UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

or

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

Commission File Number: 0-49677

WEST BANCORPORATION, INC.

(Exact Name of Registrant as Specified in its Charter)


Iowa			42-1230603
(State of Incorporation)			(I.R.S. Employer Identification No.)


			1601 22nd Street, West Des Moines, Iowa			50266
			(Address of principal executive offices)			(Zip Code)

Registrant's telephone number, including area code: (515) 222-2300

Securities registered or to be registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, no par value	WTBA	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of ~~April~~July 26, 2023, there were ~~16,712,257~~16,725,094 shares of common stock, no par value, outstanding.

WEST BANCORPORATION, INC.

INDEX


		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements	4

	Consolidated Balance Sheets as of ~~March 31,~~June 30, 2023 and December 31, 2022	4

	Consolidated Statements of Income for the three and six months ended ~~March~~June 3 10 , ~~202~~3 2023 and ~~202~~22022	5

	Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended ~~March~~ 3 1 ~~, 202~~3 June 30, 2023 and ~~202~~22022	6

	Consolidated Statements of Stockholders' Equity for the three and six months ended ~~March~~ 3 1 ~~, 202~~3 June 30, 2023 and ~~202~~22022	7

	Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~March~~ 3 1 ~~, 202~~3 June 30, 2023 and ~~202~~22022	89

	Notes to Consolidated Financial Statements	910

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3233

	"Safe Harbor" Concerning Forward-Looking Statements	3233

	Critical Accounting Policies	3233

	Non-GAAP Financial Measures	3334

	Overview	3435

	Results of Operations	3637

	Financial Condition	4245

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4750

Item 4.	Controls and Procedures	4750

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	4851

Item 1A.	Risk Factors	4851

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4851

Item 3.	Defaults Upon Senior Securities	4851

Item 4.	Mine Safety Disclosures	4851

Item 5.	Other Information	4851

Item 6.	Exhibits	4851

	Signatures	4952

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

West Bancorporation, Inc. and Subsidiary

Consolidated Balance Sheet

(unaudited)


(in thousands, except share and per share data)	(in thousands, except share and per share data)	March 31, 2023		December 31, 2022		(in thousands, except share and per share data)	June 30, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	21,579	$	24,896	Cash and due from banks	$	29,776	$	24,896
Interest-bearing deposits	Interest-bearing deposits	901		1,643		Interest-bearing deposits	1,968		1,643
Cash and cash equivalents	Cash and cash equivalents	22,480		26,539		Cash and cash equivalents	31,744		26,539
Securities available for sale, at fair value	Securities available for sale, at fair value	665,358		664,115		Securities available for sale, at fair value	645,091		664,115
Federal Home Loan Bank stock, at cost	Federal Home Loan Bank stock, at cost	22,226		19,336		Federal Home Loan Bank stock, at cost	22,488		19,336
Loans	Loans	2,756,185		2,742,836		Loans	2,807,075		2,742,836
Allowance for credit losses	Allowance for credit losses	(27,941)		(25,473)		Allowance for credit losses	(27,938)		(25,473)
Loans, net	Loans, net	2,728,244		2,717,363		Loans, net	2,779,137		2,717,363
Premises and equipment, net	Premises and equipment, net	59,565		53,124		Premises and equipment, net	66,683		53,124
Accrued interest receivable	Accrued interest receivable	12,284		11,988		Accrued interest receivable	11,785		11,988
Bank-owned life insurance	Bank-owned life insurance	44,830		44,573		Bank-owned life insurance	43,328		44,573
Deferred tax assets, net	Deferred tax assets, net	35,122		36,609		Deferred tax assets, net	36,106		36,609
Other assets	Other assets	34,834		39,571		Other assets	42,193		39,571
Total assets	Total assets	$	3,624,943	$	3,613,218	Total assets	$	3,678,555	$	3,613,218

LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY					LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES	LIABILITIES					LIABILITIES
Deposits:	Deposits:					Deposits:
Noninterest-bearing demand	Noninterest-bearing demand	$	605,666	$	693,563	Noninterest-bearing demand	$	568,029	$	693,563
Interest-bearing demand	Interest-bearing demand	486,656		536,226		Interest-bearing demand	459,030		536,226
Savings and money market	Savings and money market	1,295,280		1,237,954		Savings and money market	1,416,610		1,237,954
Time	Time	410,791		412,665		Time	392,656		412,665
Total deposits	Total deposits	2,798,393		2,880,408		Total deposits	2,836,325		2,880,408
Federal funds purchased and other short-term borrowings	Federal funds purchased and other short-term borrowings	229,290		200,000		Federal funds purchased and other short-term borrowings	184,150		200,000
Subordinated notes, net	Subordinated notes, net	79,435		79,369		Subordinated notes, net	79,500		79,369
Federal Home Loan Bank advances	Federal Home Loan Bank advances	220,000		155,000		Federal Home Loan Bank advances	280,000		155,000
Long-term debt	Long-term debt	51,486		51,486		Long-term debt	50,236		51,486
Accrued expenses and other liabilities	Accrued expenses and other liabilities	29,347		35,843		Accrued expenses and other liabilities	31,218		35,843
Total liabilities	Total liabilities	3,407,951		3,402,106		Total liabilities	3,461,429		3,402,106
COMMITMENTS AND CONTINGENCIES (NOTE 8)	COMMITMENTS AND CONTINGENCIES (NOTE 8)					COMMITMENTS AND CONTINGENCIES (NOTE 8)
STOCKHOLDERS' EQUITY	STOCKHOLDERS' EQUITY					STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value; authorized 50,000,000 shares; no shares issued and outstanding at March 31, 2023 and December 31, 2022		—		—
Common stock, no par value; authorized 50,000,000 shares; 16,712,257 and 16,640,413 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		3,000		3,000
Preferred stock, $0.01 par value; authorized 50,000,000 shares; no shares issued and outstanding at June 30, 2023 and December 31, 2022						Preferred stock, $0.01 par value; authorized 50,000,000 shares; no shares issued and outstanding at June 30, 2023 and December 31, 2022	—		—
Common stock, no par value; authorized 50,000,000 shares; 16,725,094 and 16,640,413 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively						Common stock, no par value; authorized 50,000,000 shares; 16,725,094 and 16,640,413 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively	3,000		3,000
Additional paid-in capital	Additional paid-in capital	31,797		32,021		Additional paid-in capital	32,642		32,021
Retained earnings	Retained earnings	267,620		267,562		Retained earnings	269,301		267,562
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(85,425)		(91,471)		Accumulated other comprehensive loss	(87,817)		(91,471)
Total stockholders' equity	Total stockholders' equity	216,992		211,112		Total stockholders' equity	217,126		211,112
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	3,624,943	$	3,613,218	Total liabilities and stockholders' equity	$	3,678,555	$	3,613,218

See Notes to Consolidated Financial Statements.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Consolidated Statements of Income

(unaudited)


		Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share data)	(in thousands, except per share data)		2023		2022			(in thousands, except per share data)	2023		2022		2023		2022
Interest income:	Interest income:							Interest income:
Loans, including fees	Loans, including fees		$	32,948	$	23,286		Loans, including fees	$	35,011	$	24,848	$	67,959	$	48,134
Securities:	Securities:							Securities:
Taxable	Taxable		3,316		2,889			Taxable	3,432		3,090		6,748		5,979
Tax-exempt	Tax-exempt		885		858			Tax-exempt	883		892		1,768		1,750
Interest-bearing deposits	Interest-bearing deposits		30		82			Interest-bearing deposits	25		67		55		149
Total interest income	Total interest income		37,179		27,115			Total interest income	39,351		28,897		76,530		56,012
Interest expense:	Interest expense:							Interest expense:
Deposits	Deposits		13,339		2,151			Deposits	16,277		3,146		29,616		5,297
Federal funds purchased and other short-term borrowings	Federal funds purchased and other short-term borrowings		2,079		—			Federal funds purchased and other short-term borrowings	2,264		157		4,343		157
Subordinated notes	Subordinated notes		1,106		248			Subordinated notes	1,109		394		2,215		642
Federal Home Loan Bank advances	Federal Home Loan Bank advances		1,262		630			Federal Home Loan Bank advances	1,621		635		2,883		1,265
Long-term debt	Long-term debt		698		258			Long-term debt	739		326		1,437		584
Total interest expense	Total interest expense		18,484		3,287			Total interest expense	22,010		4,658		40,494		7,945
Net interest income	Net interest income		18,695		23,828			Net interest income	17,341		24,239		36,036		48,067
Credit loss expense (benefit)	Credit loss expense (benefit)		—		(750)			Credit loss expense (benefit)	—		(1,750)		—		(2,500)
Net interest income after credit loss expense (benefit)	Net interest income after credit loss expense (benefit)		18,695		24,578			Net interest income after credit loss expense (benefit)	17,341		25,989		36,036		50,567
Noninterest income:	Noninterest income:							Noninterest income:
Service charges on deposit accounts	Service charges on deposit accounts		462		580			Service charges on deposit accounts	458		585		920		1,165
Debit card usage fees	Debit card usage fees		486		472			Debit card usage fees	511		507		997		979
Trust services	Trust services		706		629			Trust services	749		622		1,455		1,251
Increase in cash value of bank-owned life insurance	Increase in cash value of bank-owned life insurance		257		227			Increase in cash value of bank-owned life insurance	250		236		507		463
Gain from bank-owned life insurance	Gain from bank-owned life insurance		691		—			Gain from bank-owned life insurance	—		—		691		—

Other income	Other income		355		481			Other income	421		328		776		809
Total noninterest income	Total noninterest income		2,957		2,389			Total noninterest income	2,389		2,278		5,346		4,667
Noninterest expense:	Noninterest expense:							Noninterest expense:
Salaries and employee benefits	Salaries and employee benefits		6,867		6,298			Salaries and employee benefits	7,029		6,410		13,896		12,708
Occupancy and equipment	Occupancy and equipment		1,327		1,086			Occupancy and equipment	1,322		1,242		2,649		2,328
Data processing	Data processing		635		624			Data processing	729		656		1,364		1,280
Technology and software	Technology and software		513		476			Technology and software	579		492		1,092		968
FDIC insurance	FDIC insurance		416		337			FDIC insurance	420		289		836		626
Professional fees	Professional fees		250		217			Professional fees	287		202		537		419
Director fees	Director fees		205		168			Director fees	251		222		456		390
Other expenses	Other expenses		1,858		1,456			Other expenses	1,857		1,753		3,715		3,209
Total noninterest expense	Total noninterest expense		12,071		10,662			Total noninterest expense	12,474		11,266		24,545		21,928
Income before income taxes	Income before income taxes		9,581		16,305			Income before income taxes	7,256		17,001		16,837		33,306
Income taxes	Income taxes		1,737		3,121			Income taxes	1,394		4,334		3,131		7,455
Net income	Net income		$	7,844	$	13,184		Net income	$	5,862	$	12,667	$	13,706	$	25,851

Basic earnings per common share	Basic earnings per common share		$	0.47	$	0.80		Basic earnings per common share	$	0.35	$	0.76	$	0.82	$	1.56
Diluted earnings per common share	Diluted earnings per common share		$	0.47	$	0.78		Diluted earnings per common share	$	0.35	$	0.75	$	0.82	$	1.54

See Notes to Consolidated Financial Statements.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Consolidated Statements of Comprehensive Income (Loss)

(unaudited)


		Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	(in thousands)		2023		2022			(in thousands)	2023		2022		2023		2022
Net income	Net income		$	7,844	$	13,184		Net income	$	5,862	$	12,667	$	13,706	$	25,851
Other comprehensive income (loss):	Other comprehensive income (loss):							Other comprehensive income (loss):
Unrealized gains (losses) on securities:	Unrealized gains (losses) on securities:							Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period	Unrealized holding gains (losses) arising during the period		11,667		(54,595)			Unrealized holding gains (losses) arising during the period	(8,837)		(44,413)		2,830		(99,008)

Income tax (expense) benefit	Income tax (expense) benefit		(2,911)		13,813			Income tax (expense) benefit	2,192		11,236		(719)		25,049
Other comprehensive income (loss) on securities	Other comprehensive income (loss) on securities		8,756		(40,782)			Other comprehensive income (loss) on securities	(6,645)		(33,177)		2,111		(73,959)
Unrealized gains (losses) on derivatives:	Unrealized gains (losses) on derivatives:							Unrealized gains (losses) on derivatives:
Unrealized holding gains (losses) arising during the period			(1,634)		10,536
Unrealized holding gains arising during the period								Unrealized holding gains arising during the period	8,102		4,066		6,468		14,602
Plus: reclassification adjustment for net (gains) losses realized in net income	Plus: reclassification adjustment for net (gains) losses realized in net income		(1,958)		1,045			Plus: reclassification adjustment for net (gains) losses realized in net income	(2,467)		642		(4,425)		1,687

Income tax (expense) benefit			882		(2,930)
Other comprehensive income (loss) on derivatives			(2,710)		8,651
Income tax expense								Income tax expense	(1,382)		(1,191)		(500)		(4,121)
Other comprehensive income on derivatives								Other comprehensive income on derivatives	4,253		3,517		1,543		12,168
Total other comprehensive income (loss)	Total other comprehensive income (loss)		6,046		(32,131)			Total other comprehensive income (loss)	(2,392)		(29,660)		3,654		(61,791)
Comprehensive income (loss)	Comprehensive income (loss)		$	13,890	$	(18,947)		Comprehensive income (loss)	$	3,470	$	(16,993)	$	17,360	$	(35,940)

See Notes to Consolidated Financial Statements.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Consolidated Statements of Stockholders' Equity

(unaudited)


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

																Three Months Ended June 30, 2023
																									Accumulated
																					Additional				Other
																Preferred		Common Stock			Paid-In		Retained		Comprehensive
																Stock		Shares	Amount		Capital		Earnings		Income (Loss)		Total
Balance, March 31, 2023															Balance, March 31, 2023	$	—	16,712,257	$	3,000	$	31,797	$	267,620	$	(85,425)	$	216,992
Net income															Net income	—		—	—		—		5,862		—		5,862
Other comprehensive loss, net of tax															Other comprehensive loss, net of tax	—		—	—		—		—		(2,392)		(2,392)
Cash dividends declared, $0.25 per common share															Cash dividends declared, $0.25 per common share	—		—	—		—		(4,181)		—		(4,181)
Stock-based compensation costs															Stock-based compensation costs	—		—	—		845		—		—		845
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes															Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes	—		12,837	—		—		—		—		—
Balance, June 30, 2023															Balance, June 30, 2023	$	—	16,725,094	$	3,000	$	32,642	$	269,301	$	(87,817)	$	217,126

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

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

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

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

Table of Contents

West Bancorporation, Inc. and Subsidiary

Consolidated Statements of Stockholders' Equity

(unaudited)
















(in thousands, except share and per share data)

	Six Months Ended June 30, 2023
										Accumulated
						Additional				Other
	Preferred		Common Stock			Paid-In		Retained		Comprehensive
	Stock		Shares	Amount		Capital		Earnings		Income (Loss)		Total
Balance, December 31, 2022	$	—	16,640,413	$	3,000	$	32,021	$	267,562	$	(91,471)	$	211,112
Cumulative effect of change in accounting principle(1)	—		—	—		—		(3,626)		—		(3,626)
Net income	—		—	—		—		13,706		—		13,706
Other comprehensive income, net of tax	—		—	—		—		—		3,654		3,654
Cash dividends declared, $0.50 per common share	—		—	—		—		(8,341)		—		(8,341)
Stock-based compensation costs	—		—	—		1,556		—		—		1,556
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes	—		84,681	—		(935)		—		—		(935)
Balance, June 30, 2023	$	—	16,725,094	$	3,000	$	32,642	$	269,301	$	(87,817)	$	217,126


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

(1)Cumulative effect adjustment pursuant to adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. See Note 1 for additional information.

