FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED COMMISSION FILE NUMBER
September 30, 2004 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
Telephone Number (515) 222-2300
Indicate by check mark whether the registrant (1) has filed all reports required
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 [X] No[ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [X] No[ ]
As of November 4, 2004, there were 16,701,843 shares of common stock, no par
value outstanding.
1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
West Bancorporation, Inc. and Subsidiaries
Consolidated Balance Sheets
(unaudited)
September 30, December 31,
2004 2003
--------------- ---------------
Assets
Cash and due from banks $ 28,819,898 $ 27,786,795
Federal funds sold and other short-term investments 39,092,295 54,287,004
--------------- ---------------
Cash and cash equivalents 67,912,193 82,073,799
--------------- ---------------
Securities available for sale 271,215,807 178,308,941
Securities held to maturity (approximate market value of $75,619,000
and $93,477,000 at September 30, 2004 and December 31, 2003, respectively) 74,483,545 91,406,205
Federal Home Loan Bank stock, at cost 9,122,200 5,197,600
--------------- ---------------
Total securities 354,821,552 274,912,746
--------------- ---------------
Loans 677,752,180 599,355,407
Allowance for loan losses (6,139,881) (5,975,587)
--------------- ---------------
Loans, net 671,612,299 593,379,820
--------------- ---------------
Premises and equipment, net 3,865,734 3,683,020
Accrued interest receivable 6,455,281 5,878,880
Goodwill and other intangible assets 16,644,392 16,900,487
Bank-owned life insurance 21,044,752 20,386,714
Other assets 2,886,710 3,396,145
--------------- ---------------
Total assets $ 1,145,242,913 $ 1,000,611,611
=============== ===============
Liabilities and Stockholders' Equity
Deposits:
Noninterest bearing demand $ 179,312,400 $ 172,070,832
Savings and interest bearing demand 366,509,150 403,060,980
Time, in excess of $100,000 183,751,820 63,463,030
Other time 63,571,985 66,479,171
--------------- ---------------
Total deposits 793,145,355 705,074,013
Federal funds purchased and securities sold under agreements to repurchase 44,225,817 85,442,675
Other short-term borrowings 95,539,190 9,141,973
Accrued expenses and other liabilities 14,336,591 2,032,291
Trust preferred securities - 20,000,000
Subordinated notes 20,619,000 -
Federal Home Loan Bank advances and other long-term borrowing 81,347,545 86,024,315
--------------- ---------------
Total liabilities 1,049,213,498 907,715,267
--------------- ---------------
Stockholders' Equity
Common stock, no par value; authorized 50,000,000 shares; 16,701,843 and
16,863,285 shares issued and outstanding at September 30, 2004 and
December 31, 2003, respectively 3,000,000 3,000,000
Additional paid-in capital 32,000,000 32,000,000
Retained earnings 60,244,757 56,796,771
Accumulated other comprehensive income (loss) 784,658 1,099,573
--------------- ---------------
Total stockholders' equity 96,029,415 92,896,344
--------------- ---------------
Total liabilities and stockholders' equity $ 1,145,242,913 $ 1,000,611,611
=============== ===============
See accompanying notes to consolidated financial statements.
2
West Bancorporation, Inc. and Subsidiaries
Consolidated Statements of Income
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
------------ ------------ ------------ ------------
Interest income:
Loans $ 9,457,232 $ 8,636,379 $ 27,036,739 $ 24,005,693
Securities:
U.S Treasury, government agencies and corporations 1,674,276 1,189,844 4,391,663 3,452,676
States and political subdivisions 613,557 430,999 1,581,676 1,290,336
Other 643,703 943,083 2,083,609 2,346,593
Federal funds sold and other short-term investments 183,265 124,779 550,411 943,459
------------ ------------ ------------ ------------
Total interest income 12,572,033 11,325,084 35,644,098 32,038,757
------------ ------------ ------------ ------------
Interest expense:
Demand deposits 21,711 37,082 61,515 86,357
Savings deposits 820,625 733,141 2,398,382 2,227,010
Time deposits 1,001,957 571,024 2,294,109 2,091,692
Federal funds purchased and securities sold under
agreements to repurchase 134,899 318,784 468,237 1,207,135
Other short-term borrowings 265,040 2,825 347,271 6,182
Subordinated notes 370,867 - 1,104,611 -
Long-term borrowings 938,424 1,154,703 2,795,297 2,578,650
------------ ------------ ------------ ------------
Total interest expense 3,553,523 2,817,559 9,469,422 8,197,026
------------ ------------ ------------ ------------
Net interest income 9,018,510 8,507,525 26,174,676 23,841,731
Provision for loan losses 325,000 250,000 775,000 625,000
------------ ------------ ------------ ------------
Net interest income after provision for loan losses 8,693,510 8,257,525 25,399,676 23,216,731
------------ ------------ ------------ ------------
Noninterest income:
Service charges on deposit accounts 1,339,223 1,305,158 3,759,792 3,663,375
Trust services 157,000 132,000 415,500 386,000
Investment advisory fees 711,166 - 1,900,187 -
Increase in cash value of bank-owned life insurance 213,072 222,833 658,037 414,180
Net realized gains (losses) from sales of securities
available for sale 1,975 (48,626) 244,981 146,981
Other income 334,959 545,651 1,042,483 1,189,935
------------ ------------ ------------ ------------
Total noninterest income 2,757,395 2,157,016 8,020,980 5,800,471
------------ ------------ ------------ ------------
Noninterest expense:
Salaries and employee benefits 2,408,132 1,954,613 7,297,535 5,360,055
Occupancy expenses 494,033 378,899 1,499,206 1,102,022
Data processing expenses 338,189 283,133 1,027,348 775,307
Other expenses 918,084 776,662 2,880,750 1,940,197
------------ ------------ ------------ ------------
Total noninterest expense 4,158,438 3,393,307 12,704,839 9,177,581
------------ ------------ ------------ ------------
Income before income taxes 7,292,467 7,021,234 20,715,817 19,839,621
Income taxes 2,485,641 2,457,389 7,093,924 6,974,350
------------ ------------ ------------ ------------
Net income $ 4,806,826 $ 4,563,845 $ 13,621,893 $ 12,865,271
============ ============ ============ ============
Basic earnings per share $ 0.29 $ 0.27 $ 0.81 $ 0.76
============ ============ ============ ============
Cash dividends per share $ 0.160 $ 0.152 $ 0.464 $ 0.457
============ ============ ============ ============
See accompanying notes to consolidated financial statements.
