)		Purchases of securities available for sale	—		(120,077)
Purchases of Federal Home Loan Bank stock	Purchases of Federal Home Loan Bank stock	(46,884)		(2,325)		Purchases of Federal Home Loan Bank stock	(31,595)		(384)
Proceeds from redemption of Federal Home Loan Bank stock	Proceeds from redemption of Federal Home Loan Bank stock	38,499		2,504		Proceeds from redemption of Federal Home Loan Bank stock	28,705		80
Net increase in loans	Net increase in loans	(158,395)		(78,830)		Net increase in loans	(13,340)		(29,161)

Purchases of premises and equipment	Purchases of premises and equipment	(12,056)		(6,410)		Purchases of premises and equipment	(7,164)		(6,951)

Net cash used in investing activities	Net cash used in investing activities	(235,560)		(409,647)		Net cash used in investing activities	(13,733)		(130,763)
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	(193,158)		35,929		Net increase (decrease) in deposits	(82,015)		75,247
Net increase in federal funds purchased		201,620		34,005
Proceeds from issuance of subordinated debt, net of issuance costs		58,756		—
Net decrease in Federal Home Loan Bank advances		—		(50,000)
Net increase (decrease) in federal funds purchased and other short-term borrowings						Net increase (decrease) in federal funds purchased and other short-term borrowings	29,290		(2,880)

Net increase in Federal Home Loan Bank advances						Net increase in Federal Home Loan Bank advances	65,000		—
Principal payments on long-term debt	Principal payments on long-term debt	(35)		(3,904)		Principal payments on long-term debt	—		(35)
Common stock dividends paid	Common stock dividends paid	(12,459)		(11,570)		Common stock dividends paid	(4,160)		(4,139)
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	(935)		(1,519)
Net cash provided by financing activities	Net cash provided by financing activities	53,205		3,247		Net cash provided by financing activities	7,180		66,674
Net decrease in cash and cash equivalents	Net decrease in cash and cash equivalents	(133,434)		(363,966)		Net decrease in cash and cash equivalents	(4,059)		(48,570)
Cash and Cash Equivalents:	Cash and Cash Equivalents:					Cash and Cash Equivalents:
Beginning	Beginning	192,825		396,435		Beginning	26,539		192,825
Ending	Ending	$	59,391	$	32,469	Ending	$	22,480	$	144,255

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	$	15,259	$	9,596	Interest	$	16,515	$	3,218
Income taxes	Income taxes	7,490		9,220		Income taxes	—		—
Supplemental Disclosure of Noncash Investing and Financing Activities:
Purchase of securities available for sale, pending settlement		$	—	$	30,151

See Notes to Consolidated Financial Statements.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

1. Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared by West Bancorporation, Inc. (the Company) pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to such rules and regulations. Although management believes that the disclosures are adequate to make the information presented understandable, it is suggested that these interim consolidated financial statements be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 filed with the SEC on February ~~24, 2022.~~23, 2023. In the opinion of management, the accompanying consolidated financial statements of the Company contain all adjustments necessary to fairly present its financial position as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, and net income, comprehensive income (loss) ~~and~~, changes in stockholders' equity ~~for the three and nine months ended September 30, 2022 and 2021,~~ and cash flows for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022. 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~~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~~collectability 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~~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~~related to available for sale debt securities should be recorded through an allowance for credit losses. ~~The~~

In December 2019, the FASB ~~has also~~ issued ~~multiple updates to~~ASU No. 2019-10, Financial Instruments-Credit Losses (Topic 326). This update amended 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 was permitted. The one-time determination date for identifying as ~~codified in Topic 326, including ASU No. 2019-04, ASU No. 2019-05, ASU No. 2019-11, ASU No. 2020-02,~~a smaller reporting company was November 15, 2019. The Company met the definition of a smaller reporting company as of that date and ~~ASU No. 2020-03. These ASUs have provided for various minor technical corrections and improvements~~was not required to adopt the ~~codification as well as other transition matters.~~standard until January 1, 2023.

109

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

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

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

The Company ~~is currently evaluating~~adopted ASU No. 2016-13 using the modified retrospective method for financial assets measured at amortized cost and off-balance-sheet credit exposures. Results for the periods beginning after January 1, 2023 are presented under ASU No. 2016-13, while prior period amounts are reported in accordance with the previously applicable accounting standards. The Company recorded a reduction to retained earnings of $3,626 upon adoption of ASU No. 2016-13. The transition adjustment included an increase to the allowance for credit losses on loans of $2,458 and established an allowance for credit losses on off-balance sheet credit exposure of $2,344. There was no allowance for credit losses recorded for available-for-sale debt securities. The transition adjustment included corresponding increases in deferred tax assets of $1,176.

The following table illustrates the impact of ~~the ASU on the Company's consolidated financial statements.~~ASC 326 adoption.


	January 1, 2023
	Pre-ASC 326 Adoption		Impact of ASC 326 Adoption		As Reported Under ASC 326
Assets:
Commercial	$	4,804	$	677	$	5,481
Real estate:
Construction, land and land development	3,548		(234)		3,314
1-4 family residential first mortgages	357		121		478
Home equity	101		(8)		93
Commercial	16,575		1,911		18,486
Consumer and other	88		(9)		79
Allowance for credit losses on loans	$	25,473	$	2,458	$	27,931

Liabilities:
Liability for off-balance sheet credit exposures	$	—	$	2,344	$	2,344

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

1110

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

In March 2023, the FASB issued ASU No. 2023-02, Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using Proportional Amortization Method. The ASU is intended to improve the accounting and disclosures for investments in tax credit structures. It allows reporting entities to elect to adopt for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The Company is currently evaluating the impact of the ASU on the Company's consolidated financial statements.

2. Earnings per Common Share

Basic earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per common share reflect the potential dilution that could occur if the Company's outstanding restricted stock units were vested. The dilutive effect was computed using the treasury stock method, which assumes all stock-based awards were exercised and the hypothetical proceeds from exercise were used by the Company to purchase common stock at the average market price during the period. The incremental shares, to the extent they would have been dilutive, were included in the denominator of the diluted earnings per common share calculation. The calculations of earnings per common share and diluted earnings per common share for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ are presented in the following table.


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(in thousands, except per share data)	(in thousands, except per share data)	2022		2021		2022		2021		(in thousands, except per share data)		2023		2022
Net income	Net income	$	11,602	$	12,706	$	37,453	$	37,697	Net income		$	7,844	$	13,184

Weighted average common shares outstanding	Weighted average common shares outstanding	16,640		16,555		16,613		16,527		Weighted average common shares outstanding		16,645		16,561
Weighted average effect of restricted stock units outstanding	Weighted average effect of restricted stock units outstanding	154		248		200		245		Weighted average effect of restricted stock units outstanding		160		279
Diluted weighted average common shares outstanding	Diluted weighted average common shares outstanding	16,794		16,803		16,813		16,772		Diluted weighted average common shares outstanding		16,805		16,840

Basic earnings per common share	Basic earnings per common share	$	0.70	$	0.77	$	2.25	$	2.28	Basic earnings per common share		$	0.47	$	0.80
Diluted earnings per common share	Diluted earnings per common share	$	0.69	$	0.76	$	2.23	$	2.25	Diluted earnings per common share		$	0.47	$	0.78
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	183		—		112		—		Number of anti-dilutive common stock equivalents excluded from diluted earnings per share computation		249		18

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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)

3. Securities Available for Sale

The following tables show the amortized cost, gross unrealized gains and losses, and fair value of securities available for sale, by security type as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.


		September 30, 2022									March 31, 2023
		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	$	243,440	$	—	$	(58,322)	$	185,118	State and political subdivisions	$	242,202	$	10	$	(42,229)	$	199,983
Collateralized mortgage obligations (1)	Collateralized mortgage obligations (1)	352,414		—		(55,462)		296,952		Collateralized mortgage obligations (1)	332,044		—		(53,921)		278,123
Mortgage-backed securities (1)	Mortgage-backed securities (1)	172,553		—		(31,319)		141,234		Mortgage-backed securities (1)	166,479		—		(26,889)		139,590
Collateralized loan obligations	Collateralized loan obligations	37,948		—		(1,564)		36,384		Collateralized loan obligations	37,948		—		(1,061)		36,887
Corporate notes	Corporate notes	13,750		—		(1,686)		12,064		Corporate notes	13,750		—		(2,975)		10,775
		$	820,105	$	—	$	(148,353)	$	671,752		$	792,423	$	10	$	(127,075)	$	665,358

		December 31, 2021									December 31, 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	$	231,903	$	3,161	$	(2,617)	$	232,447	State and political subdivisions	$	242,823	$	4	$	(49,472)	$	193,355
Collateralized mortgage obligations (1)	Collateralized mortgage obligations (1)	325,406		1,627		(6,260)		320,773		Collateralized mortgage obligations (1)	338,875		—		(57,247)		281,628
Mortgage-backed securities (1)	Mortgage-backed securities (1)	157,607		167		(2,714)		155,060		Mortgage-backed securities (1)	169,451		—		(29,171)		140,280

Collateralized loan obligations	Collateralized loan obligations	37,880		59		(157)		37,782		Collateralized loan obligations	37,948		—		(1,137)		36,811
Corporate notes	Corporate notes	12,750		62		(52)		12,760		Corporate notes	13,750		—		(1,709)		12,041
		$	765,546	$	5,076	$	(11,800)	$	758,822		$	802,847	$	4	$	(138,736)	$	664,115

(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 ~~$299,397~~$381,622 and ~~$295,961~~$293,017 as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, were pledged to secure access to ~~the~~FHLB advances and Federal Reserve ~~discount window,~~credit programs, for public fund deposits, and for other purposes as required or permitted by law or regulation.

The amortized cost and fair value of securities available for sale as of ~~September 30, 2022,~~March 31, 2023, 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.


		September 30, 2022					March 31, 2023
		Amortized Cost		Fair Value			Amortized Cost		Fair Value

Due after five years through ten years	Due after five years through ten years	$	66,063	$	60,079	Due after five years through ten years	$	72,528	$	65,374
Due after ten years	Due after ten years	229,075		173,487		Due after ten years	221,372		182,271
		295,138		233,566			293,900		247,645
Collateralized mortgage obligations and mortgage-backed securities	Collateralized mortgage obligations and mortgage-backed securities	524,967		438,186		Collateralized mortgage obligations and mortgage-backed securities	498,523		417,713
		$	820,105	$	671,752		$	792,423	$	665,358

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

There were no sales of securities available for sale during the three months ended March 31, 2023 and 2022.

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, 2023 and December 31, 2022.


	March 31, 2023
	Less than 12 months					12 months or longer					Total
	Fair Value		Gross Unrealized (Losses)		No. of Securities	Fair Value		Gross Unrealized (Losses)		No. of Securities	Fair Value		Gross Unrealized (Losses)
Securities available for sale:
State and political subdivisions	$	21,169	$	(577)	39	$	176,282	$	(41,652)	74	$	197,451	$	(42,229)
Collateralized mortgage obligations	6,033		(431)		7	272,090		(53,490)		72	278,123		(53,921)
Mortgage-backed securities	1,306		(72)		2	138,284		(26,817)		25	139,590		(26,889)
Collateralized loan obligations	—		—		—	36,887		(1,061)		6	36,887		(1,061)
Corporate notes	901		(99)		1	9,874		(2,876)		7	10,775		(2,975)
	$	29,409	$	(1,179)	49	$	633,417	$	(125,896)	184	$	662,826	$	(127,075)


	December 31, 2022
	Less than 12 months					12 months or longer					Total
	Fair Value		Gross Unrealized (Losses)		No. of Securities	Fair Value		Gross Unrealized (Losses)		No. of Securities	Fair Value		Gross Unrealized (Losses)
Securities available for sale:
State and political subdivisions	$	74,676	$	(11,556)	74	$	118,487	$	(37,916)	43	$	193,163	$	(49,472)
Collateralized mortgage obligations	107,449		(14,484)		48	174,179		(42,763)		31	281,628		(57,247)
Mortgage-backed securities	31,350		(4,556)		8	108,930		(24,615)		19	140,280		(29,171)

Collateralized loan obligations	14,468		(480)		3	22,343		(657)		3	36,811		(1,137)
Corporate notes	9,185		(1,315)		5	2,856		(394)		3	12,041		(1,709)
	$	237,128	$	(32,391)	138	$	426,795	$	(106,345)	99	$	663,923	$	(138,736)

The Company adopted ASU No. 2016-13 effective January 1, 2023 which requires credit losses on available-for-sale securities to be recorded in an allowance for credit losses. If the Company intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis, then the security is written down to fair value through income. As of March 31, 2023, the Company did not have the intent to sell, nor was it more likely than not that we would be required to sell any of the securities in an unrealized loss position prior to recovery. As of March 31, 2023, the Company also determined that no individual securities in an unrealized loss position represented credit losses that would require an allowance for credit losses. The Company concluded that the unrealized losses were primarily attributed to increases in market interest rates since these securities were purchased and other market conditions. Accrued interest receivable is not included in available-for-sale security balances and is presented in the "Accrued interest receivable" line of the Consolidated Balance Sheets. Interest receivable on securities was $3,553 as of March 31, 2023, and is excluded from the estimate of credit losses.

As of December 31, 2022, the Company believed the unrealized losses on securities available for sale were due to market conditions rather than reduced estimated cash flows. At December 31, 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, under the accounting principles effective at December 31, 2022, the Company did not consider these securities to have other than temporary impairment as of December 31, 2022.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

~~The details of the sales of securities available for sale for the three and nine months ended September 30, 2022 and 2021 are summarized in the following table.~~

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Proceeds from sales $ — $ 1,413 $ — $ 30,374
Gross gains on sales — 11 — 283
Gross losses on sales — — — 232

September 30, 2022
Less than 12 months 12 months or longer Total
Fair
Value Gross
Unrealized
(Losses) Fair
Value Gross
Unrealized
(Losses) Fair
Value Gross
Unrealized
(Losses)
Securities available for sale:
State and political subdivisions $ 82,826 $ (21,448) $ 102,292 $ (36,874) $ 185,118 $ (58,322)
Collateralized mortgage obligations 163,344 (24,668) 133,608 (30,794) 296,952 (55,462)
Mortgage-backed securities 55,118 (10,180) 86,116 (21,139) 141,234 (31,319)
Collateralized loan obligations 26,648 (1,300) 9,736 (264) 36,384 (1,564)
Corporate notes 10,272 (1,478) 1,792 (208) 12,064 (1,686)
$ 338,208 $ (59,074) $ 333,544 $ (89,279) $ 671,752 $ (148,353)

December 31, 2021
Less than 12 months 12 months or longer Total
Fair
Value Gross
Unrealized
(Losses) Fair
Value Gross
Unrealized
(Losses) Fair
Value Gross
Unrealized
(Losses)
Securities available for sale:
State and political subdivisions $ 121,574 $ (1,223) $ 33,894 $ (1,394) $ 155,468 $ (2,617)
Collateralized mortgage obligations 241,320 (6,149) 2,352 (111) 243,672 (6,260)
Mortgage-backed securities 140,168 (2,714) — — 140,168 (2,714)
Collateralized loan obligations 22,821 (157) — — 22,821 (157)
Corporate notes 4,198 (52) — — 4,198 (52)
$ 530,081 $ (10,295) $ 36,246 $ (1,505) $ 566,327 $ (11,800)

As of September 30, 2022, securities available for sale with unrealized losses included 118 state and political subdivision securities, 79 collateralized mortgage obligation securities, 27 mortgage-backed securities, six collateralized loan obligation securities and eight 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 September 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 September 30, 2022 were due to market interest rate conditions rather than reduced estimated cash flows. At September 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 September 30, 2022.

