WTBA - Earnings call transcript Q3 2020 | West Bancorporation, Inc.

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Operator

Good day, and welcome to the West Bancorporation Third Quarter 2020 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Doug Gulling, Chief Financial Officer. Please go ahead.

Doug Gulling

Yes. good and Andrew, you, morning, everyone. Thank for you joining us morning. this Thank the Also our Dave Nelson, Accounting Chief today our are Officer, Winterbottom, Bank on Brad Funk, Officer call Jane CEO, and Chief our President. our Risk Harlee Olafson, our I’ll Disclosure And Fair Statement. with begin of Securities during meaning Litigation of conference Reform within this provisions Harbor made may contain Act Safe Comments statements of forward-looking call the the the Private XXXX. us information and us during only this is currently statement available date. forward-looking on to today’s made by of Any speaks based as call only The statements company to events. or this undertakes update no unanticipated obligation to or to circumstances revise or call reflect such of events the occurrence reflect current after And to us Dave start will off. begin the call, Nelson

Dave Nelson

interest and Thank have good general comments, a for I morning, opening you, few appreciate just detail. joining others then over Doug, to your it our I’ll in more turn and you company. Thank for everyone. us. We

just on record record setting you I a provision this quarter know, another yet had to year. hopefully we and year significant way higher As all aside think despite our

couple of general a comments. COVID Just

observing We are from phone all you doing the have working all protocols well. practicing no home as people of on appropriate and doubt are to that the continue COVID and

expansion incredibly add I’d of still to to phase. is dividend November of record declared XX terms November as like on that of very that Directors – forgiveness as weight our going you $X.XX I the our date also per think we’ve of PPP We’re payment which well. in The performance, Board a really with we’ve share, remains unchanged, and Based XX. our working we the paid. busy through level participation, that, know, at is shareholders our Minnesota class our outpunched are highest now of

during Minnesota actually Sartell, going well. And existing to Cloud, joined – Minnesota very our in have As new which Rochester, and in XXXX, you it’s – is Cloud, in and fully design expensed we underway construction and year, Cloud into is adjacent that St. St. presence the on process completed and by have last I the Minnesota, we our purchased land and facility. for area, expansion is our our Mankato building St. all know, think Owatonna to

the So I’d President. Brad over like to that, with to turn our call Bank Winterbottom,

Brad Winterbottom

Good but I’m My a our morning, about to pipeline fair PPP, pipeline won’t a sales we’re of have bit amount The year. everyone. working I be up months activities. we Absent comments through still X.X% we’re will brief. is going about first – it’s in robust, little our nine this say on. the talk that

couple a in that have us quarter. will fourth We the hit headwinds of

tune couple of have some sold anticipate $XX the a pay have We down, down significant of customers maybe would business. to some And there, million. pay that their long-term I

advanced on though, that million between On $XXX from we the that And will have we areas projects. have is and all year are we loans construction I coin, be of do that now, in. construction say other that projects in would a of another that side probably now going business

are people markets, Our letting Mr. of over on in would just folks Olafson. bankers business all the working It’s to face-to-face. are our that. we’ve PPP that not have Those year. to little cautious and terms entered People into development new our new And, are only But but are pass loans, X.X% we about that my really comments. forgiveness, three but into on harder. the a especially we of markets Harlee up this has I’m that. added again, come from be doing going last working

Harlee Olafson

to now, in and to possibly balance interest things total loan adequate list credits in watch as which thank appears some to historically of up, quality, talk individual in right could have at When see of it loans, having non-accrual be don’t look less in watch anything list, $X loan. potential going that out about credits how course level our work COVID we loss communities loss our million, the everything that loss still loans include additions low our again, list, million. some than we morning, it And allowance as watch our you liquidates. modifications regard to at don’t that and Good our it. is what potential as although our through total for watch year, kind general. watch credits, collateral our those On really in the one look list. of also the the is our that when the that it environment which the the watch that $XX there. are to of credit of principal to on and the X% is category We exceeds believe small some on in in have and I’m and, level we’ve in in you of list, Of watch correctly, your Yes. of if put fully cover The company. the at ability today. – look level specifics lists is But totals in we then we