3
s
West Bancorporation, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
(unaudited)
Nine Months Ended
September 30,
2004 2003
------------ ------------
Common Stock
Beginning of year balance $ 3,000,000 $ 3,000,000
------------ ------------
End of period balance 3,000,000 3,000,000
------------ ------------
Additional Paid-in Capital
Beginning of year balance 32,000,000 32,000,000
------------ ------------
End of period balance 32,000,000 32,000,000
------------ ------------
Retained Earnings
Beginning of year balance 56,796,771 49,792,716
Net income 13,621,893 12,865,271
Dividends on common stock (7,811,582) (7,708,930)
Purchase of fractional shares resulting from
stock dividend (2,090) -
Shares reacquired under the common stock
repurchase plan (2,360,235) -
------------ ------------
End of period balance 60,244,757 54,949,057
------------ ------------
Accumulated Other Comprehensive Income (Loss)
Beginning of year balance 1,099,573 1,031,446
Unrealized gain on securities, net of tax (314,915) 151,971
------------ ------------
End of period balance 784,658 1,183,417
------------ ------------
Total Stockholders' Equity $ 96,029,415 $ 91,132,474
============ ============
West Bancorporation, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(unaudited)
Nine Months Ended
September 30,
2004 2003
------------ ------------
Net Income $ 13,621,893 $ 12,865,271
Other comprehensive income (loss), unrealized
gains (losses) on securities, net of
reclassification adjustment, net of tax (314,915) 151,971
------------ ------------
Comprehensive income $ 13,306,978 $ 13,017,242
============ ============
See accompanying notes to consolidated financial statements.
4
West Bancorporation, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)
Nine Months Ended
September 30,
2004 2003
------------- -------------
Cash Flows from Operating Activities
Net income $ 13,621,893 $ 12,865,271
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 775,000 625,000
Net amortization 1,508,164 1,235,220
Net gains from sales of securities available for sale
and loans held for sale (360,131) (456,358)
Proceeds from sales of loans held for sale 9,612,269 30,844,808
Originations of loans held for sale (9,537,119) (31,381,728)
Depreciation 255,794 169,731
Deferred income taxes 443,070 87,579
Change in assets and liabilities:
Increase in accrued interest receivable (576,401) (1,024,895)
Increase (decrease) in accrued expenses and other liabilities 12,304,300 (85,058)
------------- -------------
Net cash provided by operating activities 28,046,839 12,879,570
------------- -------------
Cash Flows from Investing Activities
Proceeds from sales, calls, and maturities of securities available for sale 80,351,815 36,983,248
Purchases of securities available for sale (163,774,781) (129,061,840)
Proceeds from calls and maturities of securities held to maturity 36,445,000 62,551,334
Purchases of securities held to maturity (30,717,947) (16,401,785)
Acquisition of Federal Home Loan Bank stock (9,520,300) (229,900)
Proceeds from redemption of Federal Home Loan Bank stock 5,595,700 20,500
Cash effect of Hawkeye State Bank transaction - 21,364,851
Net increase in loans (78,967,479) (6,349,447)
Purchases of premises and equipment (438,508) (98,096)
Purchase of bank-owned life insurance - (20,000,000)
Change in other assets (428,739) (98,889)
------------- -------------
Net cash (used) in investing activities (161,455,239) (51,320,024)
------------- -------------
Cash Flows from Financing Activities
Net increase (decrease) in deposits 88,071,342 (80,401,896)
Net decrease in federal funds purchased and securities sold
under agreements to repurchase (41,216,858) (7,004,756)
Net increase (decrease) in other short -term borrowings 85,847,217 (1,772,618)
Proceeds from long-term borrowings 10,619,000 20,000,000
Principal payments on long-term borrowings (13,900,000) (1,607,184)
Purchase of fractional shares resulting from stock dividend (2,090) -
Payment for shares reacquired under common stock
repurchase plan (2,360,235) -
Cash dividends (7,811,582) (7,708,930)
------------- -------------
Net cash provided by (used) in financing activities 119,246,794 (78,495,384)
------------- -------------
Net decrease in cash and cash equivalents (14,161,606) (116,935,838)
Cash and Cash Equivalents
Beginning 82,073,799 181,214,068
------------- -------------
End $ 67,912,193 $ 64,278,230
============= =============
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest $ 8,984,818 $ 8,624,180
Income taxes 6,050,000 6,674,183
See accompanying notes to consolidated financial statements.
5
West Bancorporation, Inc.
Notes to Consolidated Financial Statements
(unaudited)
1. Basis of Presentation
The accompanying consolidated statements of income, stockholders' equity,
comprehensive income, and cash flows for the three and nine months ended
September 30, 2004 and 2003, and the consolidated balance sheets as of September
30, 2004 and December 31, 2003 include the accounts and transactions of the
Company and its wholly-owned subsidiaries, West Bank and WB Capital Management
Inc. d/b/a VMF Capital. All material intercompany balances and transactions have
been eliminated in consolidation.
The accompanying consolidated financial statements have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. Although management believes that the disclosures are adequate to
make the information presented not misleading, it is suggested that these
interim consolidated financial statements be read in conjunction with the
company's most recent audited financial statements and notes thereto. In the
opinion of management, the accompanying consolidated financial statements
contain all adjustments (consisting of only normal recurring accruals) necessary
to present fairly the financial position as of September 30, 2004, and the
results of operations and cash flows for the three and nine months ended
September 30, 2004 and 2003.
The results for these interim periods may not be indicative of results for the
entire year or for any other period.
2. Earnings Per Common Share
Earnings per share represent income available to common shareholders divided by
the weighted average number of shares outstanding during the period. The Company
has no common equivalent shares that could cause dilution. The average number of
shares outstanding for the three months ended September 30, 2004 and 2003 was
16,701,890 and 16,863,285, respectively, and the average number of shares
outstanding for the nine months ended September 30, 2004 and 2003 was 16,781,235
and 16,863,285, respectively.
On July 14, 2004, the Board of Directors of the Company declared a 5 percent
common stock dividend to be paid on August 2, 2004 to shareholders of record on
July 26, 2004. Any fractional shares resulting from the stock dividend were paid
in cash. The number of outstanding common shares and earnings per common share
in the accompanying financial statements and footnotes reflect the 5 percent
common stock dividend.