See Notes to Consolidated Financial Statements.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Consolidated Statements of Cash Flows

(unaudited)


		Three Months Ended March 31,					Six Months Ended June 30,
(in thousands)	(in thousands)	2023		2022		(in thousands)	2023		2022
Cash Flows from Operating Activities:	Cash Flows from Operating Activities:					Cash Flows from Operating Activities:
Net income	Net income	$	7,844	$	13,184	Net income	$	13,706	$	25,851
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Credit loss expense (benefit)	Credit loss expense (benefit)	—		(750)		Credit loss expense (benefit)	—		(2,500)
Net amortization and accretion	Net amortization and accretion	829		666		Net amortization and accretion	1,638		1,409

Stock-based compensation	Stock-based compensation	711		757		Stock-based compensation	1,556		1,619
Increase in cash value of bank-owned life insurance	Increase in cash value of bank-owned life insurance	(257)		(227)		Increase in cash value of bank-owned life insurance	(507)		(463)

Gain from bank-owned life insurance						Gain from bank-owned life insurance	(691)		—

Depreciation	Depreciation	404		307		Depreciation	808		680
Provision for deferred income taxes	Provision for deferred income taxes	635		824		Provision for deferred income taxes	462		1,885
Change in assets and liabilities:	Change in assets and liabilities:					Change in assets and liabilities:
Increase in accrued interest receivable		(296)		(1,193)
(Increase) decrease in accrued interest receivable						(Increase) decrease in accrued interest receivable	203		(473)
(Increase) decrease in other assets	(Increase) decrease in other assets	(1,322)		249		(Increase) decrease in other assets	(947)		1,448
Increase (decrease) in accrued expenses and other liabilities	Increase (decrease) in accrued expenses and other liabilities	(6,054)		1,702		Increase (decrease) in accrued expenses and other liabilities	(5,964)		4,189
Net cash provided by operating activities	Net cash provided by operating activities	2,494		15,519		Net cash provided by operating activities	10,264		33,645
Cash Flows from Investing Activities:	Cash Flows from Investing Activities:					Cash Flows from Investing Activities:

Proceeds from principal paydowns, maturities and calls of securities available for sale	Proceeds from principal paydowns, maturities and calls of securities available for sale	9,661		25,730		Proceeds from principal paydowns, maturities and calls of securities available for sale	20,326		46,529
Purchases of securities available for sale	Purchases of securities available for sale	—		(120,077)		Purchases of securities available for sale	—		(120,077)
Purchases of Federal Home Loan Bank stock	Purchases of Federal Home Loan Bank stock	(31,595)		(384)		Purchases of Federal Home Loan Bank stock	(60,394)		(21,003)
Proceeds from redemption of Federal Home Loan Bank stock	Proceeds from redemption of Federal Home Loan Bank stock	28,705		80		Proceeds from redemption of Federal Home Loan Bank stock	57,242		15,436
Net increase in loans	Net increase in loans	(13,340)		(29,161)		Net increase in loans	(64,232)		(117,363)

Purchases of premises and equipment	Purchases of premises and equipment	(7,164)		(6,951)		Purchases of premises and equipment	(15,000)		(8,548)