list; from COVID anyway, modifications. on the watch So moving

those It We medical fairly of categories. a apartments, portfolio. living of commercial all mixed-use senior real office, robust estate office, different includes warehouse, types centers; hotel, have

have areas, most COVID-related business As and been of issues. the entertainment hospitality affected by most areas the with

the April our hotel it moved in zero last for example, to were up XX%. to occupancy average May provided July, and loan-to-value. modifications And hotel on modification currently August, and back September, isn’t catastrophic have on exceeded In in although loan-to-value XX%, on and XX%. The moved it is at XX% those X. looking properties close very the fell modifications percentage still Just it It’s hotel in months, cash it XX% June, properties. not percentages looking portfolio, portfolio, we moved on average, pre our in then either. off to great. to that on COVID and occupancy – at six to to flows down the properties In the our X.X over or

are in normal were at back. these will So high they modifications fairly process. still properties circumstances still Total because end quarter bounce good that under were

at we estate types and the looked November, right X%. are down hit above average the coverage’s moving in are along at that under debt debt coverage’s our our our what drop total service As going modifications real us on we portfolio, to modifications the something that a well to And on, types commercial things and of declined then seem December we service X%. stress would looking that And into payments In and other of have in have besides under begin XXX are tests on manner. hotel major be good now. January

can what’s our base, We results so top are of And of the our requesting still strong. we very with interim stay and because on most of from borrowers, is believe portfolio, customer strength financial them. that in happening receiving more cases our

customer were higher liquidity things just This in about business the our of previous year. year, One we customers are of that’s $XXX as is Last accounts what’s lot the I is DDA happening year, interesting concern non-interest-bearing that, base they $XXX year, cash million. million our the were over than we’re economy XX% of our the holding. a deposits. of the of think, are portfolio to in level holding this with due of conservative A whole. And out our nature

markets Moving and in individual on to what’s them. happening

which the Mayo Rochester had Our Clinic, of because to in decreased bit non-critical we is doing. a of were are driver level there activity. and a XXX% the concerned Rochester Mayo activities market the to we’re market, pre-COVID They – a they big employer their little back of economy

salaries XX%. money a back some top They that. not gone process their of on had they only they to the by also of fact, bonus gave decreasing In through employees, them gave

deposit there’s I draw the is major concerts, now, problem lot that draw doing driven people There’s ballgames, There to the events University Coralville, city over people occupancies to think, there university. XX% City we X%. big customers, deal a town. about no sell to on a is they Iowa there’s is fast Eastern loans at places, going people In really new are always very grow of happening is – strong. strong. no up town. And that, area things is Mayo. markets, balances So from currently. they speed is new construction under community and $XXX,XXX. They world active are Apartments University enrollment that tourist really average have most is our continue no on. hospitals right franchise now by down and Iowa Rochester down no been their full markets. Minnesota perspective. a XX% very about the those for It well. Iowa, from in In the Iowa really The in In to good very really there with a to the in Housing in anything with like no are back and that drawing right

a in $XXX any that which the Currently, what don’t will – buildings in those markets loans million new traditional that of bit. time, change the the learned in lags have at million is business have $XXX something about new little while we is deposits, we’ve communities in We but and this deposits, of future. opening bank

at and all later in Doug. of regard those is construction any. is and things it questions markets, that I’ll hand back I’ll limited case if are in it current the with time. the there right As projects entertain we’ll new now, And leave quite to type to

Doug Gulling

out time, we be at Actually, this entertain Okay. any that there. questions may would

Operator

Thank you.

question-and-answer first go begin Please of Brendan The Sandler. the [Operator now comes will Nosal We Piper from session. Instructions] ahead. question

Brendan Nosal

hope definitely Thank all you all well. very helpful. for the prepared Good morning, you commentary, doing everybody,

definitely payoff want are of growth quarter. coming this the was outlook, looking growth past get that the activity, I fourth to larger there the on payoffs quarter. in strong just quite off starting Just a appreciate some sense

quarters? for net over kind the what couple growth loan is of your of So outlook next