3. Commitments
In the normal course of business, the Company enters into commitments to extend
credit such as loan commitments and standby letters of credit to meet the
financing needs of its customers. These commitments expose the Company to
varying degrees of credit and market risk and are subject to the same credit
reviews as those recorded on the balance sheet. For additional information on
credit extension commitments see Note 13 of the Company's 2003 consolidated
financial statements. The Company's commitments as of September 30, 2004 and
December 31, 2003 are approximately as follows:
September 30, 2004 December 31, 2003
------------------ -----------------
Commitments to extend credit $179,824,000 $166,945,000
Standby letters of credit 22,391,000 19,974,000
------------ ------------
$202,215,000 $186,919,000
============ ============
6
4. Impact of New Financial Accounting Standards
The Accounting Standards Executive Committee has issued Statement of Position
03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer.
This Statement applies to all loans acquired in a transfer, including those
acquired in the acquisition of a bank or a branch, and provides that such loans
be accounted for at fair value with no allowance for loan losses, or other
valuation allowance, permitted at the time of acquisition. The difference
between cash flows expected at the acquisition date and the investment in the
loan should be recognized as interest income over the life of the loan. If
contractually required payments for principal and interest are less than
expected cash flows, this amount should not be recognized as a yield adjustment,
a loss accrual, or a valuation allowance. For the Company, this Statement is
effective for calendar year 2005 and, early adoption, although permitted, is not
planned. No impact is expected on the consolidated financial statements at the
time of adoption.
5. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates. A significant estimate that is
particularly sensitive to change is the allowance for loan losses.
6. Critical Accounting Policies
Management has identified its most critical accounting policy to be that related
to the allowance for loan losses. The allowance for loan losses is established
through a provision for loan losses charged to expense. Loans are charged
against the allowance for loan losses when management believes that
collectibility of the principal is unlikely. The Company has policies and
procedures for evaluating the overall credit quality of its loan portfolio
including timely identification of potential problem credits. On a quarterly
basis, management reviews the appropriate level for the allowance for loan
losses incorporating a variety of risk considerations, both quantitative and
qualitative. Quantitative factors include the Company's historical loss
experience, delinquency and charge-off trends, collateral values, known
information about individual loans and other factors. Qualitative factors
include the general economic environment in the Company's market area and the
expected trend of those economic conditions. To the extent actual results differ
from forecasts and management's judgment, the allowance for loan losses may be
greater or less than future charge-offs.
7. Reclassifications
In July, 2003, the Company formed West Bancorporation Capital Trust I (the
"Trust") for the purpose of issuing trust preferred securities. Following
generally accepted accounting principles in effect as of December 31, 2003, the
financial statements of the Trust were consolidated with the Company and any
intercompany transactions were eliminated. Generally accepted accounting
principles were modified in the first quarter of 2004 to state that the
financial statements of the Trust should not be consolidated with the Company's
and intercompany transactions should not be eliminated. The result of this
change is that the balance of subordinated debt has increased by $619,000 which
represents debt issued by the Company to the Trust. In addition, other assets
increased by $619,000 which represents the Company's investment in the common
stock of the Trust. The results of the Trust are recorded on the books of the
Company using the equity method of accounting. There was no impact to net income
as a result of this change.
Other minor reclassifications were made to certain prior year's income and
expense categories to conform to the current year's presentation.
7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
The information contained in this report may contain forward-looking statements
about the Company's growth and acquisition strategies, new products and
services, and future financial performance, including earnings and dividends per
share, return on average assets, return on average equity, efficiency ratio and
capital ratio. Certain statements in this report constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking information is based upon certain underlying
assumptions, risks and uncertainties. Because of the possibility of changes in
the underlying assumptions, actual results could differ materially from these
forward-looking statements. Risks and uncertainties that may affect future
results include: interest rate risk, competitive pressures, pricing pressures on
loans and deposits, actions of bank and non-bank competitors, changes in local
and national economic conditions, changes in regulatory requirements, actions of
the Securities and Exchange Commission and the Federal Reserve Board, and
customer acceptance of the Company's products and services. The Company
undertakes no obligation to revise or update such forward-looking statements to
reflect current events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004
OVERVIEW
The following discussion is provided for the consolidated operations of the
Company, which includes its wholly-owned banking subsidiary, West Bank ("Bank")
and its wholly-owned investment advisory subsidiary, WB Capital Management Inc.
d/b/a VMF Capital ("VMF Capital"). It focuses on the consolidated results of
operations for the three and nine months ended September 30, 2004, compared to
the same periods in 2003 and on the consolidated financial condition of the
Company and its subsidiaries at September 30, 2004, compared to December 31,
2003.
Net income for the three months ended September 30, 2004 increased 5.3 percent
to $4,807,000 compared to $4,564,000 for the same period in 2003. The increase
was primarily due to a 6.0 percent increase in net interest income and higher
gains from sales of securities.
For the first nine months of 2004, net income was $13,622,000, or $.81 per
share, which is a 5.9 percent increase over last year. Net income for the first
nine months of 2004 is higher than the previous year primarily because of the
$92 million increase in average earning assets which contributed to a 9.8
percent increase in net interest income.
The year-to-date net interest margin has declined 2 basis points from a year
ago. Loan and deposit rates are both lower than a year ago, however, changes in
the mix of earning assets and interest bearing liabilities allowed the net
interest margin to remain fairly constant. The Federal Reserve increased the fed
funds targeted rate by 25 basis points on three separate occasions since June
30, 2004. The Federal Reserve had not changed rates since June of 2003.
Short-term interest rates began rising in the second quarter of 2004, causing
rates on certificates of deposit and short-term borrowings to increase. Loans
with interest rates tied to the prime rate did not readjust until the third
quarter.
Year-to-date noninterest income was higher than last year due to investment
advisory fees earned by VMF Capital and higher increases in the cash value of
bank-owned life insurance. Investment advisory fees totaled $1,900,000
year-to-date. VMF Capital was acquired in October of 2003 so there were no such
fees for the comparable periods last year. Bank-owned life insurance was
purchased in two separate transactions during 2003 and was in place for the
entire year of 2004.
Year-to-date noninterest expense was 38% higher than a year ago. The increase is
due to two additional banking office locations and two VMF Capital locations
that were acquired in 2003 and the associated personnel costs.