Proceeds of principal and earnings from bank-owned life insurance						Proceeds of principal and earnings from bank-owned life insurance	2,458		—
Net cash used in investing activities	Net cash used in investing activities	(13,733)		(130,763)		Net cash used in investing activities	(59,600)		(205,026)
Cash Flows from Financing Activities:	Cash Flows from Financing Activities:					Cash Flows from Financing Activities:
Net increase (decrease) in deposits		(82,015)		75,247
Net decrease in deposits						Net decrease in deposits	(44,083)		(173,554)
Net increase (decrease) in federal funds purchased and other short-term borrowings	Net increase (decrease) in federal funds purchased and other short-term borrowings	29,290		(2,880)		Net increase (decrease) in federal funds purchased and other short-term borrowings	(15,850)		130,120

Proceeds from issuance of subordinated debt, net of issuance costs						Proceeds from issuance of subordinated debt, net of issuance costs	—		58,783
Net increase in Federal Home Loan Bank advances	Net increase in Federal Home Loan Bank advances	65,000		—		Net increase in Federal Home Loan Bank advances	125,000		—
Principal payments on long-term debt	Principal payments on long-term debt	—		(35)		Principal payments on long-term debt	(1,250)		(35)
Common stock dividends paid	Common stock dividends paid	(4,160)		(4,139)		Common stock dividends paid	(8,341)		(8,299)
Restricted stock units withheld for payroll taxes	Restricted stock units withheld for payroll taxes	(935)		(1,519)		Restricted stock units withheld for payroll taxes	(935)		(1,519)
Net cash provided by financing activities	Net cash provided by financing activities	7,180		66,674		Net cash provided by financing activities	54,541		5,496
Net decrease in cash and cash equivalents		(4,059)		(48,570)
Net increase (decrease) in cash and cash equivalents						Net increase (decrease) in cash and cash equivalents	5,205		(165,885)
Cash and Cash Equivalents:	Cash and Cash Equivalents:					Cash and Cash Equivalents:
Beginning	Beginning	26,539		192,825		Beginning	26,539		192,825
Ending	Ending	$	22,480	$	144,255	Ending	$	31,744	$	26,940

Supplemental Disclosures of Cash Flow Information:	Supplemental Disclosures of Cash Flow Information:					Supplemental Disclosures of Cash Flow Information:
Cash payments for:	Cash payments for:					Cash payments for:
Interest	Interest	$	16,515	$	3,218	Interest	$	39,277	$	7,526
Income taxes	Income taxes	—		—		Income taxes	2,250		3,890

See Notes to Consolidated Financial Statements.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

1. Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared by West Bancorporation, Inc. (the Company) pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to such rules and regulations. Although management believes that the disclosures are adequate to make the information presented understandable, it is suggested that these interim consolidated financial statements be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 23, 2023. In the opinion of management, the accompanying consolidated financial statements of the Company contain all adjustments necessary to fairly present its financial position as of ~~March 31,~~June 30, 2023 and December 31, 2022, and net income, comprehensive income (loss), and changes in stockholders' equity for the three and six months ended June 30, 2023 and 2022, and cash flows for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022. The results for these interim periods may not be indicative of results for the entire year or for any other period.

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

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

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

In December 2019, the FASB issued ASU No. 2019-10, Financial Instruments-Credit Losses (Topic 326). This update amended the effective date of ASU No. 2016-13 for certain entities, including smaller reporting companies until fiscal years beginning after December 15, 2022, including interim periods within those fiscal periods. Early adoption was permitted. The one-time determination date for identifying as a smaller reporting company was November 15, 2019. The Company met the definition of a smaller reporting company as of that date and was not required to adopt the standard until January 1, 2023.

910

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West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

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

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

The following table illustrates the impact of ASC 326 adoption.


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

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

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this update provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. They provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update were effective for all entities as of March 12, 2020 through December 31, 2022. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope. The amendments in this update refine the scope for certain optional expedients and exceptions for contract modifications and hedge accounting to apply to derivative contracts and certain hedging relationships affected by the discounting transition. The amendments in this update were effective for all entities as of March 12, 2020 through December 31, 2022. In December 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. The amendment in this update extends the period of time preparers can utilize reference rate reform relief guidance in Topic 848, discussed above. ASU No. 2022-06 defers the sunset date from December 31, 2022 to December 31, 2024. The Company does not expect the updates within Topic 848 to have a material impact on our financial statements.