Doug Gulling

of absent I pay we the end a then. would that’s anything now year, will the to don’t before know say going replace payoffs we and between that the pipeline have off that

the see below end year. dipping by X.X% the So the us I of don’t

In be a would little fact, just bit. anticipate that I may up

Brendan Nosal

to But have side. on Perfect. guys pretty Then room moving more probably run much the That’s fast done. liability to on you much, response just not I’m the of lowering nice to in so can fed helpful. that shot costs, has deposit really, come really there’s margin, a you done guessing costs have given down the as what ton as a

it? So how a bit I’m to about imagine how just for little the I’d you’re thinking I’m just thinking about trying of outlook margin curious perhaps understand year. but pressure, the

Doug Gulling

mature, that don’t going much to impact will will this and Well, what have then and existing And those you’re have investments margin costs. lower we environment more dollars. the deposit in correct. loans really We opportunity to forward be reinvest

I little extent dollars. reinvestment most that, say we near at So could that what’s To a lower certainty yield hard of the it’s – a the think the be will dollars tell. to existing than

Harlee Olafson

Yes. low be in assets come that all are probably penalty booked five are and a I some of loans not prepayment getting rates new some getting the would that just of well. mid-X% those add years those kinds re-priced maybe But on getting with of we’ve would those sort because ago usually we’re that the as to range, of booked.

Brendan Nosal

Understood. Great. Okay.

Moving things. of on side to the credit

look is? there You little it some see was for more on prepared hoping things What just that does one a was might detail loss that mentioned you on I in what collateral like remarks that? potentially. your sector like relationship, credit,

Harlee Olafson

and sector of the is and facilities also $XX would areas. of to large appraised some some $XX the a name would that recently letters portion credit Yes. about They donors values properties interested large million. that areas but that want have total some looking different they the have specifically, sale have non-profit is and I our of leaseback The and They at mention in have intent certain to wouldn’t to some in, multiple sponsors do cities but are XX%. that have some that that on similar they’re And values properties, been over properties non-profit has have appraised is it’s million, friendly credit that that. are willing the appraised of have doing

that operating still So a credit there, how there small they’re entities. is have things loss here that – go, – depending but could on isn’t or on

options also other are we the the most – just it’s that one are there at critically. look – it’s So that

Brendan Nosal

theaters But the hotels about pointed since That’s COVID. days to in of the like that helpful direction trending have theater the shut Wanted of $XX generally XX-Q. ever movie right That’s out feels of the just been worst quickly Yes. it been I doors perfect. the movie credit beginning. in ask color. since kind early almost occupancy it has mean just seems million you like

any and color in now? about or right any there So relationship? cash relatively And down how operations shut is whether feel on overall if do coming just any you flow the ongoing it’s just

Harlee Olafson

their They And classics of do things. kind what is open. type have some they’re of there theaters of and in running those

Just to very to and neighborhood more They’ve and movies, of entertainment. add viable on the levels liquidity new the with – they’re of strength or have certainly, along to product also in But that to a – individual strong strong that’s in regard has They’re hands, of else, strength very into not injected the coming personal order owner happening. also the has somewhere be business some work. to out color putting what’s their business, that’s exceptional so the not they strong, and individual everybody $X million partial have to guarantee increased they’re support the liquidity and they – out it’s have hands their out dependent to able support business. going like If put and their they

Brendan Nosal

deferrals. Good. moving on then And to

lower release the in in remain, most to through sight you of that out much prepared chunk and moving deferrals down to line fair say year number. pointed both to a guys remarks your of your off that of that hotel? it would what You Is rolled the end have in much,

Harlee Olafson

We Hilton are do pre about products we’re it million – are in again, these at have shape. – deferral April. values basically, strong look guarantee. to Marriott and I They good Loan personal when And looking just these are I are in Yes, at entities, March that total that in the main are just and on very, and of they is. of through loan the of that, awfully $XX their pandemic, of operating by source as low income. multiple a group other other hotels do is business. cash really sources – business guaranteed their are of personally but ready, have some have have their XXs. the them hotel values that owners not And is to very liquidity

closer don’t the this we to they once ability something in, and normal. while to have come coming have income survive back the they little So have a