8
For the first nine months of 2004, VMF Capital had a net loss of $32,000, which
was in line with internal projections. It is expected that VMF Capital will be
near breakeven for the entire year of 2004, however that is dependent upon
continued growth in assets under management, which is difficult to project with
any degree of certainty. During the first nine months of 2004, assets under
management at VMF Capital increased approximately $261 million to $723 million.
RESULTS OF OPERATIONS
The following table shows selected financial results and measures for the three
and nine months ended September 30, 2004 compared with the same periods in 2003.
Three Months Ended September 30,
2004 2003 Change Change-%
----------------- ----------------- ----------------- ----------
Net income $ 4,806,826 $ 4,563,845 $ 242,981 5.3%
Average assets 1,066,044,031 963,656,348 102,387,683 10.6%
Average stockholders'
equity 93,289,537 88,408,514 4,881,023 5.5%
Return on assets 1.79% 1.88% -0.09% -4.5%
Return on equity 20.50% 20.48% 0.02% 0.1%
Efficiency ratio 34.38% 31.03% 3.35% 10.8%
Dividend payout ratio 55.59% 57.14% -1.55% -2.7%
Equity to assets ratio 8.75% 9.17% -0.42% -4.6%
Nine Months Ended September 30,
2004 2003 Change Change-%
----------------- ----------------- ----------------- ---------
Net income $ 13,621,893 $ 12,865,271 $ 756,622 5.9%
Average assets 1,023,855,058 906,918,258 116,936,800 12.9%
Average stockholders'
equity 93,505,551 87,640,752 5,864,799 6.7%
Return on assets 1.78% 1.90% -0.12% -6.3%
Return on equity 19.46% 19.63% -0.17% -0.9%
Efficiency ratio 36.49% 30.40% 6.09% 20.0%
Dividend payout ratio 57.34% 60.00% -2.66% -4.4%
Equity to assets ratio 9.13% 9.66% -0.53% -5.5%
Definitions of ratios:
Return on assets - annualized net income divided by average assets.
Return on equity - annualized net income divided by average stockholders'
equity.
Efficiency ratio - noninterest expense divided by noninterest income (excluding
securities gains) plus taxable equivalent net interest income.
Dividend payout ratio - dividends per share divided by net income per share.
Equity to assets ratio - average equity divided by average assets.
Net Interest Income
The following tables show average balances and related interest income or
interest expense, with the resulting average yield or rate by category of
average earning assets or interest bearing liabilities. Interest income and the
resulting net interest income are shown on a fully taxable basis.
9
Data for the three months ended September 30 (dollars in thousands):
Average Balance Interest Income/Expense Yield/Rate
------------------------------------- ------------------------------- --------------------
2004 2003 Change Change-% 2004 2003 Change Change-% 2004 2003 Change
Interest - earning assets:
Loans:
Commercial $262,528 $273,653 $(11,125) -4.07% $3,499 $ 3,803 $ (304) -7.99% 5.30% 5.51% -0.21%
Real estate 363,603 262,655 100,948 38.43% 5,559 4,334 1,225 28.26% 6.08% 6.55% -0.47%
Consumer 11,933 18,835 (6,902) -36.64% 216 363 (147) -40.50% 7.21% 7.65% -0.44%
Other 18,778 10,997 7,781 70.76% 266 199 67 33.67% 5.63% 7.18% -1.55%
-------- -------- -------- ------ ------ ------- ------ ------ ---- ---- ------
Total loans 656,842 566,140 90,702 16.02% 9,540 8,699 841 9.67% 5.78% 6.10% -0.32%
-------- -------- -------- ------ ------ ------- ------ ------ ---- ---- ------
Investment securities:
Taxable 245,860 237,678 8,182 3.44% 2,418 2,217 201 9.07% 3.93% 3.70% 0.23%
Tax-exempt 61,111 43,320 17,791 41.07% 762 507 255 50.30% 4.99% 4.64% 0.35%
-------- -------- -------- ------ ------ ------- ------ ------ ---- ---- ------
Total investment securities 306,971 280,998 25,973 9.24% 3,180 2,724 456 16.74% 4.14% 3.85% 0.29%
-------- -------- -------- ------ ------ ------- ------ ------ ---- ---- ------
Federal funds sold and
short-term investments 29,171 51,094 (21,923) -42.91% 171 125 46 36.80% 2.34% 0.97% 1.37%
-------- -------- -------- ------ ------ ------- ------ ------ ---- ---- ------
Total interest-earning assets $992,984 $898,232 $ 94,752 10.55% 12,891 11,548 1,343 11.63% 5.17% 5.10% 0.07%
======== ======== ======== ====== ------ ------- ------ ------ ---- ---- ------
Interest-bearing liabilities:
Deposits:
Checking with interest, savings
and money markets $372,708 $353,478 $ 19,230 5.44% 842 770 72 9.35% 0.90% 0.86% 0.04%
Time deposits 207,069 113,765 93,304 82.01% 1,002 571 431 75.48% 1.92% 1.98% -0.06%
-------- -------- -------- ------ ------ ------- ------ ------ ---- ---- ------
Total deposits 579,777 467,243 112,534 24.08% 1,844 1,341 503 37.51% 1.27% 1.14% 0.13%
-------- -------- -------- ------ ------ ------- ------ ------ ---- ---- ------
Other borrowed funds 213,289 246,700 (33,411) -13.54% 1,709 1,477 232 15.71% 3.19% 2.38% 0.81%
-------- -------- -------- ------ ------ ------- ------ ------ ---- ---- ------
Total interest-bearing
liabilities $793,066 $713,943 $ 79,123 11.08% 3,553 2,818 735 26.08% 1.78% 1.57% 0.21%
======== ======== ======== ====== ------ ------- ------ ------ ---- ---- ------
Tax-equivalent net interest income $9,338 $ 8,730 $ 608 6.96%
====== ======= ====== ======
Net interest spread 3.39% 3.53% -0.14%
==== ==== ======
Net interest margin 3.74% 3.86% -0.12%
==== ==== ======
Data for the nine months ended September 30 (dollars in thousands):
Average Balance Interest Income/Expense Yield/Rate
------------------------------------- ---------------------------------- --------------------
2004 2003 Change Change-% 2004 2003 Change Change-% 2004 2003 Change
Interest-earning assets:
Loans:
Commercial $283,333 $260,880 $ 22,453 8.61% $11,270 $10,969 $ 301 2.74% 5.31% 5.62% -0.31%
Real estate 311,473 222,760 88,713 39.82% 14,409 11,527 2,882 25.00% 6.18% 6.92% -0.74%