1011

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

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

2. Earnings per Common Share

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


		Three Months Ended March 31,			Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except per share data)	(in thousands, except per share data)		2023			2022		(in thousands, except per share data)	2023		2022		2023		2022
Net income	Net income		$	7,844		$	13,184	Net income	$	5,862	$	12,667	$	13,706	$	25,851

Weighted average common shares outstanding	Weighted average common shares outstanding		16,645			16,561		Weighted average common shares outstanding	16,722		16,638		16,683		16,599
Weighted average effect of restricted stock units outstanding	Weighted average effect of restricted stock units outstanding		160			279		Weighted average effect of restricted stock units outstanding	34		145		46		218
Diluted weighted average common shares outstanding	Diluted weighted average common shares outstanding		16,805			16,840		Diluted weighted average common shares outstanding	16,756		16,783		16,729		16,817

Basic earnings per common share	Basic earnings per common share		$	0.47		$	0.80	Basic earnings per common share	$	0.35	$	0.76	$	0.82	$	1.56
Diluted earnings per common share	Diluted earnings per common share		$	0.47		$	0.78	Diluted earnings per common share	$	0.35	$	0.75	$	0.82	$	1.54
Number of anti-dilutive common stock equivalents excluded from diluted earnings per share computation	Number of anti-dilutive common stock equivalents excluded from diluted earnings per share computation		249			18		Number of anti-dilutive common stock equivalents excluded from diluted earnings per share computation	411		182		416		88

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Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

3. Securities Available for Sale

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


		March 31, 2023									June 30, 2023
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value
Securities available for sale:	Securities available for sale:									Securities available for sale:
State and political subdivisions	State and political subdivisions	$	242,202	$	10	$	(42,229)	$	199,983	State and political subdivisions	$	241,579	$	4	$	(44,187)	$	197,396
Collateralized mortgage obligations (1)	Collateralized mortgage obligations (1)	332,044		—		(53,921)		278,123		Collateralized mortgage obligations (1)	324,003		—		(59,169)		264,834
Mortgage-backed securities (1)	Mortgage-backed securities (1)	166,479		—		(26,889)		139,590		Mortgage-backed securities (1)	163,713		—		(28,133)		135,580
Collateralized loan obligations	Collateralized loan obligations	37,948		—		(1,061)		36,887		Collateralized loan obligations	37,948		—		(685)		37,263
Corporate notes	Corporate notes	13,750		—		(2,975)		10,775		Corporate notes	13,750		—		(3,732)		10,018
		$	792,423	$	10	$	(127,075)	$	665,358		$	780,993	$	4	$	(135,906)	$	645,091

		December 31, 2022									December 31, 2022
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value
Securities available for sale:	Securities available for sale:									Securities available for sale:
State and political subdivisions	State and political subdivisions	$	242,823	$	4	$	(49,472)	$	193,355	State and political subdivisions	$	242,823	$	4	$	(49,472)	$	193,355
Collateralized mortgage obligations (1)	Collateralized mortgage obligations (1)	338,875		—		(57,247)		281,628		Collateralized mortgage obligations (1)	338,875		—		(57,247)		281,628
Mortgage-backed securities (1)	Mortgage-backed securities (1)	169,451		—		(29,171)		140,280		Mortgage-backed securities (1)	169,451		—		(29,171)		140,280

Collateralized loan obligations	Collateralized loan obligations	37,948		—		(1,137)		36,811		Collateralized loan obligations	37,948		—		(1,137)		36,811
Corporate notes	Corporate notes	13,750		—		(1,709)		12,041		Corporate notes	13,750		—		(1,709)		12,041
		$	802,847	$	4	$	(138,736)	$	664,115		$	802,847	$	4	$	(138,736)	$	664,115

(1)Collateralized mortgage obligations and mortgage-backed securities consist of residential and commercial mortgage pass-through securities and collateralized mortgage obligations guaranteed by FNMA, FHLMC, GNMA and SBA.