Brendan Nosal

then overall off quite the And in regardless. Okay. figure. It turning – non-accrual, is still very in I appreciate but that base low, to the a increase up it’s low

could two color are [ph] substandard hoping the that bonds. OV in credits increased also So offer that you I And more this was then your drove if just the a relationships quarter. little on curious those uptick the same

Harlee Olafson

The we talked was million, $XX I think. non-profit Correct. $XX the about takes that up the of one already million

of it’s par. trade point. for out credit that at going over that’s asset. We can credit. one to and see any – But that��s have. then one only we had par, now really substance shared that it we’re national trade other million. a to could a tradable we to little The everything a $XXX,XXX back the is in to It’s We par, That’s come $X.X going that that – right at of

Brendan Nosal

Good. That’s for then guys one me helpful. before I you go. certainly last let Okay. for And

earnings this You strong spent taking year of a and the building good part pre-provision reserve.

be would just more any continue given down coverage is and at next you place Is or think I’m would of curious a the cautious just So to prefer add sit level the environment? to a that that issues the absorb is quarters where your road, – over today? potential couple you to it

Doug Gulling

today, adequate. allowance at end September, was certainly, thought of Well, I sitting here the we mean, the

be right get close the similar to Brendan, just the that’s But a provision available. to it’s information quarter. upon to guess fourth now. the we can moment, going quarter and at we the As we if may the probably third right as second environment, as move forward, had depend guess that’s to

Brendan Nosal

for questions. that, understood. you’re but No one curious things. so thinking right, me. has That you totally Yes, taking the for is much fantastic. All on the ball crystal how Thank just about it

Doug Gulling

Yes, thank you.

Operator

[Operator go Please from of ahead. question Kevin Instructions] comes The Investments. McLaughlin McLaughlin next

Kevin McLaughlin

everyone. morning, Good

be to forgiveness for the of great congratulations the how difficult very in don’t of loans, what fees circumstances. accelerate that under relating another First going the process Or bank? recognition implications all, Doug, is the My the would on that to understand PPP quarter does these work? I for question

Doug Gulling

into that loan is will deferred recognized correct. at pays the be upfront time. Kevin, collected fees which any amortized unamortized Yes, these two loans income that years. life The are at were then over you’re off, still time that the loans, the as that fee and of And the off, exists pay

had of not forgiveness so And to end or we payoffs. payments. payoffs the we’re of – see at I starting had any as few mean, a September, yesterday

$XXX,XXX As of in received yesterday, have payments. we

So beginning, just starting – trickle in. But to it’s just

Kevin McLaughlin

On the much Doug? basis how of

Doug Gulling

$XXX – million. million $XXX

– so I dollar think forgiven XXXX. or going little not in. of this mean, I So but point come project that these Kevin, so to amounts it’s it’s time, be just the would to a loans until we will most hard predict when and they’re say look, a At in

Kevin McLaughlin

– Rochester question. Okay. branch ask this and I of Wells your business Fargo their you then a office? to I you, by to my if in kind wanted banking visiting I don’t and when Dave, there was so up wanted But get know, chesty other the announcement operations over much And isn’t Doug. Thank

Dave Nelson

Well, all they’ve got their quite of rid simply. essentially bankers

past an think outcome So – that years, the able that guess, is been XX rather, would have I predict. the don’t history I past many the over of that’s to

Kevin McLaughlin

When five wanted you the everyone breakeven understand. you three and breakeven months. market normally, I that to years enter and in to call nine on point just a the that’s to takes And it

have banking business a services competitors your later, within handful so of their because years of clients many So biggest moved. drops one

on to appreciate to leave as close, say I’m hopeful that’s I’m And extraordinary there want there just because that and that, markets, and to think that in well. accomplishing recognize other everyone but it that’s should what excited the that about you I these think are I an something implications performance. – I I’ll new congratulations. call you’re

Dave Nelson

Thank you, Kevin.

Operator

concludes conference any closing remarks. This answer to back to our for like the would I and over turn Doug Gulling session. question

Doug Gulling

would interest we I your again thank just Thanks. appreciate and for like company. everyone in our to joining us,

West Bancorporation (WTBA) 31 Oct 202020 Q3 Earnings call transcript