Consumer 14,642 18,497 (3,855) -20.84% 778 1,051 (273) -25.98% 7.10% 7.60% -0.50%
Other 18,673 11,697 6,976 59.64% 842 671 171 25.48% 6.02% 7.67% -1.65%
-------- -------- -------- ------ ------- ------- ------ ------ ---- ---- ------
Total loans 628,121 513,834 114,287 22.24% 27,299 24,218 3,081 12.72% 5.81% 6.30% -0.49%
-------- -------- -------- ------ ------- ------- ------ ------ ---- ---- ------
Investment securities:
Taxable 233,155 202,983 30,172 14.86% 6,755 6,051 704 11.63% 3.86% 3.99% -0.13%
Tax-exempt 53,400 39,298 14,102 35.88% 1,914 1,516 398 26.25% 4.78% 5.16% -0.38%
-------- -------- -------- ------ ------- ------- ------ ------ ---- ---- ------
Total investment securities 286,555 242,281 44,274 18.27% 8,669 7,567 1,102 14.56% 4.03% 4.18% -0.15%
-------- -------- -------- ------ ------- ------- ------ ------ ---- ---- ------
Federal funds sold and
short-term investments 38,164 105,183 (67,019) -63.72% 539 943 (404) -42.84% 1.89% 1.20% 0.69%
-------- -------- -------- ------ ------- ------- ------ ------ ---- ---- ------
Total interest-earning assets $952,840 $861,298 $ 91,542 10.63% 36,507 32,728 3,779 11.55% 5.12% 5.08% 0.04%
======== ======== ======== ====== ------- ------- ------ ------ ---- ---- ------
Interest-bearing liabilities:
Deposits:
Checking with interest, savings
and money markets $385,256 $335,041 $ 50,215 14.99% $ 2,460 $ 2,313 147 6.36% 0.85% 0.92% -0.07%
Time deposits 167,823 111,099 56,724 51.06% 2,294 2,092 202 9.66% 1.83% 2.52% -0.69%
-------- -------- -------- ------ ------- ------- ------ ------ ---- ---- ------
Total deposits 553,079 446,140 106,939 23.97% 4,754 4,405 349 7.92% 1.15% 1.32% -0.17%
-------- -------- -------- ------ ------- ------- ------ ------ ---- ---- ------
Other borrowed funds 201,875 226,036 (24,161) -10.69% 4,715 3,792 923 24.34% 3.12% 2.24% 0.88%
-------- -------- -------- ------ ------- ------- ------ ------ ---- ---- ------
Total interest-bearing
liabilities $754,954 $672,176 $ 82,778 12.31% 9,469 8,197 1,272 15.52% 1.68% 1.63% 0.05%
======== ======== ======== ====== ------- ------- ------ ------ ---- ---- ------
Tax-equivalent net interest income $27,038 $24,531 $2,507 10.22%
======= ======= ====== ======
Net interest spread 3.44% 3.45% -0.01%
==== ==== ======
Net interest margin 3.79% 3.81% -0.02%
==== ==== ======
10
Fluctuations in net interest income can result from the changes in the volumes
of assets and liabilities as well as changes in interest rates. Net interest
margin is a measure of the net return on interest-earning assets and is computed
by dividing annualized net interest income by the average of total
interest-earning assets for the period. The net interest margin for the third
quarter was 3.74 percent, which is 12 basis points lower than the same quarter
last year and 2 basis points less than the second quarter of 2004. The slight
decline from the prior quarter was due to an increase in interest rates on time
deposits and short-term borrowings as a result of increases in market rates. The
Company's tax-equivalent net interest income for the nine months ended September
30, 2004 increased $2,507,000 compared to the nine months ended September 30,
2003. The increase is primarily attributable to a higher level of earning
assets.
Taxable-equivalent interest income and fees on loans increased $3,081,000 in the
first nine months of 2004 compared to the same period in 2003, due to a higher
volume of outstanding loans. Average loans were $114 million higher than the
first nine months of last year. The average yield on loans declined to 5.81
percent for the first nine months of 2004, compared to 6.30 percent for the same
period in 2003. The yield on the Company's loan portfolio is affected by the
amount of nonaccrual loans, the mix of the portfolio, the effects of competition
and the interest rate environment. The interest rate environment can influence
the volume of new loan originations and the mix of variable rate versus fixed
rate loans. Competition for loans in the market areas served by the Company
remains strong.
The average balance of investment securities was $44 million higher than last
year while the yield has declined 15 basis points. Most purchases of investment
securities during the first nine months of 2004 have been agency bonds and
tax-exempt municipal bonds with a maturity of five years or less.
The average rate paid on deposits for the first nine months of 2004 declined to
1.15 percent from 1.32 percent for the same period last year. This decline is
primarily the result of the maturity of higher rate certificates of deposit.
Compared to the first nine months of last year, the average balance of higher
rate certificates of deposit was up $57 million, while the average balance of
money market and savings accounts, which typically have lower rates, were $29.1
million and $19.0 million higher, respectively.
The average balance of borrowings for the first nine months of 2004 was $24
million lower than a year ago. However, the mix of borrowings has changed
significantly since last year. Overnight borrowings in the form of Federal funds
purchased from downstream correspondent banks averaged $88.4 million less than
the first nine months of last year. Long-term fixed borrowings averaged $35.7
million more, consisting of $15.1 million in subordinated notes and $20.6
million in fixed-rate Federal Home Loan Bank (FHLB) advances. This change in mix
caused the overall cost of borrowings to increase by 88 basis points.
Provision for Loan Losses and the Related Allowance for Loan Losses
The following table sets forth the activity in the Allowance for Loan Losses for
the three and nine months ended September 30, 2004 and the same respective
periods for 2003 as well as common ratios related to the allowance for loan
losses.
