Earnings call transcript Q4 2022

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Operator

Good afternoon. Thank you for attending today's West Bancorporation Fourth Quarter 2022 Earnings Call. My name is Megan [ph], and I'll be your moderator for today's call. All lines will be muted in the presentation portion of the call with an opportunity for questions and answers at the end.

I would now like to pass the conference over to your host, Jane Funk, with West Bancorporation. ahead. go please Jane,

Jane Funk

Jane Bancorporation. the I'm Bank of and West Funk, you. CFO I'm West Thank

to everybody with President. want Chief Bank; earnings our Just and welcome and Risk call. year-end quarter CEO our President Today, XXXX Officer; and Brad Brad I've of Harlee Peters, got President; me Winterbottom, Nelson, to Dave Olafson, our West fourth Group Minnesota

update the within conference our available of events harbor current of I'll statement. statements circumstances is based company this unanticipated to statements forward-looking contain disclosure after obligation during the The or with of of Securities safe currently to or call this of and or speaks no us this during occurrence fair Reform to today's call information reflect such start date. the forward-looking Private statements events. out only the made Comments may made as only Act reflect by meaning undertakes Any provisions on call Litigation XXXX. revise us to

we'll start with the ahead Dave comments. We'll and And Nelson. kick off go

David Nelson

it comments for for then and I Jane, much you have very our you us, some interest and everyone. more thank just details. general Thank you, good for turn company. others afternoon, I'll your Thank over joining to in and

strongest During history. second West XXXX, Bank our had earnings XXX-year in year the

have credit XXXX, growth XX/XX/XX. that fourth sixth single it also record during loan due on in days. year, about we During out resulted were end of past good earnings 'XX our of higher in not where at year. the past a XXXX, net we year-end of like which fell And what XX.X% But our very the represented all a quarter did our year, and remains about growth they XX we little short were quality consecutive the quarter, markets was of loan this I'd to XXXX our 'XX point experienced also during than earnings, XX% and but a

our our on is quarterly speak of February margin, topic. XX, declared on record pressure to of upon on put that based have February hikes of dividend rate But $X.XX share. more performance, X. will of a and Fed as stockholders The payable The Board quarter Directors Jane common fourth per XXXX, dividend our

I'll call over to that, turn Mr. Risk now Harlee with Officer, And Chief the our Olafson.

Harlee Olafson

Dave. you, continues Bank. report happy I be major am Thank strength to to West credit a at quality

this payment ability attest the Dave said, to as -- a over of we consecutive administrative dues quarter, past our For believe have bankers. to sixth ability the not our also but attests strong for XX days. customers, zero of only I

one perform We OREO That have only is no and one loan loan well and agreed secured. to on nonaccrual. as continues

list less Financial suggest is would X% review be watch receipt information is that of and from currently our will what on list than watch the a financial after received upgraded customers the of total year-end of majority Our loans. statements.

and Rising being The and interest commercial sales, sale. of until to times are these lots development, economic have more assets X% land and have development, developed completed equity residential or hold consists slowed for holding completed ability lot total our land customers for rates significant portfolio and will favorable. of property

our though stress Our test medical good, five and warehouses portfolio office, office individual XX%; C&I by XX%; construction, really business, XX%. and at continue to top XX%; we borrowers. multifamily, type XX%; concentrations Even and information are our current and looks

good that us positions practice strong has have with and management well. financial customers business Our doing of served

enviable deal we the economy year, position We in we but challenges. an those this are expect with challenges to provide will feel

substantially team has this Loan to has continued it the mention continued relationships. bring turn assets I and Eastern over to bank year, will new thrive. in President, grew our our last that group Brad Before Winterbottom, I to Iowa

Brad. to over With that, it turn I'll

Brad Winterbottom

Thanks, Harlee.