~~Table of Contents~~

~~West Bancorporation, Inc. and Subsidiary~~

~~Notes to Consolidated Financial Statements~~

~~(unaudited)~~

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

4. Loans and Allowance for ~~Loan~~Credit Losses

Loans consisted of the following segments as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

September 30, 2022 December 31, 2021
Commercial $ 526,336 $ 492,815
Real estate:
Construction, land and land development 341,549 359,258
1-4 family residential first mortgages 69,991 66,216
Home equity 10,271 8,422
Commercial 1,661,907 1,530,218
Consumer and other 7,884 3,797
2,617,938 2,460,726
Net unamortized fees and costs (3,793) (4,530)
$ 2,614,145 $ 2,456,196

Included in commercial loans at September 30, 2022 and December 31, 2021, were $1,119 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.


	March 31, 2023		December 31, 2022
Commercial	$	520,894	$	519,196
Real estate:
Construction, land and land development	336,739		363,014
1-4 family residential first mortgages	75,223		75,211
Home equity	9,726		10,322
Commercial	1,810,158		1,771,940
Consumer and other	7,381		7,292
	2,760,121		2,746,975
Net unamortized fees and costs	(3,936)		(4,139)
	$	2,756,185	$	2,742,836

Real estate loans of approximately ~~$1,240,000~~$1,300,000 and $1,190,000 were pledged as security for Federal Home Loan Bank (FHLB) advances as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

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

Allowance for Credit Losses for Loans

The Company adopted ASU No. 2016-13 on January 1, 2023, at which time the Company implemented the current expected credit loss model in estimating the allowance for credit losses (ACL) valuation account. The following table details the changes in the ACL by loan segment for the three months ended March 31, 2023.











	Three Months Ended March 31, 2023
			Real Estate
	Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Beginning balance	$	4,804	$	3,548	$	357	$	101	$	16,575	$	88	$	25,473
Adoption of CECL	677		(234)		121		(8)		1,911		(9)		2,458
Charge-offs	—		—		—		—		—		—		—
Recoveries	8		—		1		1		—		—		10
Provision for credit loss expense(1)	8		(148)		(13)		(6)		159		—		—
Ending balance	$	5,497	$	3,166	$	466	$	88	$	18,645	$	79	$	27,941

(1)The negative provisions for the various segments are related to the decline in outstanding balances in each of those portfolio segments during the time periods disclosed, improvement in qualitative risk factors related to those portfolio segments and/or changes in economic forecasts.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

Prior to the adoption of ASU No. 2016-13 on January 1, 2023, the Company calculated the allowance for loan losses using the incurred loss methodology. The following table presents the activity in the allowance for loan losses by segment for the three months ended March 31, 2022.











	Three Months Ended March 31, 2022
			Real Estate
	Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Beginning balance	$	4,776	$	3,646	$	339	$	91	$	19,466	$	46	$	28,364
Charge-offs	—		—		—		—		—		—		—
Recoveries	4		—		1		1		3		—		9
Provision for loan losses(1)	(72)		352		8		9		(1,052)		5		(750)
Ending balance	$	4,708	$	3,998	$	348	$	101	$	18,417	$	51	$	27,623

(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.

The following tables present a breakdown of the allowance for credit losses by segment, disaggregated based on the evaluation method as of March 31, 2023 and December 31, 2022.


	March 31, 2023
			Real Estate
	Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Ending balance:
Individually evaluated for credit losses	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for credit losses	5,497		3,166		466		88		18,645		79		27,941
Total	$	5,497	$	3,166	$	466	$	88	$	18,645	$	79	$	27,941

	December 31, 2022
			Real Estate
	Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Ending balance:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment	4,804		3,548		357		101		16,575		88		25,473
Total	$	4,804	$	3,548	$	357	$	101	$	16,575	$	88	$	25,473

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

The following tables present the recorded investment in loans, exclusive of unamortized fees and costs, disaggregated based on the evaluation method by segment as of March 31, 2023 and December 31, 2022.


	March 31, 2023
			Real Estate
	Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Ending balance:
Individually evaluated for credit losses	$	—	$	—	$	316	$	—	$	—	$	—	$	316
Collectively evaluated for credit losses	520,894		336,739		74,907		9,726		1,810,158		7,381		2,759,805
Total	$	520,894	$	336,739	$	75,223	$	9,726	$	1,810,158	$	7,381	$	2,760,121


	December 31, 2022
			Real Estate
	Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Ending balance:
Individually evaluated for impairment	$	—	$	—	$	322	$	—	$	—	$	—	$	322
Collectively evaluated for impairment	519,196		363,014		74,889		10,322		1,771,940		7,292		2,746,653
Total	$	519,196	$	363,014	$	75,211	$	10,322	$	1,771,940	$	7,292	$	2,746,975

Under the current expected credit loss model, the ACL is a valuation account estimated at each balance sheet date and deducted from the amortized cost basis of loans to present the net amount expected to be collected. The Company estimates the ACL based on the underlying loans' amortized cost basis, which is the amount at which the loan is originated or acquired, adjusted for collection of cash and charge-offs, as well as applicable accretion or amortization of premiums, discount, and net deferred fees or costs. The Company's estimate of the ACL reflects losses expected over the remaining contractual life of the assets. The contractual term does not consider extensions, renewals or modifications unless the Company has identified an expected restructuring. In the event that collection of principal becomes uncertain, the Company has policies in place to reverse accrued interest in a timely manner. Therefore, the Company has made a policy election to exclude accrued interest from the measurement of the ACL.

Accrued interest on loans of $8,722 and $8,665 at March 31, 2023 and December 31, 2022, respectively, is included in accrued interest receivable on the balance sheet and is excluded from the estimate of credit losses.

Expected credit losses are reflected in the allowance for credit losses through a charge to credit loss expense. When the Company deems all or a portion of a loan to be uncollectible, the appropriate amount is written off and the ACL is reduced by the same amount. The Company applies judgment to determine when a loan is deemed uncollectible; however, generally speaking, a loan will be considered uncollectible no later than when all efforts at collection have been exhausted. Subsequent recoveries, if any, are credited to the ACL when received.

The Company measures expected credit losses of loans on a collective (pool) basis when the loans share similar risk characteristics and uses a cash flow based method to estimate expected credit losses for each of these pools. The Company's methodology for estimating the ACL considers available relevant information about the collectability of cash flows, including information about past events, current conditions, and reasonable and supportable forecasts. The methodologies apply historical loss information, adjusted for asset-specific characteristics, economic conditions at the measurement date, and forecasts about future economic conditions expected to exist through the contractual lives of the financial assets that are reasonable and supportable, to the identified pools of financial assets with similar risk characteristics for which the historical experience was observed.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

The Company uses the cash flow based model to estimate expected credit losses for all loan segments. For each of the loan segments, the Company calculates a cash flow projection using contractual terms, estimated prepayment speeds, estimated curtailment rates, and other relevant data. The Company uses regression analysis that links historical losses of the Company and its peer group to two economic metrics: national unemployment rate and 10-year treasury rate over 2-year treasury rate spread to establish the loss rates applied to the projected cash flows. For all loan segments, the Company uses a forecast period of four quarters and reverts to a historical rate after four quarters. When estimating prepayment speed and curtailment rates, the modeling is based on historical internal data.

Nonaccrual Loans and Delinquency Status

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

~~A loan is classified as a TDR loan when~~The following table presents the ~~Company separately concludes that a borrower is experiencing financial difficulties~~amortized cost basis of loans on nonaccrual status, loans on nonaccrual status with no allowance for credit losses recorded, 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 orpast due 90 days ~~past due if they are not performing per~~or more and still accruing by loan segment.


	Total Nonaccrual				Nonaccrual with no Allowance for Credit Losses				90 Days or More Past Due and Accruing
	March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022
Commercial	$	—	$	—	$	—	$	—	$	—	$	—
Real estate:
Construction, land and land development	—		—		—		—		—		—
1-4 family residential first mortgages	316		322		316		322		—		—
Home equity	—		—		—		—		—		—
Commercial	—		—		—		—		—		—
Consumer and other	—		—		—		—		—		—
Total	$	316	$	322	$	316	$	322	$	—	$	—

There was no interest income recognized on loans that were on nonaccrual for the ~~restructured terms.~~three months ended March 31, 2023 and March 31, 2022.

1517

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

The following tables provide an analysis of the delinquency status of the amortized cost of loans as of March 31, 2023 and December 31, 2022.


	March 31, 2023
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans
Commercial	$	—	$	—	$	—	$	—	$	520,894	$	520,894
Real estate:
Construction, land and
land development	—		—		—		—		336,739		336,739
1-4 family residential
first mortgages	—		—		—		—		75,223		75,223
Home equity	—		—		—		—		9,726		9,726
Commercial	—		—		—		—		1,810,158		1,810,158
Consumer and other	—		—		—		—		7,381		7,381
Total	$	—	$	—	$	—	$	—	$	2,760,121	$	2,760,121


	December 31, 2022
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans
Commercial	$	—	$	—	$	—	$	—	$	519,196	$	519,196
Real estate:
Construction, land and
land development	—		—		—		—		363,014		363,014
1-4 family residential
first mortgages	—		—		—		—		75,211		75,211
Home equity	—		—		—		—		10,322		10,322
Commercial	—		—		—		—		1,771,940		1,771,940
Consumer and other	—		—		—		—		7,292		7,292
Total	$	—	$	—	$	—	$	—	$	2,746,975	$	2,746,975

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

Loan Restructurings Made to Borrowers Experiencing Financial Difficulty

As of March 31, 2023 and December 31, 2022 the Company had no loan restructurings made to borrowers experiencing financial difficulty. There were no loan restructurings made to borrowers experiencing financial difficulty for which there was a payment default within twelve months following the modification during the three months ended March 31, 2023 and 2022. A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms.

Credit Quality Indicators

Based upon its ongoing assessment of credit quality within the loan portfolio, the Company maintains a Watch List, which includes loans classified as Doubtful, Substandard and Watch according to the Company's classification criteria. These loans involve the anticipated potential for payment defaults or collateral inadequacies. A loan on the Watch List is ~~considered impaired when management believes it is probable the Company will be unable~~analyzed individually to ~~collect all contractual principal and interest payments due in accordance with the terms of~~categorize the loan ~~agreement. Impaired loans are measured based on~~to 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 $0 and $8,599 as of September 30, 2022 and December 31, 2021, respectively, and were included in the nonaccrual~~appropriate credit risk category. There were no loan modifications considered to be TDR that occurred during the three and nine months ended September 30, 2022. There were six loan modifications related to one borrower considered to be TDR, with a pre- and post-modification recorded investment of $14,044, that occurred during the three and nine months ended September 30, 2021. A specific reserve of $0 and $2,500 related to TDR loans was recorded at September 30, 2022 and December 31, 2021, respectively. No TDR loans that were modified within the 12 months preceding September 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.

~~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 September 30, 2022 and December 31, 2021.

September 30, 2022 December 31, 2021
Recorded Investment Unpaid Principal Balance Related Allowance Recorded Investment Unpaid Principal Balance Related Allowance
With no related allowance recorded:
Commercial $ — $ — $ — $ — $ — $ —
Real estate:
Construction, land and land development — — — — — —
1-4 family residential first mortgages 329 329 — 349 349 —
Home equity — — — — — —
Commercial — — — — — —
Consumer and other — — — — — —
329 329 — 349 349 —
With an allowance recorded:
Commercial — — — — — —
Real estate:
Construction, land and land development — — — — — —
1-4 family residential first mortgages — — — — — —
Home equity — — — — — —
Commercial — — — 8,599 8,599 2,500
Consumer and other — — — — — —
— — — 8,599 8,599 2,500
Total:
Commercial — — — — — —
Real estate:
Construction, land and land development — — — — — —
1-4 family residential first mortgages 329 329 — 349 349 —
Home equity — — — — — —
Commercial — — — 8,599 8,599 2,500
Consumer and other — — — — — —
$ 329 $ 329 $ — $ 8,948 $ 8,948 $ 2,500

~~The Company has no commitments to advance additional funds on any of the impaired loans.~~

~~Table of Contents~~

~~West Bancorporation, Inc. and Subsidiary~~

~~Notes to Consolidated Financial Statements~~

~~(unaudited)~~

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

~~The following table summarizes the average recorded investment and interest income recognized on impaired loans by segment for the three and nine months ended September 30, 2022 and 2021.~~

Three Months Ended September 30, Nine Months Ended September 30,
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
With no related allowance recorded:
Commercial $ — $ — $ — $ — $ — $ — $ — $ —
Real estate:
Construction, land and land development — — — — — — — —
1-4 family residential first mortgages 332 — 360 — 338 — 367 —
Home equity — — — — — — — —
Commercial — — — — — — — —
Consumer and other — — — — — — — —
332 — 360 — 338 — 367 —
With an allowance recorded:
Commercial — — — — — — — —
Real estate:
Construction, land and land development — — — — — — — —
1-4 family residential first mortgages — — — — — — — —
Home equity — — — — — — — —
Commercial — — 12,781 — 5,090 — 14,310 —
Consumer and other — — — — — — — —
— — 12,781 — 5,090 — 14,310 —
Total:
Commercial — — — — — — — —
Real estate:
Construction, land and land development — — — — — — — —
1-4 family residential first mortgages 332 — 360 — 338 — 367 —
Home equity — — — — — — — —
Commercial — — 12,781 — 5,090 — 14,310 —
Consumer and other — — — — — — — —
$ 332 $ — $ 13,141 $ — $ 5,428 $ — $ 14,677 $ —

~~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 September 30, 2022 and December 31, 2021.~~

September 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
Commercial $ — $ — $ — $ — $ 526,336 $ — $ 526,336
Real estate:
Construction, land and
land development — — — — 341,549 — 341,549
1-4 family residential
first mortgages — — — — 69,662 329 69,991
Home equity — — — — 10,271 — 10,271
Commercial — — — — 1,661,907 — 1,661,907
Consumer and other — — — — 7,884 — 7,884
Total $ — $ — $ — $ — $ 2,617,609 $ 329 $ 2,617,938

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

~~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 September 30, 2022 and December 31, 2021.~~

September 30, 2022
Pass Watch Substandard Doubtful Total
Commercial $ 526,336 $ — $ — $ — $ 526,336
Real estate:
Construction, land and land development 341,500 49 — — 341,549
1-4 family residential first mortgages 69,414 150 427 — 69,991
Home equity 10,271 — — — 10,271
Commercial 1,604,317 57,590 — — 1,661,907
Consumer and other 7,884 — — — 7,884
Total $ 2,559,722 $ 57,789 $ 427 $ — $ 2,617,938

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.

~~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.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

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

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

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

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

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

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

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

The 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 offollowing tables present the ~~collectability~~amortized cost basis of loans by loan segment, credit quality indicator 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,origination year, and the current ~~economic conditions that may affect~~period gross write-off by loan segment and origination year, based on the ~~borrower's ability to pay. Loans are charged-off against the allowance for loan losses when management believes that collectability~~analysis performed as 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.March 31, 2023 and December 31, 2022.