Three Months Ended September 30, Nine Months Ended September 30,
2004 2003 Change 2004 2003 Change
---- ---- ------ ---- ---- ------
Balance at beginning of period $ 6,032,246 $ 4,796,329 $ 1,235,917 $ 5,975,587 $ 4,493,583 $1,482,004
Allowances related to acquisitions - 911,000 (911,000) 911,000 (911,000)
Charge-offs (260,628) (110,465) (150,163) (728,080) (271,146) (456,934)
Recoveries 43,263 32,511 10,752 117,374 120,938 (3,564)
------------ ------------ ------------ ------------ ------------ ----------
Net charge-offs (217,365) (77,954) (139,411) (610,706) (150,208) (460,498)
Provision charged to operations 325,000 250,000 75,000 775,000 625,000 150,000
------------ ------------ ------------ ------------ ------------ ----------
Balance at end of period $ 6,139,881 $ 5,879,375 $ 260,506 $ 6,139,881 $ 5,879,375 $ 260,506
============ ============ ============ ============ ============ ==========
Average loans outstanding $656,842,839 $566,139,731 $628,120,475 $513,834,406
Ratio of net charge-offs during the
period to average loans outstanding 0.03% 0.01% 0.10% 0.03%
Ratio of allowance for loan losses
to average loans outstanding 0.93% 1.04% 0.98% 1.14%
11
Management determines an appropriate provision based on its evaluation of the
adequacy of the allowance for loan losses in relationship to a continuing review
of problem loans, the current economic conditions, actual loss experience and
industry trends. The allowance for loan losses is management's best estimate of
probable losses inherent in the loan portfolio as of the balance sheet date;
however, changes in the loan portfolio and the uncertainty of the general
economy require that management continue to evaluate the adequacy of the
allowance for loan losses and make additional provisions in future periods as
deemed necessary. See also the discussion of nonperforming assets later in this
report.
Noninterest Income
The following table shows the variance from the prior year in the noninterest
income categories shown in the Consolidated Statements of Income. In addition,
accounts within the Other Income category that represent significant variances
are shown.
Three Months Ended September 30,
2004 2003 Change Change-%
---- ---- ------ --------
Noninterest income
Service charges on deposit accounts $ 1,339,223 $ 1,305,158 $ 34,065 2.61%
Trust services 157,000 132,000 25,000 18.94%
Investment advisory fees 711,166 - 711,166 -
Increase in cash value of bank - owned
life insurance 213,072 222,833 (9,761) -4.38
Other:
Letter of credit fees 37,475 40,704 (3,229) -7.93
VISA/Mastercard income 42,987 39,321 3,666 9.32%
Gain on sale of real estate loans 36,373 224,618 (188,245) -83.81
Safe deposit box rent 33,363 38,558 (5,195) -13.47
All other 184,761 202,450 (17,689) -8.74
----------- ----------- ----------- --------
Total other 334,959 545,651 (210,692) -38.61
----------- ----------- ----------- --------
Gain (loss) on sale of securities 1,975 (48,626) 50,601 -104.06
----------- ----------- ----------- --------
Total noninterest income $ 2,757,395 $ 2,157,016 $ 600,379 27.83%
=========== =========== =========== ========
Nine Months Ended September 30,
2004 2003 Change Change-%
---- ---- ------ --------
Noninterest income
Service charges on deposit accounts $ 3,759,792 $ 3,663,375 $ 96,417 2.63%
Trust services 415,500 386,000 29,500 7.64%
Investment advisory fees 1,900,187 - 1,900,187 -
Increase in cash value of bank - owned
life insurance 658,037 414,180 243,857 58.88%
Other:
Letter of credit fees 119,829 74,819 45,010 60.16%
VISA/Mastercard income 130,954 113,766 17,188 15.11%
Gain on sale of real estate loans 115,150 309,377 (194,227) -62.78
Safe deposit box rent 121,615 102,653 18,962 18.47%
All other 554,935 589,320 (34,385) -5.83
----------- ----------- ----------- -------
Total other 1,042,483 1,189,935 (147,452) -12.39
----------- ----------- ----------- -------
Gain (loss) on sale of securities 244,981 146,981 98,000 66.68%
----------- ----------- ----------- -------
Total noninterest income $ 8,020,980 $ 5,800,471 $ 2,220,509 38.28%
=========== =========== =========== =======
Noninterest income results from the charges and fees collected by the Company
from its customers for various services performed and miscellaneous other income
and gains or losses from the sale of investment securities held in the available
for sale category. Investment advisory fees are fees earned by VMF Capital,
which commenced operations on October 1, 2003. Bank-owned life insurance was
purchased during the first and third quarters of 2003. Letter of credit fee
variances are due to volume. The increase in VISA/MasterCard income is due to an
increase in the number of merchant customers. The gain on the sale of real
estate loans is lower this year because of a decline in the volume of sold loans
due to rising mortgage rates. The year-to-date increase in safe deposit box rent
is primarily attributable to the Iowa City offices.
12
Noninterest Expense
The following table shows the variance from the prior year in the noninterest
expense categories shown in the Consolidated Statements of Income. In addition,
accounts within the Other Expense category that represent significant variances
are shown.
Three Months Ended September 30,
2004 2003 Change Change-%
---- ---- ------ --------
Noninterest expense:
Salaries and employee benefits $ 2,408,132 $ 1,954,613 $ 453,519 23.20%
Occupancy expenses 494,033 378,899 115,134 30.39%
Data processing expenses 338,189 283,133 55,056 19.45%
Other:
Intangible amortization 86,395 51,795 34,600 66.80%
Supplies 65,074 49,363 15,711 31.83%
Marketing 82,108 51,667 30,441 58.92%
Business development 26,089 30,980 (4,891) -15.79%
Charitable contributions 39,600 46,546 (6,946) -14.92%
Professional fees 126,724 59,933 66,791 111.44%
Other real estate owned expense (82,408) 43,706 (126,114) -288.55%
All other 574,502 442,672 131,830 29.78%
----------- ----------- ----------- --------
Total other 918,084 776,662 141,422 18.21%
----------- ----------- ----------- --------
Total noninterest expense $ 4,158,438 $ 3,393,307 $ 765,131 22.55%
=========== =========== =========== ========
Nine Months Ended September 30,
2004 2003 Change Change-%
---- ---- ------ --------
Noninterest expense:
Salaries and employee benefits $ 7,297,535 $5,360,055 $1,937,480 36.15%
Occupancy expenses 1,499,206 1,102,022 397,184 36.04%
Data processing expenses 1,027,348 775,307 252,041 32.51%
Other:
Intangible amortization 275,096 67,705 207,391 306.32%
Supplies 196,397 130,831 65,566 50.12%
Marketing 274,991 149,471 125,520 83.98%
Business development 93,291 59,139 34,152 57.75%
Charitable contributions 127,723 112,669 15,054 13.36%
Professional fees 400,285 218,657 181,628 83.07%
Other real estate owned expense (172,447) 46,993 (219,440) -466.96%
All other 1,685,414 1,154,732 530,682 45.96%
----------- ---------- ---------- --------
Total other 2,880,750 1,940,197 940,553 48.48%
----------- ---------- ---------- --------
Total noninterest expense $12,704,839 $9,177,581 $3,527,258 38.43%
=========== ========== ========== ========
The increase in salaries and benefits includes compensation related expenses for
the employees associated with the acquisitions in the last half of 2003.