loans under by commercial of driven outstanding during the our transactions. assisted the For few purchase refinance the some and X% along to billion PPP Significant the $XXX million or quarter growth significant estate primarily which ended grew real December This $X.X with quarter end transactions. excluding just year. loans, XX, at closed some estate a transactions we was on long-term real 'XX, customers

all year excluding the in of a outstanding loans, markets from consecutive PPP this our equal with $XXX these the double-digits We over are has For loans Minnesota five markets, ended annually. years million exceeded third year growth This is growth in year growth out loan grew or XX.X%. saw that results. and 'XX, pleased Iowa row just the in roughly four and

some as we loan the is the As activity. enter there in XXXX, pipeline, slowness for

With the rising less. interest rate much environment, refinance opportunities are

also from going they base into this customer much our that year. cautious are We hear more

to though, and enhance appointments prospects team, daily to basis, on customers see a continues sales Our set relationship. our and looking

side bank, the Regarding the deposits total at deposit held produced gathering retail in customer base increase a of our bank. X% the

This decrease by growth was held for funds commercial other using either of in result making decrease funds on Our their a customer return the fund acquisitions. base, the deposits. to hand, the or looking a total better excess or experienced customers these

lost rather reduction not a customers have just We maintained. in deposits

another that to terms make market our their the moving sales team seasoned with deposit-gathering focus calling on and to as to add in I'd banker of Eastern in bank. January, positive is in previously. process, early continue beginning Iowa We assets we that also our mentioned activities marks added

will I it over that, to Mr. Peters. turn With

Brad Peters

I'm Thanks, Minnesota. our to into Brad, provide brief on expansion and good afternoon, update a going everyone.

to growing centers. of Our each team regional solid in make Minnesota continues our progress

on focused targeted calling activities are building, and our are and business new bankers Our ongoing creating relationship opportunities.

on growth has treasury adding We business. new focus management core and focused continue This C&I. deposit our grow driven strong by to business relationships

which usage our increase, has also seeing margins. line are benefited We

this for a and summer. construction plans facility with of finalizing The market exploring open building, The to has the Mankato to plans new close we're market to new begun land. sites purchase Owatonna is a

my Jane. end it turn now Those over will comments. are the I back of to

Jane Funk

I'll just highlights. of Brad. couple comments financial Thanks, on make a our

history, strong years negative million the that. to provision of losses loan prior quarter fourth both for our mentioned, Dave company's the as was, financial 'XX 'XX, the in second-best to no this performance provision $X.X We and compared a year. very the had year XXXX, and for in recorded For

mentioned, our extremely Harlee credit As remains strong. quality

to expenses a and to We in XXXX, manage continue that have experienced addition of our increase expense in bankers the of period -- reasonable inflation into and noninterest included very and increase and related would during closely during XXXX in X.X% benefits XXXX. salary five through late this

the margin, relates fourth interest it X.XX% to for compared As margin third quarter quarter. our the was X.XX% to for net

yield for by of the third for XXXX. X.XX% funding. Our loan was increasing X.XX% the the yields fourth of increased the improvement XXXX outpaced compared cost quarter and quarter X.XX% of This for to to quarter fourth

fourth Our costs to of basis the third the X.XX% for quarter to increased deposit X.XX% fourth XX for compared the and points year. last quarter quarter for

funding Brokered terms. and we've convert the second long-term short-term to executing increased various the funding been and longer-term some swap our funding half three transactions year Since of October, drop to evaluating deposits of five-year with fixed in the rate rates. and in into short-term

sensitivity our year deposit by extreme magnified the base to in and rate movements been deposit changes the has activities this competitive rate markets. Our this the of nature

to has XXs earlier the the ratio to low income. fourth the due from net the interest Our primarily in decline year, in efficiency in the quarter XX% increased

for will now remarks, prepared my and up of end the it open we questions. That's

Operator

Absolutely. [Operator Instructions].

Piper comes Sandler. first question Our Nosal the Brendan from with line of

open. is now line Your

Brendan Nosal

doing? Hey, you folks. good afternoon How

Jane Funk

are How Hi, doing you? We're good. Brendan.