	Term Loans by Origination Year
As of March 31, 2023	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total
Commercial
Pass	$	64,257	$	129,097	$	60,612	$	46,986	$	8,937	$	49,173	$	161,832	$	520,894
Watch	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	64,257	$	129,097	$	60,612	$	46,986	$	8,937	$	49,173	$	161,832	$	520,894
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Real estate:
Construction, land and land development
Pass	$	6,086	$	53,833	$	21,637	$	2,389	$	1,536	$	193	$	251,021	$	336,695
Watch	—		44		—		—		—		—		—		44
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	6,086	$	53,877	$	21,637	$	2,389	$	1,536	$	193	$	251,021	$	336,739
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
1-4 family residential first mortgages
Pass	$	5,203	$	22,187	$	21,218	$	13,459	$	3,955	$	4,614	$	4,036	$	74,672
Watch	147		—		—		—		—		—		—		147
Substandard	—		88		—		—		316		—		—		404
Doubtful	—		—		—		—		—		—		—		—
Total	$	5,350	$	22,275	$	21,218	$	13,459	$	4,271	$	4,614	$	4,036	$	75,223
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Home equity
Pass	$	129	$	401	$	585	$	488	$	129	$	162	$	7,832	$	9,726
Watch	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	129	$	401	$	585	$	488	$	129	$	162	$	7,832	$	9,726
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial
Pass	$	43,243	$	434,292	$	416,913	$	405,642	$	90,607	$	215,846	$	151,040	$	1,757,583
Watch	—		22,390		30,185		—		—		—		—		52,575
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	43,243	$	456,682	$	447,098	$	405,642	$	90,607	$	215,846	$	151,040	$	1,810,158
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Consumer and other
Pass	$	297	$	623	$	703	$	85	$	74	$	203	$	5,396	$	7,381
Watch	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	297	$	623	$	703	$	85	$	74	$	203	$	5,396	$	7,381
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

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.


	Term Loans by Origination Year
As of December 31, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans		Total
Commercial
Pass	$	148,637	$	64,984	$	63,072	$	9,873	$	23,771	$	24,103	$	184,756	$	519,196
Watch	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	148,637	$	64,984	$	63,072	$	9,873	$	23,771	$	24,103	$	184,756	$	519,196
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Real estate:
Construction, land and land development
Pass	$	75,946	$	24,095	$	2,501	$	1,562	$	196	$	—	$	258,667	$	362,967
Watch	47		—		—		—		—		—		—		47
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	75,993	$	24,095	$	2,501	$	1,562	$	196	$	—	$	258,667	$	363,014
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
1-4 family residential first mortgages
Pass	$	23,608	$	23,460	$	14,879	$	4,229	$	1,283	$	4,267	$	2,927	$	74,653
Watch	—		148		—		—		—		—		—		148
Substandard	88		—		—		322		—		—		—		410
Doubtful	—		—		—		—		—		—		—		—
Total	$	23,696	$	23,608	$	14,879	$	4,551	$	1,283	$	4,267	$	2,927	$	75,211
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	31	$	—	$	31
Home equity
Pass	$	413	$	613	$	512	$	130	$	169	$	—	$	8,485	$	10,322
Watch	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	413	$	613	$	512	$	130	$	169	$	—	$	8,485	$	10,322
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial
Pass	$	429,826	$	421,283	$	403,195	$	92,304	$	54,723	$	169,055	$	147,518	$	1,717,904
Watch	22,553		30,573		—		910		—		—		—		54,036
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	452,379	$	451,856	$	403,195	$	93,214	$	54,723	$	169,055	$	147,518	$	1,771,940
Current period gross writeoffs	$	—	$	451	$	—	$	—	$	—	$	—	$	—	$	451
Consumer and other
Pass	$	1,176	$	1,082	$	136	$	86	$	272	$	72	$	4,468	$	7,292
Watch	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	1,176	$	1,082	$	136	$	86	$	272	$	72	$	4,468	$	7,292
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

~~The following tables detail the changes in the allowance for loan losses by segment for the three and nine months ended September 30, 2022 and 2021.~~

Three Months Ended September 30, 2022
Real Estate
Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total
Beginning balance $ 4,661 $ 4,043 $ 373 $ 95 $ 16,189 $ 73 $ 25,434
Charge-offs — — (31) — — — (31)
Recoveries 9 — 1 1 4 — 15
Provision (1)
429 (557) 20 9 82 17 —
Ending balance $ 5,099 $ 3,486 $ 363 $ 105 $ 16,275 $ 90 $ 25,418
Three Months Ended September 30, 2021
Real Estate
Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total
Beginning balance $ 4,464 $ 2,950 $ 359 $ 91 $ 20,129 $ 49 $ 28,042
Charge-offs — — — — — — —
Recoveries 45 — 1 1 4 5 56
Provision (1)
191 498 (5) 9 (686) (7) —
Ending balance $ 4,700 $ 3,448 $ 355 $ 101 $ 19,447 $ 47 $ 28,098
Nine Months Ended September 30, 2022
Real Estate
Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total
Beginning balance $ 4,776 $ 3,646 $ 339 $ 91 $ 19,466 $ 46 $ 28,364
Charge-offs — — (31) — (451) — (482)
Recoveries 21 — 2 3 10 — 36
Provision (1)
302 (160) 53 11 (2,750) 44 (2,500)
Ending balance $ 5,099 $ 3,486 $ 363 $ 105 $ 16,275 $ 90 $ 25,418
Nine Months Ended September 30, 2021
Real Estate
Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total
Beginning balance $ 4,718 $ 2,634 $ 360 $ 114 $ 21,535 $ 75 $ 29,436
Charge-offs — — — — — — —
Recoveries 142 — 2 3 10 5 162
Provision (1)
(160) 814 (7) (16) (2,098) (33) (1,500)
Ending balance $ 4,700 $ 3,448 $ 355 $ 101 $ 19,447 $ 47 $ 28,098

~~(1)~~

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

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

~~The following tables present a breakdown~~

Collateral Dependent Loans

Loans that do not share risk characteristics are evaluated on an individual basis. For collateral dependent loans where the Company has determined that foreclosure of the ~~allowance for loan losses disaggregated~~collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loans to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of ~~impairment analysis method by segment~~the loan as of ~~September 30, 2022 and December 31, 2021.~~

September 30, 2022
Real Estate
Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total
Ending balance:
Individually evaluated for impairment $ — $ — $ — $ — $ — $ — $ —
Collectively evaluated for impairment 5,099 3,486 363 105 16,275 90 25,418
Total $ 5,099 $ 3,486 $ 363 $ 105 $ 16,275 $ 90 $ 25,418
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 $ — $ — $ — $ — $ 2,500 $ — $ 2,500
Collectively evaluated for impairment 4,776 3,646 339 91 16,966 46 25,864
Total $ 4,776 $ 3,646 $ 339 $ 91 $ 19,466 $ 46 $ 28,364
the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the present value of expected cash flows from the operation of collateral. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the fair value of the underlying collateral less estimated cost to sell. The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the loan.

The following ~~tables present~~table presents the ~~recorded investment in loans, exclusive of unamortized fees and costs, disaggregated on the~~amortized cost basis of ~~impairment analysis method~~collateral dependent loans, by ~~segment as of September 30, 2022~~primary collateral type, which are individually evaluated to determine expected credit losses, and ~~December 31, 2021.~~the related ACL allocated to these loans.

September 30, 2022
Real Estate
Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total
Ending balance:
Individually evaluated for impairment $ — $ — $ 329 $ — $ — $ — $ 329
Collectively evaluated for impairment 526,336 341,549 69,662 10,271 1,661,907 7,884 2,617,609
Total $ 526,336 $ 341,549 $ 69,991 $ 10,271 $ 1,661,907 $ 7,884 $ 2,617,938

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


	As of March 31, 2023
	Primary Type of Collateral
	Real Estate		Equipment		Other		Total		ACL Allocation
Commercial	$	—	$	—	$	—	$	—	$	—
Real estate:
Construction, land and land development	—		—		—		—		—
1-4 family residential first mortgages	316		—		—		316		—
Home equity	—		—		—		—		—
Commercial	—		—		—		—		—
Consumer and other	—		—		—		—		—
Total	$	316	$	—	$	—	$	316	$	—


	As of December 31, 2022
	Primary Type of Collateral
	Real Estate		Equipment		Other		Total		ACL Allocation
Commercial	$	—	$	—	$	—	$	—	$	—
Real estate:
Construction, land and land development	—		—		—		—		—
1-4 family residential first mortgages	322		—		—		322		—
Home equity	—		—		—		—		—
Commercial	—		—		—		—		—
Consumer and other	—		—		—		—		—
Total	$	322	$	—	$	—	$	322	$	—

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

Allowance for Credit Losses on Off-Balance-Sheet Credit Exposures

The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The Company has recorded an allowance for credit losses for unfunded commitments of $2,344 as of March 31, 2023. The allowance for credit losses for off-balance-sheet credit exposures is presented in the "Accrued expenses and other liabilities" line of the Consolidated Balance Sheets. Changes in the allowance for credit losses for off-balance-sheet credit exposures is reflected in the "Credit loss expense " line of the Consolidated Statements of Income. There were no changes to the allowance for credit losses for off-balance-sheet credit exposures during the three months ended March 31, 2023.

5. Derivatives

The Company has entered into various interest rate swap agreements as part of its interest rate risk management strategy. The Company uses interest rate swaps to manage its interest rate risk exposure on certain loans, 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 ~~$280,000~~$375,000 and ~~$255,000~~$310,000 at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. As of ~~September 30, 2022,~~March 31, 2023, the Company had swaps with a total notional amount of ~~$150,000~~$245,000 that hedge the interest payments of rolling fixed-rate one-month funding consisting of FHLB advances or brokered deposits. One of these swaps with a total notional amount of $25,000 is a forward-starting swap with a starting date in September 2023. Also as of ~~September 30, 2022,~~March 31, 2023, 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 September 30, 2022 and December 31, 2021.~~

September 30, 2022 December 31, 2021
Cash Flow Hedges:
Gross notional amount $ 280,000 $ 255,000
Fair value in other assets 17,149 —
Fair value in other liabilities — (7,517)
Weighted-average floating rate received 3.12 % 0.39 %
Weighted-average fixed rate paid 2.09 % 2.09 %
Weighted-average maturity in years 3.5 4.2
Non-Hedging Derivatives:
Gross notional amount $ 255,733 $ 172,008
Fair value in other assets 16,073 3,887
Fair value in other liabilities (16,073) (3,887)

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

The table below identifies the balance sheet category and fair values of the Company's derivative instruments as of March 31, 2023 and December 31, 2022.


	March 31, 2023			December 31, 2022
Cash Flow Hedges:
Gross notional amount	$	375,000		$	310,000
Fair value in other assets	13,025			16,284
Fair value in other liabilities	(333)			—
Weighted-average floating rate received	4.93		%	4.53		%
Weighted-average fixed rate paid	2.45		%	2.25		%
Weighted-average maturity in years	3.4			3.3

Non-Hedging Derivatives:
Gross notional amount	$	253,483		$	254,369
Fair value in other assets	12,508			15,309
Fair value in other liabilities	(12,508)			(15,309)

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 nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Pre-tax gain recognized in other comprehensive income		$	8,637	$	359	$	23,239	$	5,801
Pre-tax gain (loss) recognized in other comprehensive income										Pre-tax gain (loss) recognized in other comprehensive income		$	(1,634)	$	10,536
Reclassification from AOCI into income:	Reclassification from AOCI into income:									Reclassification from AOCI into income:
Increase (decrease) in interest expense	Increase (decrease) in interest expense	$	(259)	$	(1,105)	$	1,428	$	(3,573)	Increase (decrease) in interest expense		$	(1,958)	$	1,045
Decrease in noninterest income, swap termination fees		—		—		—		(3,600)

The Company estimates there will be approximately ~~$2,615~~$8,695 reclassified from accumulated other comprehensive income to reduce interest expense through the 12 months ending ~~September 30, 2023~~March 31, 2024 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 ~~September 30, 2022~~both March 31, 2023 and December 31, ~~2021,~~2022, the Company pledged $0 ~~and $4,500, respectively,~~ of collateral to the counterparties in the form of cash on deposit. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company's counterparties pledged ~~$32,390~~$26,280 and ~~$0,~~$31,560, 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.

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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Deferred tax assets:	Deferred tax assets:					Deferred tax assets:
Allowance for loan losses		$	6,202	$	7,176
Allowance for credit losses						Allowance for credit losses	$	7,420	$	6,241
Net unrealized losses on securities available for sale	Net unrealized losses on securities available for sale	36,790		1,701		Net unrealized losses on securities available for sale	31,639		34,544
Net unrealized losses on interest rate swaps		—		1,903

Lease liabilities	Lease liabilities	1,219		1,502		Lease liabilities	1,069		1,147
Accrued expenses	Accrued expenses	364		395		Accrued expenses	213		434
Restricted stock unit compensation	Restricted stock unit compensation	822		821		Restricted stock unit compensation	663		1,038
State net operating loss carryforward	State net operating loss carryforward	1,401		1,276		State net operating loss carryforward	1,527		1,476

Other	Other	153		139		Other	171		156
		46,951		14,913			42,702		45,036
Deferred tax liabilities:	Deferred tax liabilities:					Deferred tax liabilities:
Right-of-use assets	Right-of-use assets	1,172		1,450		Right-of-use assets	1,022		1,099
Net deferred loan fees and costs		246		247
Deferred loan costs						Deferred loan costs	260		249

Net unrealized gains on interest rate swaps	Net unrealized gains on interest rate swaps	4,199		—		Net unrealized gains on interest rate swaps	3,121		4,003
Premises and equipment	Premises and equipment	1,251		809		Premises and equipment	1,198		1,219
New markets tax credit loan						New markets tax credit loan	325		303
Other	Other	355		312		Other	127		78
		7,223		2,818			6,053		6,951
Net deferred tax assets before valuation allowance	Net deferred tax assets before valuation allowance	39,728		12,095		Net deferred tax assets before valuation allowance	36,649		38,085
Valuation allowance	Valuation allowance	(1,401)		(1,276)		Valuation allowance	(1,527)		(1,476)
Net deferred tax assets	Net deferred tax assets	$	38,327	$	10,819	Net deferred tax assets	$	35,122	$	36,609

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~~2023 and thereafter.

In the second quarter of 2022, the Company recorded 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 nine months ended September 30, 2022 was 22.18 percent. Excluding this one-time state tax expense, the effective tax rate for the nine months ended September 30, 2022 would have been 20.79 percent.

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 ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.


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

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	(106,011)		17,486		(88,525)		Other comprehensive income (loss) before reclassifications	(40,782)		7,870		(32,912)
Amounts reclassified from accumulated other comprehensive income	Amounts reclassified from accumulated other comprehensive income	(11)		1,009		998		Amounts reclassified from accumulated other comprehensive income	—		781		781
Net current period other comprehensive income (loss)	Net current period other comprehensive income (loss)	(106,022)		18,495		(87,527)		Net current period other comprehensive income (loss)	(40,782)		8,651		(32,131)
Balance, September 30, 2022		$	(111,043)	$	12,879	$	(98,164)

Balance, December 31, 2020		$	5,994	$	(17,840)	$	(11,846)
Other comprehensive income (loss) before reclassifications		(7,826)		4,340		(3,486)
Amounts reclassified from accumulated other comprehensive income		(38)		5,365		5,327
Net current period other comprehensive income (loss)		(7,864)		9,705		1,841
Balance, September 30, 2021		$	(1,870)	$	(8,135)	$	(10,005)
Balance, March 31, 2022								Balance, March 31, 2022	$	(45,803)	$	3,035	$	(42,768)

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 adopted ASU No. 2016-13 effective January 1, 2023 which requires an allowance for credit losses on off-balance sheet credit exposure. See Note 4 for additional information. The Company's commitments consisted of the following amounts as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Commitments to fund real estate construction loans	Commitments to fund real estate construction loans	$	405,058	$	294,580	Commitments to fund real estate construction loans	$	403,841	$	336,900
Other commitments to extend credit	Other commitments to extend credit	697,725		585,678		Other commitments to extend credit	698,520		727,666
Standby letters of credit	Standby letters of credit	18,397		17,391		Standby letters of credit	19,819		20,557
		$	1,121,180	$	897,649		$	1,122,180	$	1,085,123

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

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 ~~$24,197~~$22,720 and ~~$31,552~~$23,337 at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Contractual commitments: The Company had remaining commitments to invest in qualified affordable housing projects totaling ~~$3,707~~$3,012 and ~~$3,986~~$3,431 as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

~~Table of Contents~~

~~West Bancorporation, Inc. and Subsidiary~~

~~Notes to Consolidated Financial Statements~~

~~(unaudited)~~

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

West Bank entered into a construction contract in 2022 for the construction of a new headquarters building in West Des Moines, ~~Iowa subsequent to quarter-end.~~Iowa. West Bank will pay the contractor a contract price consisting of the cost of work plus a fee, subject to a guaranteed maximum price of $42,309, with anticipated construction completed in 2024. As of ~~September 30, 2022, $1,499 has been paid~~March 31, 2023, there was a remaining commitment of $30,415 under this ~~construction~~ contract. West Bank is also building a new office in Mankato, Minnesota to be completed in the fall of 2023, which had a remaining commitment of $5,426 as of March 31, 2023.