Occupancy expenses likewise were higher this year due to four additional
locations: two banking locations in Iowa City and two VMF Capital offices. The
increase in intangible asset amortization relates to the 2003 acquisitions.
Supplies are higher because of the acquisitions and the implementation of a new
corporate logo. Marketing expenses increased as the result of an increased focus
on direct mail campaigns, market research and implementation of the new
corporate logo. The increase in business development costs is mostly
attributable to VMF Capital. Charitable contributions are higher because of the
timing of certain payments. The increase in professional fees were the result of
additional legal and accounting services associated with complying with the
Sarbanes-Oxley Act of 2002 and the decision to outsource the Company's internal
audit services. Other real estate owned expense has declined as a result of
selling several other real estate properties at gains.
13
Income Tax Expense
The Company incurred income tax expense of $7,094,000 for the nine months ended
September 30, 2004 compared to $6,974,000 for the nine months ended September
30, 2003. The effective income tax rate as a percent of income before taxes for
the three and nine months ended September 30, 2004 was 34.1 percent and 34.2
percent, compared to 35.0 percent and 35.2 percent, respectively, for the same
periods last year. The effective income tax rate is slightly lower in 2004
because of a higher level of income that is exempt from Federal income taxes.
FINANCIAL CONDITION
Total assets as of September 30, 2004 were $1,145,243,000, up from
$1,000,612,000 at December 31, 2003. The increase is primarily due to loan
growth and an increase in the investment securities portfolio.
Investment Securities
Investment securities available for sale increased $92,907,000 from December 31,
2003 to $271,216,000. Since December 31, 2003, investment securities classified
as held to maturity declined $16,922,000 to $74,484,000 as of September 30, 2004
due to maturities and calls. The increase in the available for sale category was
accomplished to allow for increased liquidity and flexibility.
Loans and Nonperforming Assets
Loans outstanding increased $78,397,000 from December 31, 2003 to September 30,
2004. The increase was primarily attributable to growth in commercial real
estate, construction and commercial loans.
The following table sets forth the amount of non-performing loans and assets
carried by the Company and common ratio measurements of those items (dollars in
thousands).
September 30, 2004 December 31, 2003 Change
------------------ ----------------- ---------
Nonaccrual loans $ 919 $ 1,668 $ (749)
Loans past due 90 days and still
accruing interest 132 125 7
------------------ ----------------- ---------
Total non-performing loans 1,051 1,793 (742)
Other real estate owned 195 441 (246)
------------------ ----------------- ---------
Total non-performing assets $ 1,246 $ 2,234 $ (988)
================== ================= =========
Non-performing assets to total loans 0.18% 0.37% - 0.19%
Non-performing assets to total assets 0.11% 0.22% - 0.11%
The decrease in nonaccrual loans was due to the pay-off of a commercial real
estate loan with a balance of approximately $900,000. All principal and earned
interest was collected. In the opinion of management, loans past due 90 days and
still accruing interest are adequately collateralized to cover any unpaid
interest.
Reference is also made to the information and discussion earlier in this report
under the heading of "Provision for Loan Losses and the Related Allowance for
Loan Losses".
Deposits
Total deposits as of September 30, 2004 were $793,145,000 compared with
$705,074,000 as of December 31, 2003. Most of the increase was in certificates
of deposit in excess of $100,000, which were $183,752,000 at September 30, 2004,
up $120,289,000 from December 31, 2003. The increase was primarily in public
fund certificates of deposit, $100,000 and over.
14
Borrowings
The balance of federal funds purchased and securities sold under agreement to
repurchase was $44,226,000 at September 30, 2004, down from $85,443,000 at
December 31, 2003. Most of this decrease relates to federal funds purchased,
which are federal funds sold to West Bank by approximately 25 banks throughout
Iowa. This is a correspondent bank service provided by West Bank. Federal funds
sold to West Bank by these downstream correspondent banks are invested in
federal funds sold to upstream correspondent banks or other short-term
investments. The balance of other short-term borrowings consisted of Treasury,
Tax and Loan option notes and short-term FHLB borrowings at September 30, 2004
and December 31, 2003. The increase in this category offsets the decline in
federal funds purchased.
Liquidity and Capital Resources
The objective of liquidity management is to ensure the availability of
sufficient cash flows to meet the requirements of depositors and borrowers, all
corporate financial commitments and to capitalize on opportunities for
profitable business expansion. The Company's principal source of funds is
deposits including demand, money market, savings and certificates of deposit.
Other sources include principal repayments on loans, proceeds from the maturity
and sale of investment securities, federal funds purchased, repurchase
agreements, advances from the Federal Home Loan Bank 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 maturities and payments, expected deposit flows, and the
objectives set by the Company's funds management policy. The Company had liquid
assets (cash and cash equivalents) of $67,912,000 as of September 30, 2004,
compared with $82,074,000 as of December 31, 2003. Securities available for sale
may be sold prior to maturity to meet liquidity needs, to respond to market
changes or to adjust the Company's interest rate risk position. In addition, the
Bank maintains lines of credit with correspondent banks totaling $80 million
that would allow it to borrow Federal funds on a short-term basis, if necessary,
and has additional borrowing capacity of approximately $50 million at the
Federal Home Loan Bank. The Company also has a $5 million unsecured line of
credit through a large regional correspondent bank. The interest rate is
variable and tied to LIBOR. To date, the line has not been used. Management
believes the combination of high levels of potentially liquid assets, cash flows
from operations and additional borrowing capacity provided strong liquidity for
the Company at September 30, 2004 to meet the needs of borrowers and depositors.