Brendan Nosal

Thanks. the side sheet. the Maybe just here Good. asset on off of start balance to

strong are very you loan Another No I today. where know the organic some mentioned year there. you in for growth softening rates surprise folks. of for given kind pipeline,

thoughts any on have Just early curious up shape growth to how if kind you XXXX? of expect loan you for

Brad Winterbottom

pipeline is paid of our transactions off funding. will but also I've no, due I'm the Really -- okay. assets. it of I'm transactions aware stronger, we'll be to mean, be -- that aware are I of that sale the seen that But

but fourth So I we the anticipate not out our had and the busy. in growth of guys the are that quarter would first, kind

Brendan Nosal

That's But turning portfolio. color, helpful to Understood. That's fair. the securities nonetheless. fair. Maybe

curious kind XXXX? growth. Just context much of trying secured to book of How the of flows the cash future fund in in loan

Jane Funk

investment roll off $XX in of the principal to XXXX. There will will be that's roll about that -- million off of portfolio projected

Brendan Nosal

Okay. that kind you part are of the curious securities wholesale of just the funding, ties and view question. growth. help off seems of year? this next And funding roll future what into on loan the do probably balance then that. Whether deposits it's for But my funding with just I or how think ambitions Certainly question like core

Jane Funk

There's Well, sources. I think here. from that bullet the funding process side not a will an all-in or come various magic

is of much as building So efforts as the lending the certainly of focused are deposits. core we is. That on bankers

on our strong use whether But those long-term Home and the deposits, deposits with just advances certainly, deposit options manage versus the the core Bank brokered for are year. will evaluating organization of we a sense and continue Loan effort makes pricing depending So deposits short-term really cost side with to kind and side. success Federal this

Brendan Nosal

yes. Yes,

is deposit we the what in are through? we for pricing partway cycle? end this Are where Are pricing Okay. What's itself, your here? you sense? Maybe nearing on sense your deposit folks

Jane Funk

the Well, probably what depends I on Fed does. that would say

the a numbers. our are sensitive, rates little deposits in I Our other can which than portfolios, quarter bit more fourth Fed to think, some you see

slows we on improvements funding. Fed cost sooner the making the can So gains or that stops, the and the on down -- sooner of start

Brendan Nosal

would correct? point, a I be right. that benefit Is at this to All imagine Fed probably cuts margin. rate would your

Jane Funk

Yes, we're liability-sensitive.

impact of Fed rate The XXX has So reversal benefit. that a us. to the immediate good have would these extent on some points increases that pretty impact basis had of

Brendan Nosal

in course than the mean certainly quarter I the the Okay. forward, broadly, there's NIM does the of terms out margin but question kind would of I this mean the is pressure Maybe expecting, Fed imagine kind of of I or of first theme I for not out this quarter? reverse All it's quarter. more that's space compression like right. a hopefully more pressure a bank pause on the universal until in was going here.

Jane Funk

on necessarily there points. our or many certainly like basis variables. net provide guidance of our hard I if as the we some think -- to forecast. It's XX point efforts, increments interest depending future handle with to XX-basis Fed opposed can Fed are But deposit changes margin, success rate so

there's variables Fed into go So of margin hopefully, rate the lot slows increases. net these or will interest quarters that few as a on pauses next their down just

Brendan Nosal

yes. Yes,

that conceptualize. to know an not it's easy certainly thing I course, Of

Okay. Maybe moving expense the things. the -- on side to of

come to at you of kind impression? forward? the point And leverage of at Just any, then wondering thoughts growth the move you if kind have, on expense any margin what pace of impact this as of

Jane Funk

mean, Yes, our I very to be certainly, always We've expense growth cognizant of very efficient. I we're very been expect expenses. modest. would noninterest

always ratio one been of in the efficiency best has the Our industry.

extent, the at relate purpose, additional looking expenses. lot the we monitoring are to expenses, the there's to. that places that any to certainly, of not benefits, necessarily those But trim a So investments closely

related XXXX the bankers. in biggest -- addition increase to like mentioned, Our I our biggest of

we so as of more the costs And have with to will a Bank. they bit West little time those see benefit season

Brendan Nosal

any remains Okay. anything right. to That's Obviously, curious there's look that But this book turn? -- number helpful might single you All and what soon. suggests quality. hearing for just a turning color. impeccably we not No clean. heading I credit that can number anytime Maybe whether or you're indicates a conversation hey, anecdotally, wrong kind look of say, can at go be at could the