Concentrations of credit risk: Substantially all of the Company's loans, commitments to extend credit and standby letters of credit have been granted to customers in the Company's market areas. The concentrations of credit by type of loan are set forth in Note 4. The distribution by type of loan of commitments to extend credit approximates the distribution by type of loan outstanding. Standby letters of credit were granted primarily to commercial borrowers.

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

9. Fair Value Measurements

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

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

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

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

The Company's policy is to recognize transfers between levels at the end of each reporting period, if applicable. There were no transfers between levels of the fair value hierarchy during the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023.

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.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

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.

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, 2023 and December 31, 2022.


	March 31, 2023
	Total		Level 1		Level 2		Level 3
Financial assets:
Securities available for sale:
State and political subdivisions	$	199,983	$	—	$	199,983	$	—
Collateralized mortgage obligations	278,123		—		278,123		—
Mortgage-backed securities	139,590		—		139,590		—
Collateralized loan obligations	36,887		—		36,887		—
Corporate notes	10,775		—		10,775		—
Derivative instruments, interest rate swaps	25,533		—		25,533		—

Financial liabilities:
Derivative instruments, interest rate swaps	$	12,841	$	—	$	12,841	$	—


	December 31, 2022
	Total		Level 1		Level 2		Level 3
Financial assets:
Securities available for sale:
State and political subdivisions	$	193,355	$	—	$	193,355	$	—
Collateralized mortgage obligations	281,628		—		281,628		—
Mortgage-backed securities	140,280		—		140,280		—

Collateralized loan obligations	36,811		—		36,811		—
Corporate notes	12,041		—		12,041		—
Derivative instruments, interest rate swaps	31,593		—		31,593		—

Financial liabilities:
Derivative instruments, interest rate swaps	$	15,309	$	—	$	15,309	$	—

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 September 30, 2022 and December 31, 2021.~~

September 30, 2022
Total Level 1 Level 2 Level 3
Financial assets:
Securities available for sale:
State and political subdivisions $ 185,118 $ — $ 185,118 $ —
Collateralized mortgage obligations 296,952 — 296,952 —
Mortgage-backed securities 141,234 — 141,234 —
Collateralized loan obligations 36,384 — 36,384 —
Corporate notes 12,064 — 12,064 —
Derivative instruments, interest rate swaps 33,222 — 33,222 —
Financial liabilities:
Derivative instruments, interest rate swaps $ 16,073 $ — $ 16,073 $ —

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 $6,099 for which a fair value adjustment was recorded were classified as Level 3 as of December 31, 2021.~~ As of both March 31, 2023 and 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 September 30,~~ 2022, there were no individually evaluated loans ~~for which~~with a fair value ~~adjustment was recorded.~~adjustment. Individually evaluated loans are classified within Level 3 of the fair value hierarchy and are evaluated and valued at the lower of cost or fair value when the loan is individually evaluated. Fair value is based on the value of the collateral securing these loans.

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

~~Table of Contents~~

~~West Bancorporation, Inc. and Subsidiary~~

~~Notes to Consolidated Financial Statements~~

~~(unaudited)~~

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

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

~~Valuation Technique~~

~~Unobservable Inputs~~

~~Range (Weighted Average)~~

~~September 30, 2022~~

~~Impaired loans~~

—

~~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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.


		September 30, 2022											March 31, 2023
		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	$	58,342	$	58,342	$	58,342	$	—	$	—	Cash and due from banks	$	21,579	$	21,579	$	21,579	$	—	$	—
Federal funds sold		1,049		1,049		1,049		—		��
Interest-bearing deposits												Interest-bearing deposits	901		901		901		—		—
Securities available for sale	Securities available for sale	671,752		671,752		—		671,752		—		Securities available for sale	665,358		665,358		—		665,358		—
Federal Home Loan Bank stock	Federal Home Loan Bank stock	18,350		18,350		18,350		—		—		Federal Home Loan Bank stock	22,226		22,226		22,226		—		—
Loans, net	Loans, net	2,588,727		2,445,989		—		2,445,989		—		Loans, net	2,728,244		2,623,471		—		2,623,471		—
Accrued interest receivable	Accrued interest receivable	10,786		10,786		10,786		—		—		Accrued interest receivable	12,284		12,284		12,284		—		—
Interest rate swaps	Interest rate swaps	33,222		33,222		—		33,222		—		Interest rate swaps	25,533		25,533		—		25,533		—
Financial liabilities:	Financial liabilities:											Financial liabilities:
Deposits	Deposits	$	2,822,847	$	2,822,099	$	—	$	2,822,099	$	—	Deposits	$	2,798,393	$	2,798,370	$	—	$	2,798,370	$	—
Federal funds purchased		204,500		204,500		204,500		—		—
Federal funds purchased and other short-term borrowings												Federal funds purchased and other short-term borrowings	229,290		229,290		229,290		—		—
Subordinated notes, net	Subordinated notes, net	79,303		71,013		—		71,013		—		Subordinated notes, net	79,435		69,275		—		69,275		—
Federal Home Loan Bank advances	Federal Home Loan Bank advances	125,000		125,000		—		125,000		—		Federal Home Loan Bank advances	220,000		220,000		—		220,000		—
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	2,370		2,370		2,370		—		—		Accrued interest payable	5,173		5,173		5,173		—		—
Interest rate swaps	Interest rate swaps	16,073		16,073		—		16,073		—		Interest rate swaps	12,841		12,841		—		12,841		—
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	—		—		—		—		—

Table of Contents

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.


	December 31, 2022
	Carrying Amount		Approximate Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and due from banks	$	24,896	$	24,896	$	24,896	$	—	$	—
Interest-bearing deposits	1,643		1,643		1,643		—		—
Securities available for sale	664,115		664,115		—		664,115		—
Federal Home Loan Bank stock	19,336		19,336		19,336		—		—
Loans, net	2,717,363		2,582,911		—		2,582,911		—
Accrued interest receivable	11,988		11,988		11,988		—		—
Interest rate swaps	31,593		31,593		—		31,593		—
Financial liabilities:
Deposits	$	2,880,408	$	2,880,495	$	—	$	2,880,495	$	—
Federal funds purchased and other short-term borrowings	200,000		200,000		200,000		—		—
Subordinated notes, net	79,369		68,047		—		68,047		—
Federal Home Loan Bank advances	155,000		155,000		—		155,000		—
Long-term debt	51,486		51,486		—		51,486		—
Accrued interest payable	3,260		3,260		3,260		—		—
Interest rate swaps	15,309		15,309		—		15,309		—
Off-balance sheet financial instruments:
Commitments to extend credit	—		—		—		—		—
Standby letters of credit	—		—		—		—		—

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

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

"SAFE HARBOR" CONCERNING FORWARD-LOOKING STATEMENTS

Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to the Company’s business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meanings of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Forward-looking statements may appear throughout this report. These forward-looking statements are generally identified by the words “believes,” “expects,” “intends,” “anticipates,” “projects,” “future,” “confident,” “may,” “should,” “will,” “strategy,” “plan,” “opportunity,” “will be,” “will likely result,” “will continue” or similar references, or references to estimates, predictions or future events. Such forward-looking statements are based upon certain underlying assumptions, risks and uncertainties. Because of the possibility that the underlying assumptions are incorrect or do not materialize as expected in the future, actual results could differ materially from these forward-looking statements. Risks and uncertainties that may affect future results include: interest rate risk, including the effects of recent rate increases by the Federal Reserve; fluctuations in the values of the securities held in our investment portfolio, including as a result of rising interest ~~rates;~~rates, which has resulted in unrealized losses in our portfolio; competitive pressures, including from non-bank competitors such as "fintech" ~~companies;~~companies and digital asset service providers; pricing pressures on loans and deposits; our ability to successfully manage liquidity risk; changes in credit and other risks posed by the Company’s loan portfolio, including declines in commercial or residential real estate values or changes in the allowance for ~~loan~~credit 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; the concentration of large deposits from certain clients, who have balances above current FDIC insurance limits and may withdraw deposits to diversify their exposure; changes in local, national and international economic conditions, including rising rates of inflation; the effects of recent developments and events in the financial services industry, including the large-scale deposit withdrawals over a short period of time at Silicon Valley Bank and Signature Bank that resulted in failure of those institutions; changes in legal and regulatory requirements, limitations and ~~costs;~~costs, including in response to the recent failures of Silicon Valley Bank and Signature Bank; changes in customers’ acceptance of the Company’s products and services; cyber-attacks; unexpected outcomes of existing or new litigation involving the Company; the monetary, trade and other regulatory policies of the U.S. government; acts of war or terrorism, including the Russian invasion of Ukraine, widespread disease or pandemics, such as the COVID-19 pandemic, or other adverse external events; risks related to climate change and the negative impact it may have on our customers and their business; developments and uncertainty related to the future use and availability of some reference rates, such as the expected discontinuation of the London Interbank Offered Rate ~~as well as~~and the development of other alternative reference rates; changes to U.S. tax laws, regulations and guidance; talent and labor shortages; the new 1%1 percent excise tax on stock buybacks by publicly traded companies; and any other risks described in the “Risk Factors” sections of this and other reports filed by the Company with the SEC. The Company undertakes no obligation to revise or update such forward-looking statements to reflect current or future events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of the Company's financial condition and results of operations are based upon the Company's consolidated financial statements that have been prepared in accordance with GAAP. The preparation of the Company's financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, income and expenses. These estimates are based upon historical experience and on various other assumptions that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The estimates and judgments that management believes involve the most complex and subjective estimates and judgments and have the most effect on the Company's reported financial position and results of operations are described as critical accounting policies in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, as filed with the SEC on February ~~24, 2022. There have been no significant changes~~23, 2023. The Company adopted ASU 2016-13 on January 1, 2023 and replaced the allowance for loan losses "incurred loss" model discussed in the ~~critical~~Form 10-K for the year ended December 31, 2022 with the allowance for credit losses "current expected credit loss" model, referred to as the CECL model. Refer to Note 1 and 4 for additional information and accounting policies orrelated to the ~~assumptions and judgments utilized in applying these policies since December 31, 2021.~~CECL model.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

NON-GAAP FINANCIAL MEASURES

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

The following table reconciles the non-GAAP financial measures of net interest income and net interest margin on a ~~fully taxable equivalent~~FTE basis and 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 September 30,						Nine Months Ended September 30,								Three Months Ended March 31,
		2022			2021			2022			2021						2023			2022
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)	$	23,004		$	24,486		$	71,071		$	70,457			Net interest income (GAAP)		$	18,695		$	23,828
Tax-equivalent adjustment (1)	Tax-equivalent adjustment (1)	270			306			925			805				Tax-equivalent adjustment (1)		161			329
Net interest income on a FTE basis (non-GAAP)	Net interest income on a FTE basis (non-GAAP)	23,274			24,792			71,996			71,262				Net interest income on a FTE basis (non-GAAP)		18,856			24,157
Average interest-earning assets	Average interest-earning assets	3,322,521			3,212,283			3,371,915			3,099,066				Average interest-earning assets		3,435,988			3,432,114
Net interest margin on a FTE basis (non-GAAP)	Net interest margin on a FTE basis (non-GAAP)	2.78		%	3.06		%	2.85		%	3.07		%		Net interest margin on a FTE basis (non-GAAP)		2.23		%	2.85		%

Reconciliation of efficiency ratio on an adjusted and FTE basis to GAAP:	Reconciliation of efficiency ratio on an adjusted and FTE basis to GAAP:														Reconciliation of efficiency ratio on an adjusted and FTE basis to GAAP:
Net interest income on a FTE basis (non-GAAP)	Net interest income on a FTE basis (non-GAAP)	$	23,274		$	24,792		$	71,996		$	71,262			Net interest income on a FTE basis (non-GAAP)		$	18,856		$	24,157
Noninterest income	Noninterest income	3,276			2,401			7,943			7,381				Noninterest income		2,957			2,389
Adjustment for realized securities gains, net		—			(11)			—			(51)

Adjustment for losses on disposal of premises and equipment, net	Adjustment for losses on disposal of premises and equipment, net	—			—			27			29				Adjustment for losses on disposal of premises and equipment, net		—			18
Adjusted income	Adjusted income	26,550			27,182			79,966			78,621				Adjusted income		21,813			26,564
Noninterest expense	Noninterest expense	11,458			10,712			33,386			31,509				Noninterest expense		12,071			10,662
Efficiency ratio on an adjusted and FTE basis (non-GAAP) (2)	Efficiency ratio on an adjusted and FTE basis (non-GAAP) (2)	43.16		%	39.41		%	41.75		%	40.08		%		Efficiency ratio on an adjusted and FTE basis (non-GAAP) (2)		55.34		%	40.14		%

					September 30, 2022			December 31, 2021			September 30, 2021
Reconciliation of allowance for loan losses ratio, excluding PPP loans:
Loans outstanding (GAAP)					$	2,614,145		$	2,456,196		$	2,359,567
Less: PPP loans					(1,119)			(22,206)			(47,416)
Loans, net of PPP loans (non-GAAP)					2,613,026			2,433,990			2,312,151
Allowance for loan losses					25,418			28,364			28,098
Allowance for loan losses ratio, excluding PPP loans (non-GAAP) (3)					0.97		%	1.17		%	1.22		%

(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.

3433

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

OVERVIEW

The following discussion describes the consolidated operations and financial condition of the Company, West Bank and West Bank's special purpose subsidiaries (which are invested in new markets tax credit activities). Results of operations for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 are compared to the results for the same ~~periods~~period in ~~2021,~~2022, and the consolidated financial condition of the Company as of ~~September 30, 2022~~March 31, 2023 is compared to that as of December 31, ~~2021.~~2022. 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,~~2022, filed with the SEC on February ~~24, 2022.~~23, 2023.

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 ~~September 30, 2022~~March 31, 2023 was ~~$11,602,~~$7,844, or ~~$0.69~~$0.47 per diluted common share, compared to ~~$12,706,~~$13,184, or ~~$0.76~~$0.78 per diluted common share, for the three months ended ~~September 30, 2021.~~March 31, 2022. The Company's annualized return on average assets and return on average equity for the three months ended ~~September 30, 2022~~March 31, 2023 were ~~1.32~~0.88 percent and ~~21.01~~14.77 percent, respectively, compared to ~~1.52~~1.51 percent and ~~20.02~~20.96 percent, respectively, for the three months ended ~~September 30, 2021.~~March 31, 2022.

The decrease in net income for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the same period in ~~2021~~2022 was primarily due to a decrease in net interest income and an increase in salaries and employee benefits, partially offset by an increase in ~~loan swap fees and a decrease in FDIC insurance expense.~~gain from bank-owned life insurance.