The Company's total stockholders' equity increased to $96,029,000 at September
30, 2004, from $92,896,000 at December 31, 2003. Total stockholders' equity was
8.4 percent of total assets as of September 30, 2004 and 9.3 percent on December
31, 2003. No material capital expenditures or material changes in the capital
resource mix are anticipated at this time.
In April 2004, the Company's Board of Directors authorized the buy-back of the
Company's common stock for a period of twelve months, in an amount not to exceed
$5 million. Since the authorization, 161,312 shares at a cost of $2,360,235 have
been purchased. These purchases took place in the second quarter.
15
The table below shows the various measures of regulatory capital and related
ratios.
Regulatory capital:
September 30, 2004 December 31, 2003
------------------ -----------------
Total shareholders' equity $ 96,029,415 $ 92,896,344
Less: net unrealized (gains) losses on
available for sale securities (784,658) (1,099,573)
Less: net unrealized loss on
available for sale equity securities (27,084) (3,500)
Less: intangible assets (16,644,392) (16,900,487)
Plus: subordinated notes/trust preferred securities 20,000,000 20,000,000
------------- -------------
Tier 1 capital 98,573,281 94,892,784
Plus: allowance for loan losses 6,139,881 5,975,587
------------- -------------
Total risk-based capital $ 104,713,162 $ 100,868,371
============= =============
Regulatory
requirements to be: Actual Regulatory
Adequately Well- Capital Ratios as of:
Capitalized Capitalized September 30, 2004 December 31, 2003
----------- ----------- ------------------ -----------------
Total risk-based capital
as % of risk-weighted assets 8.0% 10.0% 12.1% 13.1%
Tier 1 capital as % of risk-weighted assets 4.0% 6.0% 11.4% 12.3%
Tier 1 capital as % average assets 4.0% 5.0% 9.4% 9.6%
Risk-based capital guidelines require the classification of assets and some
off-balance items in terms of credit-risk exposure and the measuring of capital
as a percentage of the risk adjusted asset totals. Management believes, and data
in the above table show that, as of September 30, 2004 and December 31, 2003,
the Company met all capital adequacy requirements to which it is subject. As of
those same dates, West Bank was "well capitalized" under regulatory prompt
corrective action provisions.
Market Risk Management
Market risk is the risk of earnings volatility that results from adverse changes
in interest rates and market prices. The Company's market risk is primarily
interest rate risk arising from its core banking activities of lending and
deposit taking. Interest rate risk is the risk that changes in market interest
rates may adversely affect the Company's net interest income. Management
continually develops and implements strategies to mitigate this risk. The
analysis of the Company's interest rate risk was presented in the Form 10-K
filed with the Securities and Exchange Commission on March 4, 2004 and is
incorporated herein by reference. The Company has not experienced any material
changes to its market risk position since December 31, 2003. Management does not
believe the Company's primary market risk exposures and how those exposures were
managed in the first nine months of 2004 changed when compared to 2003.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
The information appearing above under the heading "Market Risk Management" is
incorporated herein by reference.
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 was performed under the supervision and
with the participation of the Company's Chief Executive Officer and Chief
Financial Officer of the effectiveness of the Company's disclosure controls and
procedures (as defined in Exchange Act Rule 240.13a-15(e)) as of the end of the
period covered by this report. Based on that evaluation, the Chief Executive
Officer and the Chief Financial Officer have concluded that the Company's
current disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in the reports that it files
or submits under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms.
16
b. Changes in internal controls 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 has materially affected, or is reasonably
likely to materially affect, the Company's internal control over financial
reporting.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company and its subsidiaries from time to time are party to various legal
actions arising in the normal course of business. Management believes, as of the
date of this Form 10-Q, that there is no threatened or pending proceeding
against the Company, West Bank or VMF Capital, which, if determined adversely,
would have a material adverse effect on the business or financial position of
the Company, West Bank or VMF Capital.
Item 2. Change in Securities and Use of Proceeds
There were no purchases during the third quarter of 2004 of the Company's common
shares under the $5 million stock buy-back plan approved by the Board of
Directors on April 15, 2004. On a year-to-date basis 161,312 shares have been
repurchased at a total cost of $2,360,235.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed as part of this report:
Exhibits
3.1 Restated Articles of Incorporation of the Company *
3.2 By-laws of the Company *
10.1 Lease for Main Bank Facility *
10.2 Supplemental Agreement to Lease for Main Bank Facility *
10.3 Short-term Lease related to Main Bank Facility *
10.4 Assignment *
10.5 Lease Modification Agreement No. 1 for Main Bank Facility *
10.6 Memorandum of Real estate contract *
10.7 Affidavit *
10.8 Addendum to Lease for Main Bank Facility *
10.9 Data Processing Contract *
10.10 Employment Contract *
10.11 Consulting Contract *
10.12 Data Processing Contract Amendment **
10.13 Purchase and Assumption Agreement between West Des Moines State Bank
and Hawkeye State Bank ***
10.14 Employment Agreement effective March 1, 2003, which was consummated
in the first quarter of 2004****
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
* Incorporated herein by reference to the related exhibit filed with the
Form 10 on March 11, 2002.
** Incorporated herein by reference to the related exhibit filed with the
Form 10-K on March 26, 2003.
*** Incorporated herein by reference to the related exhibit filed with the
Form 10-Q on May 15, 2003.
**** Incorporated herein by reference to the related exhibit filed with the
Form 10-K on March 4, 2004.
17
(b) Reports on Form 8-K: During the three months ended September 30, 2004, the
Company filed a Form 8-K on July 15, 2004 which contained a press release
announcing a 5% common stock dividend and a quarterly dividend, a Form 8-K on
July 19, 2004 which contained a press release announcing corrected record and
payment dates for the 5% common stock dividend and the quarterly dividend, and a
Form 8-K on July 19, 2004 which contained a press release announcing earnings
for the three and six months ended June 30, 2004.
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
November 4, 2004 By: /s/ Thomas E. Stanberry
- ---------------- -----------------------
Dated Thomas E. Stanberry
Chairman, President and Chief Executive Officer
November 4, 2004 By: /s/ Douglas R. Gulling
- ---------------- ----------------------
Dated Douglas R. Gulling
Executive Vice President and Chief Financial Officer
(Principal Accounting Officer)
19
EXHIBIT INDEX
The following exhibits are filed herewith:
Exhibit No. Description
- ----------- -----------
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
20