David Nelson

we portfolio The the can had of tell of customers years, a issues and stayed C&I that lot of they what few last we've in that lot liquidity test a had in far. has to pretty regarding we from that success way The regard have have time that stood received have with XXXX so they the what then information a have our do. good and

I don't issue So see there. an

and and been Office increased, as have regard Multifamily strong fact, strong, strong. strong to NOIs are we medical in probably rents, and has their warehouses very go. increasing stayed are very in

the vigilant to this continue have but says we direction. anything don't quarterly review monthly going today financials, wrong So are I that financials, to is

Brendan Nosal

line nearing do Got the perfect. so feel the this want a on we're bleed point where that a of then at quarter. bit down And of to point like kind a the reserve you Perfect, to level? XX-basis hold And it. kind of you allowance, ratio in -- loan

Jane Funk

was Well, I pre-pandemic, -- we in were mean, XXs. we that low yes, the

So think for that of benchmark, normal was operating us for procedures. kind a I

We will be adopting X/X. CECL effective

guess throw layer I So into complexity provision 'XX. to, that's and the for another of whole the allowance a going

Brendan Nosal

yes. Yes,

course. of course, Of

me final Okay. I step And then from one question maybe back. before

TCE and capital hoping turn calendar Year. I value of that Just your the up. start But to out priorities lay about can Certainly, this as curious just kind see book kind you how back move New you're you year. can thinking of tangible to

Jane Funk

in June did we same injection in 'XX Well, mean, with sub I way always issuance. 'XX do. probably some the we -- capital debt

of we investment strong. well year. the capital, actually very the portfolio, think regulatory we're well-capitalized our last the The capital, above months has I level the mean impact So of couple requirements. bank is of core in our capital improved AOCI

down So itself, a as bit in the kind stabilize portfolio that stabilizes kind more, of and of that, pays and little rates number. of

a dividend historical mentioned, this dividend week that's payments. line So as we declared Dave with in

so see us wholesale procedures And or in making that. I changes for processes don't any our

Brendan Nosal

Perfect. questions. all thank Well, for taking the all right. Okay, so you much

Jane Funk

Brendan. Thanks,

Operator

are you. currently Thank additional comes line Capital. [Operator next There Instructions] waiting. no of River David the questions question with from Welch Our Oaks

Your is line open. now

David Welch

not made to ability core to thoughts. I'd address I'm just grew great a I to, ability loans, in see the throw of of following, bring background, the career your this banks Thank and great kind to in not generate up I'll a you. I group. I a lot so And it don't yours the And advocating so know who but deposits. like Minnesota. Iowa, up I that have like to as

I Minnesota any it's interest with the fix. trade do nicely funding for and this just in XX%, XX%, ratios. augmenting are see both that like you. not environment know in time? your Iowa rural fit short-term center over a that really base littered you Would XX% But loan-to-deposit banks have

David Nelson

what David, joining suggesting that what us makes you to question. thank being would it Bank efficiency really you certainly to. commercial Nelson, is the comes that, open our developing our But and hi, we business and you're be when Dave call, what to for is or And is like be unique so having -- and a an is important we've appreciate that West model to something always and enviable focus very interest this on and bank. would

our And strategic so alignment were look be we model. any own partner, type it with business if to would of in towards

David Welch

XX% again, I'm can't to I'm not multiyear they loan over familiar They're advocating. you you were the just growth. same thank if you're thoughts. their fund was modify Yes. going for Bank Bridgewater sure today your -- the up timeline. just They Okay. But down results No, period. here. I strategy with announced I And a because wondering possibly

David Nelson

you. Thank

Operator

waiting currently you. questions time. are Thank at additional There no this

to So I for will team pass management over the conference remarks. any back the closing

Jane Funk

forward listening so end of quarter is Jane thanks this today to for next And end we again. to at thank just our the Well I call in. want for call first and at everyone joining April, joining. the look the of the

Operator

the a you concludes call. fourth quarter West That Bancorporation earnings XXXX day. wonderful Thank for your Have participation.

West Bancorporation (WTBA) 26 Jan 222022 Q4 Earnings call transcript