Net interest income for the three months ended ~~September 30, 2022 decreased $1,482,~~March 31, 2023 declined $5,133, or ~~6.1~~21.5 percent, compared to the three months ended ~~September 30, 2021.~~March 31, 2022. The decrease in net interest income was primarily due to an increase in interest expense on deposits and borrowed funds due to rising interest rates, partially offset by an increase in interest income on securities and loans.

Noninterest income increased for the three months ended September 30, 2022 compared to the same period in 2021 due to loan swap fees earned in the third quarter of 2022. Noninterest expense increased $746 during the three months ended September 30, 2022 compared to the three months ended September 30, 2021, primarily due to an increase in salaries and employee benefits and occupancy expense, partially offset by a decrease in FDIC insurance expense.

Net income for the nine months ended September 30, 2022 was $37,453, or $2.23 per diluted common share, compared to $37,697, or $2.25 per diluted common share, for the nine months ended September 30, 2021. The Company's annualized return on average assets and return on average equity for the nine months ended September 30, 2022 were 1.43 percent and 21.57 percent, respectively, compared to 1.56 percent and 20.98 percent, respectively, for the nine months ended September 30, 2021.

The decrease in net income for the nine months ended September 30, 2022 compared to the same period in 2021 was primarily due to an increase in noninterest expense and income tax expense, partially offset by a larger negative provision for loan losses and increases in net interest income and noninterest income. Income tax expense for the nine months ended September 30, 2022 included a one-time increase in state income tax expense of $671 for the reduction in deferred tax assets upon the enactment of changes in the Iowa bank franchise tax rates.

~~Net interest income for the nine months ended September 30, 2022 grew $614, or 0.9 percent, compared to the nine months ended September 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,~~deposits and other borrowings resulting from rapidly rising interest rates and inverted yield curve, and changes in funding mix, partially offset by an increase in interest ~~expense~~income on ~~deposits~~loans and ~~other borrowings~~securities.

Noninterest income increased $568 for the three months ended March 31, 2023 compared to the same period in 2022 due to ~~rising interest rates. The Company recorded~~ a ~~negative provision for loan losses of $2,500~~gain from bank-owned life insurance. Noninterest expense increased $1,409 during the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023 compared to ~~a negative provision of $1,500 for~~ the ~~nine~~three months ended ~~September 30, 2021. The negative provision in 2021 was~~March 31, 2022, primarily due to increases in salaries and employee benefits and occupancy and equipment expense.

Total loans outstanding increased $13,349, or 0.5 percent, during the ~~improvement in economic conditions and removal~~first three months of ~~pandemic-related restrictions on businesses, in addition to lack of loan losses for the Company since the onset~~2023. The credit quality of the ~~COVID-19 pandemic. The negative provision~~loan portfolio remained strong, as evidenced by the Company's ratio of nonperforming loans to total assets of 0.01 percent as of both March 31, 2023 and December 31, 2022. As of March 31, 2023, the allowance for credit losses was 1.01 percent of total outstanding loans, compared to 0.93 percent as of December 31, 2022. Management believed the allowance for credit losses at March 31, 2023 was adequate to absorb expected losses in ~~2022 was due to~~ the ~~reversal~~loan portfolio as of ~~a specific reserve on an impaired loan and the sustained performance of loans after the expiration of COVID modifications and continued improvement in classified loans.~~

that date.

3534

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Noninterest income increased for the nine months ended September 30, 2022 compared to the same period in 2021 due to the loan swap fees earned in the third quarter of 2022. Noninterest expense increased $1,877 during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, primarily due to an increase in salaries and employee benefits expense, partially offset by a decrease in FDIC insurance expense.

Total loans outstanding increased $157,949, or 6.4 percent, during the first nine months of 2022. Excluding the impact of PPP loan activity, total loans outstanding increased $179,036, or 7.4 percent, during the first nine months of 2022. As of September 30, 2022, the allowance for loan losses was 0.97 percent of total outstanding loans, compared to 1.15 percent as of December 31, 2021. At September 30, 2022, the allowance for loan losses was 0.97 percent of total outstanding loans, excluding $1,119 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 September 30, 2022 was adequate to absorb any losses inherent in the loan portfolio as of that date.

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

On a quarterly basis, the Company compares three key performance metrics to those of our identified peer group. The peer group for ~~2022~~2023 consists of 1922 Midwestern, publicly traded financial institutions, including Bank First Corporation, Bridgewater Bancshares Inc., ChoiceOne Financial Services, Inc., Civista Bancshares, Inc., CrossFirst Bankshares, Inc., Equity Bancshares, Inc., Farmers National Banc Corp., Farmers & Merchants Bancorp., First Business Financial Services, Inc., First Financial Corp., First Mid Bancshares, Inc., German American Bancorp, Inc., HBT Financial Inc., Hills Bancorporation, Isabella Bank Corporation, LCNB Corp., Macatawa Bank Corporation, Mercantile Bank Corporation, MidWestOne Financial Group, Inc., Nicolet Bankshares, Inc., Peoples Bancorp, Inc., and Southern Missouri Bancorp, Inc. ~~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 nine months ended September 30, 2022	As of and for the six months ended June 30, 2022	As of and for the six months ended June 30, 2022		As of and for the three months ended March 31, 2023	As of and for the year ended December 31, 2022	As of and for the year ended ended December 31, 2022
Return on average equity	Return on average equity	21.57%	21.83%	9.41% - 16.90%	Return on average equity	14.77%	20.71%	9.97% - 17.24%
Efficiency ratio(1)	Efficiency ratio(1)	41.75%	41.05%	43.14% - 65.65%	Efficiency ratio(1)	55.34%	43.70%	41.14% - 63.37%
Nonperforming assets to total assets	Nonperforming assets to total assets	0.01%	0.01%	0.10% - 1.11%	Nonperforming assets to total assets	0.01%	0.01%	0.02% - 1.08%

(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 ~~October~~April 26, ~~2022,~~2023, the Company's Board of Directors declared a quarterly cash dividend of $0.25 per common share. The dividend is payable on ~~November 23, 2022,~~May 24, 2023, to stockholders of record on ~~November 9, 2022.~~May 10, 2023.

3635

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 nine~~ months ended ~~September 30, 2022~~March 31, 2023 compared with the same ~~periods~~period in ~~2021.~~2022.


		Three Months Ended September 30,											Nine Months Ended September 30,												Three Months Ended March 31,
		2022			2021			Change			Change %		2022			2021			Change			Change %						2023					2022					Change			Change %
Net income	Net income	$	11,602		$	12,706		$	(1,104)		(8.69)	%	$	37,453		$	37,697		$	(244)		(0.65)	%	Net income				$	7,844				$	13,184				$	(5,340)		(40.50)	%
Average assets	Average assets	3,475,894			3,325,522			150,372			4.52	%	3,507,796			3,220,687			287,109			8.91	%	Average assets				3,617,458					3,544,564					72,894			2.06	%
Average stockholders' equity	Average stockholders' equity	219,065			251,770			(32,705)			(12.99)	%	232,177			240,235			(8,058)			(3.35)	%	Average stockholders' equity				215,391					255,130					(39,739)			(15.58)	%

Return on average assets	Return on average assets	1.32		%	1.52		%	(0.20)		%			1.43		%	1.56		%	(0.13)		%			Return on average assets				0.88		%			1.51		%			(0.63)		%
Return on average equity	Return on average equity	21.01		%	20.02		%	0.99		%			21.57		%	20.98		%	0.59		%			Return on average equity				14.77		%			20.96		%			(6.19)		%
Net interest margin (1)	Net interest margin (1)	2.78		%	3.06		%	(0.28)		%			2.85		%	3.07		%	(0.22)		%			Net interest margin (1)				2.23		%			2.85		%			(0.62)		%
Efficiency ratio (1) (2)	Efficiency ratio (1) (2)	43.16		%	39.41		%	3.75		%			41.75		%	40.08		%	1.67		%			Efficiency ratio (1) (2)				55.34		%			40.14		%			15.20		%
Dividend payout ratio	Dividend payout ratio	35.86		%	31.27		%	4.59		%			33.27		%	30.69		%	2.58		%			Dividend payout ratio				52.31		%			31.39		%			20.92		%
Average equity to average assets ratio	Average equity to average assets ratio	6.30		%	7.57		%	(1.27)		%			6.62		%	7.46		%	(0.84)		%			Average equity to average assets ratio				5.95		%			7.20		%			(1.25)		%

													As of September 30,															As of March 31,
													2022			2021			Change									2023					2022					Change
Nonperforming assets to total assets (2)	Nonperforming assets to total assets (2)												0.01		%	0.28		%	(0.27)		%			Nonperforming assets to total assets (2)		0.01	%				0.25	%				(0.24)	%
Equity to assets ratio	Equity to assets ratio												5.65		%	7.77		%	(2.12)		%			Equity to assets ratio				5.99		%			6.67		%			(0.68)		%
Tangible common equity ratio	Tangible common equity ratio												5.65		%	7.77		%	(2.12)		%			Tangible common equity ratio		5.99	%				6.67	%				(0.68)	%

(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.

3736

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Net Interest Income

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

are shown on a FTE basis.

Data for the three months ended September 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 $ 498,268 $ 496,485 $ 1,783 0.36 % $ 6,144 $ 5,687 $ 457 8.04 % 4.89 % 4.54 % 0.35 %
Real estate (3)
2,074,692 1,837,251 237,441 12.92 % 21,981 18,632 3,349 17.97 % 4.20 % 4.02 % 0.18 %
Consumer and other 6,902 3,619 3,283 90.72 % 86 39 47 120.51 % 5.01 % 4.30 % 0.71 %
Total loans 2,579,862 2,337,355 242,507 10.38 % 28,211 24,358 3,853 15.82 % 4.34 % 4.13 % 0.21 %

Securities:
Taxable 584,721 506,746 77,975 15.39 % 3,147 2,412 735 30.47 % 2.15 % 1.90 % 0.25 %
Tax-exempt (3)
153,187 155,806 (2,619) (1.68) % 1,051 940 111 11.81 % 2.74 % 2.41 % 0.33 %
Total securities 737,908 662,552 75,356 11.37 % 4,198 3,352 846 25.24 % 2.28 % 2.02 % 0.26 %

Federal funds sold 4,751 212,376 (207,625) (97.76) % 30 82 (52) (63.41) % 2.51 % 0.15 % 2.36 %
Total interest-earning assets (3)
$ 3,322,521 $ 3,212,283 $ 110,238 3.43 % 32,439 27,792 4,647 16.72 % 3.87 % 3.43 % 0.44 %

Interest-bearing liabilities:
Deposits:
Interest-bearing demand $ 476,145 $ 490,653 $ (14,508) (2.96) % 679 208 471 226.44 % 0.57 % 0.17 % 0.40 %
Savings and money market 1,327,935 1,444,633 (116,698) (8.08) % 4,461 1,452 3,009 207.23 % 1.33 % 0.40 % 0.93 %
Time deposits 343,862 210,465 133,397 63.38 % 1,149 361 788 218.28 % 1.33 % 0.68 % 0.65 %
Total deposits 2,147,942 2,145,751 2,191 0.10 % 6,289 2,021 4,268 211.18 % 1.16 % 0.37 % 0.79 %
Borrowed Funds:
Federal funds purchased 105,431 5,069 $ 100,362 1,979.92 % 655 2 653 32,650.00 % 2.46 % 0.12 % 2.34 %
Subordinated notes, net 79,285 20,460 58,825 287.51 % 1,106 254 852 335.43 % 5.54 % 4.93 % 0.61 %
Federal Home Loan Bank
advances 125,000 125,000 — — % 649 656 (7) (1.07) % 2.06 % 2.08 % (0.02) %
Long-term debt 51,486 18,654 32,832 176.01 % 466 66 400 606.06 % 3.60 % 1.40 % 2.20 %
Total borrowed funds 361,202 169,183 192,019 113.50 % 2,876 978 1,898 194.07 % 3.16 % 2.29 % 0.87 %
Total interest-bearing
liabilities $ 2,509,144 $ 2,314,934 $ 194,210 8.39 % 9,165 2,999 8,064 205.60 % 1.45 % 0.51 % 0.94 %

Net interest income (FTE) (4)
$ 23,274 $ 24,793 $ (1,519) (6.13) %
Net interest spread (FTE) 2.42 % 2.92 % (0.50) %
Net interest margin (FTE) (4)
2.78 % 3.06 % (0.28) %

Data for the three months ended March 31:

~~Table of Contents~~

~~West Bancorporation, Inc.~~

~~Management's Discussion and Analysis~~

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


Data for the nine months ended September 30:

		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				2023			2022			Change			Change- %				2023			2022			Change			Change- %				2023				2022				Change
Interest-earning assets:	Interest-earning assets:																							Interest-earning assets:
Loans: (1) (2)	Loans: (1) (2)																							Loans: (1) (2)
Commercial	Commercial	$	479,723	$	538,579	$	(58,856)	(10.93)	%	$	15,751	$	17,880	$	(2,129)	(11.91)	%	4.39	%	4.44	%	(0.05)	%	Commercial		$	522,034		$	470,105		$	51,929		11.05		%		$	7,567		$	4,658		$	2,909		62.45		%		5.88		%		4.02		%		1.86		%
Real estate (3)	Real estate (3)	2,037,779		1,764,285		273,494		15.50	%	60,678		53,712		6,966		12.97	%	3.98	%	4.07	%	(0.09)	%	Real estate (3)		2,215,355			1,975,858			239,497			12.12		%		25,333			18,725			6,608			35.29		%		4.64		%		3.84		%		0.80		%
Consumer and other	Consumer and other	5,154		4,365		789		18.08	%	173		146		27		18.49	%	4.50	%	4.48	%	0.02	%	Consumer and other		7,992			3,558			4,434			124.62		%		125			34			91			267.65		%		6.35		%		3.90		%		2.45		%
Total loans	Total loans	2,522,656		2,307,229		215,427		9.34	%	76,602		71,738		4,864		6.78	%	4.06	%	4.16	%	(0.10)	%	Total loans		2,745,381			2,449,521			295,860			12.08		%		33,025			23,417			9,608			41.03		%		4.88		%		3.88		%		1.00		%

Securities:	Securities:																							Securities:
Taxable	Taxable	611,647		403,873		207,774		51.45	%	9,126		5,952		3,174		53.33	%	1.99	%	1.96	%	0.03	%	Taxable		538,158			633,654			(95,496)			(15.07)		%		3,316			2,889			427			14.78		%		2.46		%		1.82		%		0.64		%
Tax-exempt (3)	Tax-exempt (3)	160,226		133,074		27,152		20.40	%	3,199		2,506		693		27.65	%	2.66	%	2.51	%	0.15	%	Tax-exempt (3)		150,311			170,898			(20,587)			(12.05)		%		974			1,056			(82)			(7.77)		%		2.59		%		2.47		%		0.12		%
Total securities	Total securities	771,873		536,947		234,926		43.75	%	12,325		8,458		3,867		45.72	%	2.13	%	2.10	%	0.03	%	Total securities		688,469			804,552			(116,083)			(14.43)		%		4,290			3,945			345			8.75		%		2.49		%		1.96		%		0.53		%

Federal funds sold		77,386		254,890		(177,504)		(69.64)	%	179		226		(47)		(20.80)	%	0.31	%	0.12	%	0.19	%
Interest-bearing deposits																							Interest-bearing deposits		2,138			178,041			(175,903)			(98.80)		%		25			82			(57)			(69.51)		%		4.81		%		0.19		%		4.62		%
Total interest-earning assets (3)	Total interest-earning assets (3)	$	3,371,915	$	3,099,066	$	272,849	8.80	%	89,106		80,422		8,684		10.80	%	3.53	%	3.47	%	0.06	%	Total interest-earning assets (3)		$	3,435,988		$	3,432,114		$	3,874		0.11		%		37,340			27,444			9,896			36.06		%		4.41		%		3.24		%		1.17		%

Interest-bearing liabilities:	Interest-bearing liabilities:																							Interest-bearing liabilities:
Deposits:	Deposits:																							Deposits:
Interest-bearing demand	Interest-bearing demand	$	513,106	$	471,781	$	41,325	8.76	%	1,253		561		692		123.35	%	0.33	%	0.16	%	0.17	%	Interest-bearing demand		$	500,392		$	546,237		$	(45,845)		(8.39)		%		1,570			250			1,320			528.00		%		1.27		%		0.19		%		1.08		%
Savings and money market	Savings and money market	1,505,834		1,369,861		135,973		9.93	%	8,520		4,119		4,401		106.85	%	0.76	%	0.40	%	0.36	%	Savings and money market		1,277,676			1,610,639			(332,963)			(20.67)		%		8,655			1,620			7,035			434.26		%		2.75		%		0.41		%		2.34		%
Time deposits		248,628		212,967		35,661		16.74	%	1,813		1,213		600		49.46	%	0.97	%	0.76	%	0.21	%
Time																							Time		417,427			195,638			221,789			113.37		%		3,114			281			2,833			1,008.19		%		3.03		%		0.58		%		2.45		%
Total deposits	Total deposits	2,267,568		2,054,609		212,959		10.36	%	11,586		5,893		5,693		96.61	%	0.68	%	0.38	%	0.30	%	Total deposits		2,195,495			2,352,514			(157,019)			(6.67)		%		13,339			2,151			11,188			520.13		%		2.46		%		0.37		%		2.09		%
Borrowed funds:	Borrowed funds:																							Borrowed funds:
Federal funds purchased		50,796		4,850		45,946		947.34	%	812		4		808		20,200.00	%	2.14	%	0.11	%	2.03	%
Federal funds purchased and																							Federal funds purchased and
other short-term borrowings																							other short-term borrowings		186,333			1,506			184,827			12,272.71		%		2,079			—			2,079			N/A				4.53		%		0.05		%		4.48		%
Subordinated notes, net	Subordinated notes, net	43,955		20,457		23,498		114.87	%	1,748		754		994		131.83	%	5.32	%	4.93	%	0.39	%	Subordinated notes, net		79,400			20,467			58,933			287.94		%		1,106			248			858			345.97		%		5.65		%		4.91		%		0.74		%
Federal Home Loan Bank	Federal Home Loan Bank																							Federal Home Loan Bank
advances	advances	125,000		145,421		(20,421)		(14.04)	%	1,914		2,288		(374)		(16.35)	%	2.05	%	2.10	%	(0.05)	%	advances		203,722			125,000			78,722			62.98		%		1,262			630			632			100.32		%		2.51		%		2.04		%		0.47		%
Long-term debt	Long-term debt	51,490		20,104		31,386		156.12	%	1,050		220		830		377.27	%	2.73	%	1.46	%	1.27	%	Long-term debt		51,486			51,497			(11)			(0.02)		%		698			258			440			170.54		%		5.50		%		2.03		%		3.47		%
Total borrowed funds	Total borrowed funds	271,241		190,832		80,409		42.14	%	5,524		3,266		2,258		69.14	%	2.72	%	2.29	%	0.43	%	Total borrowed funds		520,941			198,470			322,471			162.48		%		5,145			1,136			4,009			352.90		%		4.01		%		2.32		%		1.69		%
Total interest-bearing	Total interest-bearing																							Total interest-bearing
liabilities	liabilities	$	2,538,809	$	2,245,441	$	293,368	13.07	%	17,110		9,159		7,951		86.81	%	0.90	%	0.55	%	0.35	%	liabilities		$	2,716,436		$	2,550,984		$	165,452		6.49		%		18,484			3,287			15,197			462.34		%		2.76		%		0.52		%		2.24		%

Net interest income (FTE) (4)	Net interest income (FTE) (4)									$	71,996	$	71,263	$	733	1.03	%							Net interest income (FTE) (4)															$	18,856		$	24,157		$	(5,301)		(21.94)		%
Net interest spread (FTE)	Net interest spread (FTE)																	2.63	%	2.92	%	(0.29)	%	Net interest spread (FTE)																												1.65		%		2.72		%		(1.07)		%
Net interest margin (FTE) (4)	Net interest margin (FTE) (4)																	2.85	%	3.07	%	(0.22)	%	Net interest margin (FTE) (4)																												2.23		%		2.85		%		(0.62)		%

(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.

3937

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

The Company's largest component of net income is net interest income, which is the difference between interest earned on interest-earning assets, consisting primarily of loans and securities, and interest paid on interest-bearing liabilities, consisting of deposits and borrowings. Fluctuations in net interest income can result from the combination of changes in the average balances of asset and liability categories and changes in interest rates. Interest rates earned and paid are also affected by general economic conditions, particularly changes in market interest rates, and by competitive factors, government policies and actions of regulatory authorities. The Federal Reserve increased the target federal funds interest rate by a total of ~~300~~425 basis points in 2022 and 50 basis points during the first ~~nine~~three months of ~~2022 and~~2023. At this time it is ~~expected to continue to raise the~~unknown whether additional target federal funds interest rate ~~into~~changes will occur during the remainder of 2023. ~~These~~The increases that occurred throughout 2022 and 2023 will have ~~had~~ an impact on ~~the Company's net interest income and net interest margin and will impact~~ the comparability of net interest income between ~~2022~~2023 and ~~2021.~~2022.

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 nine~~ months ended ~~September 30, 2022~~March 31, 2023 decreased by ~~28 and 22~~62 basis points ~~respectively,~~ compared to the three ~~and nine~~ months ended ~~September 30, 2021.~~March 31, 2022. The primary driver of the decrease in the net interest margin was an increase in rates paid on deposits and borrowed funds, which have repriced faster than loans and securities, and an increase in average borrowed funds balances. Tax-equivalent net interest income decreased ~~$1,519~~$5,301 for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the same time period in 2021. The decrease in net interest income for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 was primarily due to the increase in the average borrowed funds balances and increases in rates paid on deposits and borrowed funds, partially offset by increases in loans and securities average balances and yields on loans and securities. The increase in net interest income for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was primarily due to increases in loans and securities average balances, partially offset by increases in average balances and rates paid on deposits and borrowed funds.2022.

Tax-equivalent interest income on loans increased ~~$3,853 and $4,864~~$9,603 for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 compared to the three ~~and nine~~ months ended ~~September 30, 2021.~~March 31, 2022. This increase in interest income on loans was ~~primarily~~ driven by ~~the~~a combination of an increase in the average balance of ~~commercial real estate~~ loans and an increase in loan yields. The average balance of loans for the three months ended ~~September 30, 2022~~March 31, 2023 increased $295,860 compared to the same period in 2021, the increase in loan yields. The comparability of net interest income and net interest margin between 2022 and 2021 is 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 $101 and $1,590 and yields of 17.89 percent and 9.28 percent for the three months ended ~~September 30,~~March 31, 2022, while loan yields increased 100 basis points. Rising market interest rates have resulted in increasing rates on variable-rate loans and ~~September 30, 2021, respectively. PPP loan~~higher interest ~~income was $753~~rates on renewed and $5,819 with yields of 14.02 percent and 6.46 percent for the nine months ended September 30, 2022 and September 30, 2021, respectively. Exclusive of the PPP loans, the yield on loans was 4.33 percent and 3.98 percent for the three months ended September 30, 2022 and September 30, 2021, respectively, and 4.03 percent for both the nine months ended September 30, 2022 and September 30, 2021.

originated loans. 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 yield on the loan portfolio is expected to increase in a rising rate environment as ~~variable rate~~variable-rate loans and loan renewals reprice at higher rates. The political and economic environments can also influence the volume of new loan originations and the mix of variable-rate versus fixed-rate loans.

The average balance of deposits ~~increased $2,191 and $212,959~~decreased $157,019 for the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, compared to the three ~~and nine~~ months ended ~~September 30, 2021.~~March 31, 2022. The rates paid on deposits increased ~~79 and 30~~209 basis points for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 compared to the same ~~periods~~period in ~~2021.~~2022. The ~~increases~~increase in the cost of deposits ~~were~~was primarily due to ~~changes in~~higher deposit ~~mix, and increases in certain deposit~~interest rates in response to ~~the~~ increases in the target federal funds rate and market interest rates, increased competition for deposit balances, and changes in deposit mix. The Federal Reserve increased the target federal funds rate ~~competition. The~~by a total of 425 basis points in 2022 and 50 basis points in the first three months of 2023. These increases have had a direct impact on the cost of deposits ~~could increase further in a rising rate environment.~~and market competition.

Interest expense on borrowed funds increased $4,009 for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. The average balance of borrowed funds increased ~~$192,019 and $80,409~~$322,471 for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 compared to the three ~~and nine~~ months ended ~~September 30, 2021.~~March 31, 2022. The Company ~~increased variable-rate long-term debt by $34,500 in December 2021 and~~ issued $60,000 of subordinated debt ~~of $60,000~~ in June 2022. ~~Average~~Additionally, average balances of federal funds purchased and other short-term borrowings increased ~~$100,362 and $45,946~~$184,827 for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 compared to the same ~~periods~~period in ~~2021.~~2022. The average rate ~~paid on borrowed~~of the federal funds purchased and other short-term borrowings increased ~~87 and 43~~by 448 basis points ~~for~~in the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 compared to the three ~~and nine~~ months ended ~~September 30, 2021. The cost of borrowed funds may continue to~~March 31, 2022. This increase ~~as the variable rate~~in average rates paid on ~~long-term debt and~~ federal funds purchased ~~may increase if market rates continue~~and other short-term borrowings was driven by the increases in the target federal funds rate by the Federal Reserve.

Credit Loss Expense and the Related Allowance for Credit Losses

The Company adopted ASU No. 2016-13 using the modified retrospective method for financial assets measured at amortized cost and off-balance-sheet credit exposures. See Notes 1 and 4 to ~~increase.~~the Financial Statements for additional information.

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Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

InThe credit loss expense recorded on the first nine months of 2022, the Federal Reserve increased the target federal funds rate by a total of 300 basis points, and it is expected to make additional rate increases into 2023. These rate increases could improve reinvestment rates on loans and securities, but also increase the Company's cost of deposits and borrowed funds and increase the unrealized losses in the Company's securities portfolio.

~~Provision for Loan Losses and the Related Allowance for Loan Losses~~

~~The provision for loan losses~~income statement represents a charge made to earnings to maintain an adequate allowance for ~~loan~~credit losses. The adequacy of the allowance for ~~loan~~credit losses is evaluated quarterly by management and reviewed by the Board of Directors. The allowance for ~~loan~~credit losses is management's ~~best~~ estimate of ~~probable~~expected lifetime losses ~~inherent~~ in the loan portfolio as of the balance sheet date. There was no provision for ~~loan~~credit losses for the three months ended ~~September 30, 2022 and September 30, 2021.~~March 31, 2023. The credit loss expense was negative $750 for the three months ended March 31, 2022. The negative ~~provisions for loan losses were $2,500 for the nine months ended September 30, 2022, compared to negative provisions of $1,500 for the nine months ended September 30, 2021. The negative provisions~~credit loss expense recorded in 2021 were 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 provisions in 2022 ~~were~~was due to the sustained performance of loans after the expiration of ~~the~~ COVID modifications ~~continued~~and improvement in classified loans and the reversal of a specific reserve on an impaired loan. The impaired loan, which had a specific reserve of $2,500, was settled in the second quarter of 2022 resulting in a charge-off of $451.loans.

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~~credit losses. Such agencies may require West Bank to recognize additional charge-offs or provision for ~~loan~~credit losses based on such agencies' review of information available to them at the time of their examinations.

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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~~credit losses on loans for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ and related ratios.

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 Change 2022 2021 Change
Balance at beginning of period $ 25,434 $ 28,042 $ (2,608) $ 28,364 $ 29,436 $ (1,072)
Charge-offs (31) — (31) (482) — (482)
Recoveries 15 56 (41) 36 162 (126)
Net (charge-offs) recoveries (16) 56 (72) (446) 162 (608)
Provision for loan losses charged (credited) to operations — — — (2,500) (1,500) (1,000)
Balance at end of period $ 25,418 $ 28,098 $ (2,680) $ 25,418 $ 28,098 $ (2,680)
Average loans outstanding $ 2,579,862 $ 2,337,355 $ 2,522,656 $ 2,307,229
Ratio of annualized net (charge-offs) recoveries during the period to average loans outstanding 0.00 % 0.01 % (0.02) % 0.01 %
Ratio of allowance for loan losses to average loans outstanding 0.99 % 1.20 % 1.01 % 1.22 %
Ratio of allowance for loan losses to total loans at end of period 0.97 % 1.19 % 0.97 % 1.19 %
Ratio of allowance for loan losses to total loans at end of period, excluding PPP loans(1)
0.97 % 1.22 % 0.97 % 1.22 %

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


	Three Months Ended March 31,
		2023			2022			Change
Balance at beginning of period		$	25,473		$	28,364		$	(2,891)
Adoption of CECL		2,458			—			2,458
Charge-offs		—			—			—
Recoveries		10			9			1
Net (charge-offs) recoveries		10			9			1
Provision for credit losses charged (credited) to operations		—			(750)			750
Balance at end of period		$	27,941		$	27,623		$	318

Average loans outstanding		$	2,745,381		$	2,449,521

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

Ratio of allowance for credit losses for loans to average loans outstanding		1.02		%	1.13		%

Ratio of allowance for credit losses for loans to total loans at end of period		1.01		%	1.11		%

The U.S. economy continues to be affected by federal government programs and the Federal Reserve's accommodative monetary policies initiated during the COVID-19 pandemic. Current economic concerns include the impact of sharp increases in interest rates as the Federal Reserve responds to inflationary trends, ~~continuing supply chain issues and~~ labor shortages and wage pressures, and ~~expectations~~the uncertainty of additional increases in the Federal Reserve target federal funds rate. In response to increasing inflation rates, the Federal Reserve increased the target federal funds rate by a total of ~~300~~425 basis points in 2022 and 50 basis points in the first ~~nine~~three months of ~~2022. It is expected that additional~~2023. The forecast for future rate increases ~~will occur into 2023. The Company decreased certain qualitative factors used in~~is uncertain at this time. Management believed the allowance for ~~loan~~credit losses evaluation in the first nine months of 2022 based upon the sustained performance of loans after the expiration of COVID modifications and continued improvement in classified loans, 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 nine months ended September 30, 2022. Management believes the resulting allowance for loan losses as of September 30, 2022at March 31, 2023 was adequate to absorb ~~any~~expected losses ~~inherent~~ in the loan portfolio ~~at the end~~as of ~~the quarter.~~that date.

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Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Noninterest Income

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


		Three Months Ended September 30,									Three Months Ended March 31,
Noninterest income:	Noninterest income:	2022		2021		Change		Change %		Noninterest income:	2023		2022		Change		Change %
Service charges on deposit accounts	Service charges on deposit accounts	$	553	$	589	$	(36)	(6.11)	%	Service charges on deposit accounts	$	462	$	580	$	(118)	(20.34)	%
Debit card usage fees	Debit card usage fees	498		490		8		1.63	%	Debit card usage fees	486		472		14		2.97	%
Trust services	Trust services	780		695		85		12.23	%	Trust services	706		629		77		12.24	%
Increase in cash value of bank-owned life insurance	Increase in cash value of bank-owned life insurance	246		230		16		6.96	%	Increase in cash value of bank-owned life insurance	257		227		30		13.22	%
Loan swap fees		835		—		835		N/A
Realized securities gains, net		—		11		(11)		(100.00)	%
Gain from bank-owned life insurance										Gain from bank-owned life insurance	691		—		691		N/A
Other income:	Other income:									Other income:
All other income	All other income	364		386		(22)		(5.70)	%	All other income	355		481		(126)		(26.20)	%
Total other income	Total other income	364		386		(22)		(5.70)	%	Total other income	355		481		(126)		(26.20)	%
Total noninterest income	Total noninterest income	$	3,276	$	2,401	$	875	36.44	%	Total noninterest income	$	2,957	$	2,389	$	568	23.78	%

		Nine Months Ended September 30,
Noninterest income:		2022		2021		Change		Change %
Service charges on deposit accounts		$	1,718	$	1,749	$	(31)	(1.77)	%
Debit card usage fees		1,477		1,443		34		2.36	%
Trust services		2,031		2,038		(7)		(0.34)	%
Increase in cash value of bank-owned life insurance		709		690		19		2.75	%
Loan swap fees		835		42		793		1,888.10	%
Realized securities gains, net		—		51		(51)		(100.00)	%
Other income:
All other income		1,173		1,368		(195)		(14.25)	%
Total other income		1,173		1,368		(195)		(14.25)	%
Total noninterest income		$	7,943	$	7,381	$	562	7.61	%

The increase in noninterest income for the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2021 was primarily due to loan swap fees of $835 earned in the third quarter of 2022. Additionally, revenueRevenue from trust services ~~increased~~was higher for the three months ended ~~September 30, 2022 when~~March 31, 2023 compared to the ~~same period in 2021,~~three months ended March 31, 2022 primarily due to an increase in one-time estate ~~fees earned~~fees. An increase in ~~2022.~~trust assets and accounts since March 31, 2022 also contributed to the increase in trust service fees. The gain from bank-owned life insurance was from a death benefit claim. The decrease in other income ~~for the nine months ended September 30, 2022 compared to the same period in 2021~~ was primarily due to $97 of income recognized in the ~~recognition of net swap termination gains totaling $181 in~~three months ended 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~~31, 2022 related to the ~~financial statements for additional information.~~purchase of discounted transferable state income tax credits.

~~Table of Contents~~

~~West Bancorporation, Inc.~~

~~Management's Discussion and Analysis~~

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

Noninterest Expense

The following ~~tables show~~table shows the variance from the prior year period 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 September 30,									Three Months Ended March 31,
Noninterest expense:	Noninterest expense:	2022		2021		Change		Change %		Noninterest expense:	2023		2022		Change		Change %
Salaries and employee benefits	Salaries and employee benefits	$	6,578	$	6,018	$	560	9.31	%	Salaries and employee benefits	$	6,867	$	6,298	$	569	9.03	%
Occupancy		1,315		1,203		112		9.31	%
Occupancy and equipment										Occupancy and equipment	1,327		1,086		241		22.19	%
Data processing	Data processing	644		616		28		4.55	%	Data processing	635		624		11		1.76	%
Technology and software										Technology and software	513		476		37		7.77	%
FDIC insurance	FDIC insurance	127		528		(401)		(75.95)	%	FDIC insurance	416		337		79		23.44	%
Professional fees	Professional fees	250		212		38		17.92	%	Professional fees	250		217		33		15.21	%
Director fees	Director fees	209		176		33		18.75	%	Director fees	205		168		37		22.02	%
Other expenses:	Other expenses:									Other expenses:
Subscriptions and service contracts		651		424		227		53.54	%
Business development	Business development	305		229		76		33.19	%	Business development	333		236		97		41.10	%
Insurance expense	Insurance expense	198		127		71		55.91	%	Insurance expense	215		151		64		42.38	%
Trust	Trust	137		181		(44)		(24.31)	%	Trust	165		137		28		20.44	%
Charitable contributions										Charitable contributions	60		—		60		N/A
Consulting fees	Consulting fees	66		70		(4)		(5.71)	%	Consulting fees	49		50		(1)		(2.00)	%
Marketing	Marketing	60		54		6		11.11	%	Marketing	41		54		(13)		(24.07)	%
Charitable contributions		—		60		(60)		(100.00)	%
Low income housing projects amortization	Low income housing projects amortization	116		203		(87)		(42.86)	%	Low income housing projects amortization	161		142		19		13.38	%
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	230		230		—		—	%
All other	All other	572		381		191		50.13	%	All other	604		456		148		32.46	%
Total other expenses	Total other expenses	2,335		1,959		376		19.19	%	Total other expenses	1,858		1,456		402		27.61	%
Total noninterest expense	Total noninterest expense	$	11,458	$	10,712	$	746	6.96	%	Total noninterest expense	$	12,071	$	10,662	$	1,409	13.22	%

		Nine Months Ended September 30,
Noninterest expense:		2022		2021		Change		Change %
Salaries and employee benefits		$	19,286	$	17,298	$	1,988	11.49	%
Occupancy		3,643		3,630		13		0.36	%
Data processing		1,924		1,835		89		4.85	%
FDIC insurance		753		1,358		(605)		(44.55)	%
Professional fees		669		763		(94)		(12.32)	%
Director fees		599		581		18		3.10	%
Other expenses:
Subscriptions and service contracts		1,619		1,269		350		27.58	%
Business development		832		676		156		23.08	%
Insurance expense		505		371		134		36.12	%
Trust		412		459		(47)		(10.24)	%
Consulting fees		241		223		18		8.07	%
Marketing		184		156		28		17.95	%
Charitable contributions		—		180		(180)		(100.00)	%
Low income housing projects amortization		388		529		(141)		(26.65)	%
New markets tax credit project amortization and management fees		689		689		—		—	%
All other		1,642		1,492		150		10.05	%
Total other expenses		6,512		6,044		468		7.74	%
Total noninterest expense		$	33,386	$	31,509	$	1,877	5.96	%

4441

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 nine~~ months ended ~~September 30, 2022~~March 31, 2023 when compared to the three ~~and nine~~ months ended ~~September 30, 2021, primarily~~March 31, 2022, due to wage increases that have been higher than recent historical averages in response to market conditions and competition in retaining and recruiting talent. Additionally, there has been an increase in ~~expense related to restricted stock units, the addition of five~~full-time equivalent employees with growth in our commercial ~~bankers from third quarter of 2021 through the third quarter of 2022,~~banking team and ~~normal operating increases. FDIC insurance expense decreased during the three~~information technology department. Occupancy and nine months ended September 30, 2022 when compared to the same time periods in 2021 primarily due to reductions in the assessment rate resulting from capital injections into the Bank in December 2021 and June 2022. Occupancyequipment expense increased for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the same period in ~~2021~~2022 primarily due to ~~the~~an increase in depreciation expense related to the new building in St. Cloud, ~~Minnesota.~~

~~Subscriptions~~Minnesota which opened in March 2022 and ~~service contracts~~scheduled increases in rent expense on existing leases. FDIC insurance expense increased ~~for~~during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 when compared to the same time ~~periods~~period in ~~2021,~~2022 primarily due to ~~increases~~the FDIC's increase in ~~information technology~~the minimum assessment rate, announced in 2022 and ~~information security solutions.~~ effective for the first quarter of 2023.

Business development expenses increased in 2023 compared to 2022 asdue to an increase in the size of our commercial banking team and a general increase in sponsorships and business development ~~efforts have normalized following~~activity. Insurance expense increased for the ~~initial~~three months ended March 31, 2023 compared to the same period ~~of the pandemic with increased in-person activities, and the addition of five commercial bankers.~~in 2022 primarily due to insurance costs related to bank buildings that are under construction.

Income Tax Expense

The Company recorded income tax expense of ~~$3,220 (21.7 percent of pre-tax income) and $10,675 (22.2~~$1,737 (18.1 percent of pre-tax income) for the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, compared with ~~$3,469 (21.4 percent of pre-tax income) and $10,132 (21.2~~$3,121 (19.1 percent of pre-tax income) for the three ~~and nine~~ months ended ~~September 30, 2021.~~March 31, 2022. 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, gain from bank-owned life insurance, disallowed interest expense, and state income taxes. For the nine months ended September 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 by $671 and in turn caused the one-time increase in 2022 tax expense.

Additionally, for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ a tax benefit of ~~$385~~$11 and ~~$233,~~$377, 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 ~~nine~~three months of ~~2022~~2023 and ~~2021~~2022 were also impacted by year-to-date federal low income housing tax credits and a new markets tax credit of approximately ~~$1,101~~$375 and ~~$1,026,~~$367, respectively.

FINANCIAL CONDITION

The Company had total assets of $3,624,943 as of March 31, 2023, compared to total assets of $3,613,218 as of December 31, 2022. Fluctuations in the balance sheet included increases in loans, premises and equipment, and borrowed funds and a decrease in deposits.

Securities

Securities available for sale increased by $1,243 during the three months ended March 31, 2023. This slight increase was primarily attributable to the decrease in unrealized losses in the securities portfolio, partially offset by principal paydowns on securities. In the first three months of 2023, net unrealized losses on the available for sale securities portfolio decreased by $11,667. This was primarily due to falling market yields since December 31, 2022. Management concluded the unrealized losses are primarily attributed to increases in risk-free market interest rates since these securities were purchased and were not credit-related losses. Unrealized losses are recorded in accumulated other comprehensive loss, net of tax. The Company expects the securities portfolio as a percentage of total assets to decrease over time as the proceeds from paydowns and maturities may be used for loan growth or repayment of borrowed funds.

As of March 31, 2023, approximately 63 percent of the available for sale securities portfolio consisted of government agency guaranteed collateralized mortgage obligations and mortgage-backed securities. These securities have little to no credit risk and provide cash flows for liquidity and repricing opportunities.

Loans and Nonperforming Assets

Loans outstanding increased $13,349 from $2,742,836 as of December 31, 2022 to $2,756,185 as of March 31, 2023. Changes in the loan portfolio during the first three months of 2023 included an increase of $38,218 in commercial real estate loans and a decrease of $26,275 in construction, land and land development loans. The Company continues to focus on business development efforts in all of its markets.

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 $3,517,517 as of September 30, 2022, compared to total assets of $3,500,201 as of December 31, 2021. Fluctuations in the balance sheet included increases in loans, deferred tax assets, other assets, federal funds purchased and subordinated debt and decreases in federal funds sold, securities and deposits.

~~Securities~~

Securities available for sale decreased by $87,070 during the nine months ended September 30, 2022. In the first three months of 2022, the Company purchased securities to improve the yield on excess liquidity while monitoring duration and interest rate risk. The impact of these purchases was offset by principal paydowns and the change in the fair value of the portfolio, which declined $141,629 in the first nine 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 unrealized losses are recorded in accumulated other comprehensive loss, net of tax. Future increases in market interest rates could result in a further increase of the unrealized losses in the securities portfolio.

As of September 30, 2022, approximately 65 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 $157,949 from $2,456,196 as of December 31, 2021 to $2,614,145 as of September 30, 2022. Changes in the loan portfolio during the first nine months of 2022 included increases of $131,689 in commercial real estate loans and $33,521 in commercial loans and a decrease of $17,709 in construction, land and land development loans. Included in the change in commercial loans was a decline of $21,087 in PPP loans. As of September 30, 2022, PPP loans outstanding totaled $1,119. The Company continues to focus on business development efforts in all of its markets. Exclusive of PPP loans, loan growth in the first nine months of 2022 was $179,036, or 7.4 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~~commercial real estate portfolio ~~levels exceed~~exceeds these regulatory guidelines, itthey are within the Company's established policy limits and the Company has ~~established~~appropriate risk management policies and procedures to regularly monitor the commercial real estate portfolio. An analysis of the Company's non-owner occupied commercial real estate portfolio as of December 31, ~~2021~~2022 was presented in the Company's Form 10-K filed with the SEC on February ~~24, 2022,~~23, 2023, and the Company has not experienced any material changes to that portfolio since December 31, ~~2021.~~2022.

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.


		September 30, 2022			December 31, 2021			Change				March 31, 2023			December 31, 2022			Change
Nonaccrual loans	Nonaccrual loans	$	329		$	8,948		$	(8,619)		Nonaccrual loans	$	316		$	322		$	(6)
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)		—			—			—
Loan restructurings (1)											Loan restructurings (1)	—			—			—
Total nonperforming loans	Total nonperforming loans	329			8,948			(8,619)			Total nonperforming loans	316			322			(6)
Other real estate owned	Other real estate owned	—			—			—			Other real estate owned	—			—			—
Total nonperforming assets	Total nonperforming assets	$	329		$	8,948		$	(8,619)		Total nonperforming assets	$	316		$	322		$	(6)

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

(1)While ~~TDR loans~~loan restructurings made to borrowers experiencing financial difficulty (loan restructurings) are commonly reported by the industry as nonperforming, those not classified in the nonaccrual category are accruing interest due to payment performance. ~~TDR loans~~Loan restructurings on nonaccrual status are categorized as nonaccrual. There were no ~~TDR loans~~loan restructurings categorized as nonaccrual as of ~~September 30, 2022. There were six TDR loans related to one borrower as of~~March 31, 2023 or December 31, ~~2021, categorized as nonaccrual.~~2022.

~~Table of Contents~~

~~West Bancorporation, Inc.~~

~~Management's Discussion and Analysis~~

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

Premises and Equipment

The ~~Company completed construction of a new office for its St. Cloud, Minnesota branch which opened in March 2022. 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 construction began in the second quarter of 2022. Construction is expected to be completed in 2024. Additionally, construction of a new office in Mankato, Minnesota also began in the first quarter of ~~2022.~~2022 and is expected to be completed in 2023.

Deposits

Deposits decreased ~~$193,158~~$82,015, or 2.8 percent, during the first ~~nine~~three months of 2023. A large part of this decrease was attributbale to a decrease in brokered deposits. Brokered deposits decreased to $234,213 at March 31, 2023, from $272,691 at December 31, 2022. Excluding brokered deposits, deposits decreased $43,537, or 1.5 percent, during the first three months of 2023. Deposit inflows and outflows are influenced by prevailing market interest rates, competition, local and national economic conditions, and fluctuations in our business customers' own liquidity ~~needs. The decline~~needs and may also be influenced by recent developments in the financial services industry. Significant competition for deposits driven by high interest rate alternatives for depositors is currently impacting deposit ~~balances was not due to the loss~~fluctuations and increasing our cost 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. A large corporate customer completed significant business transactions during 2022 that were funded by existing cash balances, accounting for a significant portion of the decrease in deposits. Also, large depositors who had accumulated excess discretionary balances sought higher yields in Treasury securities and other investment options primarily as a result of the sharp increase in shorter term interest rates.

~~At September 30, 2022,~~West Bank participates in the ~~Company had $258,080~~IntraFi® ICS and CDARS reciprocal deposit network which enables depositors to receive FDIC insurance coverage on deposits otherwise exceeding the maximum insurable amount. As of March 31, 2023, estimated uninsured deposits, which excludes deposits in ~~brokered~~the IntraFi® reciprocal network and public funds protected by state programs, were approximately 33.3 percent of total deposits, compared to ~~$130,032~~approximately 34.9 percent as of December 31, 2022.

Borrowed Funds

Federal funds purchased and other short-term borrowings increased from $200,000 at December 31, ~~2021. Brokered deposits included fixed-rate deposits~~2022 to $229,290 as of March 31, 2023. The fluctuations in the balances of federal funds purchased and other short-term borrowings is based on customer loan and deposit activity and the Company's balance sheet management objectives, which from time to time may require the Company to draw on the federal funds purchased lines with ~~terms through September 2024 and variable-rate deposits with terms through February 2024.~~our correspondent banks or FHLB advances.

~~Subordinated Debt~~

Table of Contents

~~On June 14, 2022,~~West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

The Company had $220,000 of short-term FHLB advances outstanding at March 31, 2023 associated with long-term interest rate swaps, which is an increase of $65,000 from December 31, 2022. In the first quarter of 2023, 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 injectionentered into ~~West Bank, the Company's subsidiary.~~

~~Derivatives~~

~~At September 30, 2022 and December 31, 2021, the Company had~~four additional long-term interest rate swap ~~contracts associated with loans, borrowed funds and deposits~~agreements with a total notional amount of ~~$535,733 and $427,008, respectively. The fair values~~$65,000. As of ~~these derivative contracts are reported in other assets or other liabilities on~~March 31, 2023, the ~~balance sheet. Changes in the fair values of the~~Company has long-term interest rate swap ~~contracts resulted in~~agreements with a ~~$29,335 increase in other assets~~total notional amount of $220,000 to hedge the interest payments of one-month rolling funding consisting of FHLB advances or brokered deposits. These interest rate swaps have maturity dates ranging from September 2023 through June 2029 and ~~a $4,669 increase in other liabilities~~fixed rates ranging from ~~December 31, 2021~~1.63 percent to ~~September 30, 2022 due to changes in forecasted yield curves.~~3.64 percent. This strategy of hedging short-term rolling funding effectively provides fixed cost wholesale funding through the maturity dates of the various interest rate swaps.

Liquidity

The objectives of liquidity management are to ensure the availability of sufficient cash flows to meet all financial commitments and to capitalize on opportunities for profitable business expansion. The Company's principal source of funds is deposits. Other sources include loan principal repayments, proceeds from the maturity and sale of securities, principal payments on ~~collateralized mortgage obligations and mortgage-backed~~amortizing securities, federal funds purchased, advances from the FHLB, other wholesale funding and funds provided by operations. Liquidity management is conducted on both a daily and a long-term basis. Investments in liquid assets are adjusted based on expected loan demand, projected loan and securities maturities and payments, expected deposit flows and the objectives set by the Company's asset-liability management policy. The Company had liquid assets (cash and cash equivalents) of ~~$59,391~~$22,480 as of ~~September 30, 2022~~March 31, 2023 compared with ~~$192,825~~$26,539 as of December 31, ~~2021.~~2022.

~~Table of Contents~~

~~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~~business customers' own liquidity ~~needs.~~needs and may also be influenced by recent developments in the financial services industry. The Company ~~may utilize~~utilizes brokered deposits to supplement core deposit fluctuations and loan growth. Brokered deposits are obtained through various programs administered by IntraFi, including IntraFi Network Deposits and IntraFi Funding, and through other third parties. At ~~September 30, 2022,~~March 31, 2023, the Company had ~~$258,080~~$234,213 in brokered deposits, which included fixed-rate deposits with terms through September 2024 and variable-rate deposits with terms through February 2024.

As of ~~September 30, 2022,~~March 31, 2023, West Bank had additional borrowing capacity available from the FHLB of approximately ~~$430,000,~~$434,000, as well as approximately ~~$4,000~~$3,000 through the Federal Reserve discount window, ~~and $67,000~~$35,000 through unsecured federal funds lines of credit with correspondent ~~banks.~~banks, and $14,067 through the new Federal Reserve Bank Term Funding Program. The Bank Term Funding Program was established by the Federal Reserve in March 2023 to provide an additional source of liquidity against high-quality securities. As of March 31, 2023, West Bank had pledged $14,067 in eligible securities to facilitate participation in the program. No funds were borrowed from the Federal Reserve discount window or Bank Term Funding Program during the three months ended March 31, 2023. Net cash from operating activities contributed ~~$48,921~~$2,494 to liquidity for the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023. Management believed that the combination of high levels of potentially liquid assets, unencumbered securities, cash flows from operations, and additional borrowing capacity are sufficient to meet our liquidity and capital needs.

The Company had remaining commitments to invest in qualified affordable housing projects totaling ~~$3,707~~$3,012 and ~~$3,986~~$3,431 as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

West Bank ~~has~~ entered into a construction contract in 2022 for the construction of a new headquarters building in West Des Moines, Iowa. West Bank will pay the contractor a contract price consisting of the cost of work plus a fee, subject to a guaranteed maximum price of $42,309, with anticipated construction completed in 2024. As of ~~September 30, 2022, $1,499 has been paid~~March 31, 2023, there was a remaining commitment of $30,415 under this ~~construction~~ contract. West Bank is also building a new office in Mankato, Minnesota to be completed in the fall of 2023, which had a remaining commitment of $5,426 as of March 31, 2023.

Capital

The Company's total stockholders' equity ~~decreased~~increased to ~~$198,764~~$216,992 at ~~September 30, 2022~~March 31, 2023 from ~~$260,328~~$211,112 at December 31, ~~2021.~~2022. The ~~decrease~~increase was primarily the result of the ~~increase~~decrease in accumulated other comprehensive loss ~~partially offset by~~and net income less dividends ~~paid.~~paid, partially offset by the adjustment made upon the adoption of ASU 2016-13. The decrease in accumulated other comprehensive loss is primarily the result of falling market yields since December 31, 2022. At ~~September 30, 2022,~~March 31, 2023, the Company's tangible common equity as a percent of tangible assets was ~~5.65~~5.99 percent compared to ~~7.44~~5.84 percent as of December 31, 2021. The increase in accumulated other comprehensive loss is primarily the result of the negative effect that rising interest rates have had on the unrealized market value adjustment of our available for sale investment portfolio.2022. While accumulated other comprehensive losses reduce tangible common equity, they have no impact on regulatory capital.

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 ~~September 30, 2022.~~March 31, 2023.

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


	Actual				For Capital Adequacy Purposes				For Capital Adequacy Purposes With Capital Conservation Buffer				To Be Well-Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
As of March 31, 2023:
Total Capital (to Risk-Weighted Assets)
Consolidated	$	412,702	12.17	%	$	271,365	8.00	%	$	356,167	10.50	%	$	339,207	10.00	%
West Bank	446,026		13.16	%	271,226		8.00	%	355,984		10.50	%	339,032		10.00	%

Tier 1 Capital (to Risk-Weighted Assets)
Consolidated	322,417		9.51	%	203,524		6.00	%	288,326		8.50	%	271,365		8.00	%
West Bank	415,741		12.26	%	203,419		6.00	%	288,177		8.50	%	271,226		8.00	%

Common Equity Tier 1 Capital (to Risk-Weighted Assets)
Consolidated	302,417		8.92	%	152,643		4.50	%	237,445		7.00	%	220,484		6.50	%
West Bank	415,741		12.26	%	152,564		4.50	%	237,322		7.00	%	220,371		6.50	%

Tier 1 Capital (to Average Assets)
Consolidated	322,417		8.60	%	149,898		4.00	%	149,898		4.00	%	187,373		5.00	%
West Bank	415,741		11.10	%	149,816		4.00	%	149,816		4.00	%	187,270		5.00	%

As of December 31, 2022:
Total Capital (to Risk-Weighted Assets)
Consolidated	$	408,056	12.08	%	$	270,221	8.00	%	$	354,665	10.50	%	$	337,776	10.00	%
West Bank	441,628		13.08	%	270,053		8.00	%	354,445		10.50	%	337,566		10.00	%

Tier 1 Capital (to Risk-Weighted Assets)
Consolidated	322,583		9.55	%	202,666		6.00	%	287,110		8.50	%	270,221		8.00	%
West Bank	416,155		12.33	%	202,540		6.00	%	286,931		8.50	%	270,053		8.00	%

Common Equity Tier 1 Capital (to Risk-Weighted Assets)
Consolidated	302,583		8.96	%	151,999		4.50	%	236,443		7.00	%	219,555		6.50	%
West Bank	416,155		12.33	%	151,905		4.50	%	236,296		7.00	%	219,418		6.50	%

Tier 1 Capital (to Average Assets)
Consolidated	322,583		8.81	%	146,439		4.00	%	146,439		4.00	%	183,049		5.00	%
West Bank	416,155		11.37	%	146,367		4.00	%	146,367		4.00	%	182,958		5.00	%

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

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

Actual For Capital
Adequacy Purposes For Capital
Adequacy Purposes With Capital Conservation Buffer To Be Well-Capitalized
Amount Ratio Amount Ratio Amount Ratio Amount Ratio
As of September 30, 2022:
Total Capital (to Risk-Weighted Assets)
Consolidated $ 402,346 12.34 % $ 260,881 8.00 % $ 342,407 10.50 % $ 326,102 10.00 %
West Bank 436,158 13.38 % 260,716 8.00 % 342,189 10.50 % 325,894 10.00 %

Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 316,928 9.72 % 195,661 6.00 % 277,187 8.50 % 260,881 8.00 %
West Bank 410,740 12.60 % 195,537 6.00 % 277,010 8.50 % 260,716 8.00 %
Common Equity Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 296,928 9.11 % 146,746 4.50 % 228,271 7.00 % 211,966 6.50 %
West Bank 410,740 12.60 % 146,652 4.50 % 228,126 7.00 % 211,831 6.50 %

Tier 1 Capital (to Average Assets)
Consolidated 316,928 8.85 % 143,286 4.00 % 143,286 4.00 % 179,108 5.00 %
West Bank 410,740 11.47 % 143,221 4.00 % 143,221 4.00 % 179,026 5.00 %

As of December 31, 2021:
Total Capital (to Risk-Weighted Assets)
Consolidated $ 319,329 10.89 % $ 234,670 8.00 % $ 308,004 10.50 % $ 293,337 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)
Consolidated 290,965 9.92 % 176,002 6.00 % 249,337 8.50 % 234,670 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)
Consolidated 270,965 9.24 % 132,002 4.50 % 205,336 7.00 % 190,669 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)
Consolidated 290,965 8.49 % 137,065 4.00 % 137,065 4.00 % 171,331 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 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 ~~September 30, 2022,~~March 31, 2023, the capital ratios for the Company and West Bank were sufficient to meet the conservation buffer.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

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

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

The following table presents the estimated change in net interest income for one year under several scenarios of assumed interest rate changes for the rate shock levels shown. The changes in each interest rate scenario represents the difference between estimated net interest income in the unchanged interest rate scenario, or the base case, and the estimated net interest income in each of the alternative interest rate scenarios. The net interest income in each scenario is based on parallel ~~and permanent~~yield curve changes in the interest ~~rates.~~rates applied to a static balance sheet. These do not reflect earnings expectations of management.



~~Scenario~~			~~% Change~~
~~300 basis points rising~~			~~(5.87)%~~
~~200 basis points rising~~			~~(3.95)%~~
~~100 basis points rising~~			~~(2.15)%~~
~~Base~~			—
~~100 basis points falling~~			~~2.08%~~

As of September 30, 2022, the estimated effect of a 300 basis point increase in interest rates would be a decrease of the Company’s net interest income by approximately 5.87 percent, or $5,440 over the twelve months ended September 30, 2023.


	Net Interest Income at March 31, 2023
Change in Interest Rates	Amount	% Change
300 basis points rising	$77,792	(9.12)%
200 basis points rising	80,220	(6.29)
100 basis points rising	82,533	(3.59)
Base	85,602	—
100 basis points falling	88,827	3.77
200 basis points falling	96,423	12.64

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

Item 4. Controls and Procedures

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

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b. Changes in internal control over financial reporting. There were no changes in the Company's internal control over financial reporting that occurred during the 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.~~23, 2023.

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.

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)
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)


~~October~~April 27, ~~2022~~2023	By:	/s/ David D. Nelson
Date		David D. Nelson
		Chief Executive Officer and President
		(Principal Executive Officer)

~~October~~April 27, ~~2022~~2023	By:	/s/ Jane M. Funk
Date		Jane M. Funk
		Executive Vice President, Treasurer and Chief Financial Officer
		(Principal Financial and Accounting Officer)

5249


(in thousands, except share and per share data)

	Three Months Ended September 30, 2022
										Accumulated
						Additional				Other
	Preferred		Common Stock			Paid-In		Retained		Comprehensive
	Stock		Shares	Amount		Capital		Earnings		Income (Loss)		Total
Balance, June 30, 2022	$	—	16,640,413	$	3,000	$	30,283	$	255,334	$	(72,428)	$	216,189
Net income	—		—	—		—		11,602		—		11,602
Other comprehensive loss, net of tax	—		—	—		—		—		(25,736)		(25,736)
Cash dividends declared, $0.25 per common share	—		—	—		—		(4,160)		—		(4,160)
Stock-based compensation costs	—		—	—		869		—		—		869

Balance, September 30, 2022	$	—	16,640,413	$	3,000	$	31,152	$	262,776	$	(98,164)	$	198,764


	Three Months Ended September 30, 2021
										Accumulated
						Additional				Other
	Preferred		Common Stock			Paid-In		Retained		Comprehensive
	Stock		Shares	Amount		Capital		Earnings		Income (Loss)		Total
Balance, June 30, 2021	$	—	16,554,846	$	3,000	$	28,888	$	221,113	$	(6,475)	$	246,526
Net income	—		—	—		—		12,706		—		12,706
Other comprehensive loss, net of tax	—		—	—		—		—		(3,530)		(3,530)
Cash dividends declared, $0.24 per common share	—		—	—		—		(3,974)		—		(3,974)
Stock-based compensation costs	—		—	—		648		—		—		648

Balance, September 30, 2021	$	—	16,554,846	$	3,000	$	29,536	$	229,845	$	(10,005)	$	252,376

See Notes to Consolidated Financial Statements.


(in thousands, except share and per share data)

	Nine Months Ended September 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	—		—	—		—		37,453		—		37,453
Other comprehensive loss, net of tax	—		—	—		—		—		(87,527)		(87,527)
Cash dividends declared, $0.75 per common share	—		—	—		—		(12,459)		—		(12,459)
Stock-based compensation costs	—		—	—		2,488		—		—		2,488
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes	—		85,567	—		(1,519)		—		—		(1,519)
Balance, September 30, 2022	$	—	16,640,413	$	3,000	$	31,152	$	262,776	$	(98,164)	$	198,764


	Nine Months Ended September 30, 2021
										Accumulated
						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	—		—	—		—		37,697		—		37,697
Other comprehensive income, net of tax	—		—	—		—		—		1,841		1,841
Cash dividends declared, $0.70 per common share	—		—	—		—		(11,570)		—		(11,570)
Stock-based compensation costs	—		—	—		1,926		—		—		1,926
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes	—		85,574	—		(1,213)		—		—		(1,213)
Balance, September 30, 2021	$	—	16,554,846	$	3,000	$	29,536	$	229,845	$	(10,005)	$	252,376


	September 30, 2022						December 31, 2021
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Commercial	$	—	$	—	$	—	$	—	$	—	$	—
Real estate:
Construction, land and land development	—		—		—		—		—		—
1-4 family residential first mortgages	329		329		—		349		349		—
Home equity	—		—		—		—		—		—
Commercial	—		—		—		—		—		—
Consumer and other	—		—		—		—		—		—
	329		329		—		349		349		—
With an allowance recorded:
Commercial	—		—		—		—		—		—
Real estate:
Construction, land and land development	—		—		—		—		—		—
1-4 family residential first mortgages	—		—		—		—		—		—
Home equity	—		—		—		—		—		—
Commercial	—		—		—		8,599		8,599		2,500
Consumer and other	—		—		—		—		—		—
	—		—		—		8,599		8,599		2,500
Total:
Commercial	—		—		—		—		—		—
Real estate:
Construction, land and land development	—		—		—		—		—		—
1-4 family residential first mortgages	329		329		—		349		349		—
Home equity	—		—		—		—		—		—
Commercial	—		—		—		8,599		8,599		2,500
Consumer and other	—		—		—		—		—		—
	$	329	$	329	$	—	$	8,948	$	8,948	$	2,500