Securities with an amortized cost of approximately ~~$381,622~~$464,361 and $293,017 as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively, were pledged to secure access to FHLB advances and Federal Reserve credit programs, for public fund deposits, and for other purposes as required or permitted by law or regulation.

The amortized cost and fair value of securities available for sale as of ~~March 31,~~June 30, 2023, by contractual maturity, are shown below. Certain securities have call features that allow the issuer to call the securities prior to maturity. Expected maturities may differ from contractual maturities for collateralized mortgage obligations and mortgage-backed securities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Therefore, collateralized mortgage obligations and mortgage-backed securities are not included in the maturity categories within the following maturity summary.


		March 31, 2023					June 30, 2023
		Amortized Cost		Fair Value			Amortized Cost		Fair Value

Due after five years through ten years	Due after five years through ten years	$	72,528	$	65,374	Due after five years through ten years	$	72,800	$	65,002
Due after ten years	Due after ten years	221,372		182,271		Due after ten years	220,477		179,675
		293,900		247,645			293,277		244,677
Collateralized mortgage obligations and mortgage-backed securities	Collateralized mortgage obligations and mortgage-backed securities	498,523		417,713		Collateralized mortgage obligations and mortgage-backed securities	487,716		400,414
		$	792,423	$	665,358		$	780,993	$	645,091

1213

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

There were no sales of securities available for sale during the three and six months ended ~~March 31,~~June 30, 2023 and 2022.

The following tables show the fair value and gross unrealized losses, aggregated by investment type and length of time that individual securities have been in a continuous loss position, as of ~~March 31,~~June 30, 2023 and December 31, 2022.


		March 31, 2023															June 30, 2023
		Less than 12 months					12 months or longer					Total					Less than 12 months					12 months or longer					Total
		Fair Value		Gross Unrealized (Losses)		No. of Securities	Fair Value		Gross Unrealized (Losses)		No. of Securities	Fair Value		Gross Unrealized (Losses)			Fair Value		Gross Unrealized (Losses)		No. of Securities	Fair Value		Gross Unrealized (Losses)		No. of Securities	Fair Value		Gross Unrealized (Losses)
Securities available for sale:	Securities available for sale:															Securities available for sale:
State and political subdivisions	State and political subdivisions	$	21,169	$	(577)	39	$	176,282	$	(41,652)	74	$	197,451	$	(42,229)	State and political subdivisions	$	9,853	$	(273)	14	$	186,848	$	(43,914)	102	$	196,701	$	(44,187)
Collateralized mortgage obligations	Collateralized mortgage obligations	6,033		(431)		7	272,090		(53,490)		72	278,123		(53,921)		Collateralized mortgage obligations	—		—		—	264,834		(59,169)		79	264,834		(59,169)
Mortgage-backed securities	Mortgage-backed securities	1,306		(72)		2	138,284		(26,817)		25	139,590		(26,889)		Mortgage-backed securities	—		—		—	135,580		(28,133)		27	135,580		(28,133)
Collateralized loan obligations	Collateralized loan obligations	—		—		—	36,887		(1,061)		6	36,887		(1,061)		Collateralized loan obligations	—		—		—	37,263		(685)		6	37,263		(685)
Corporate notes	Corporate notes	901		(99)		1	9,874		(2,876)		7	10,775		(2,975)		Corporate notes	—		—		—	10,018		(3,732)		8	10,018		(3,732)
		$	29,409	$	(1,179)	49	$	633,417	$	(125,896)	184	$	662,826	$	(127,075)		$	9,853	$	(273)	14	$	634,543	$	(135,633)	222	$	644,396	$	(135,906)


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

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

The Company adopted ASU No. 2016-13 effective January 1, 2023 which requires credit losses on available-for-sale securities to be recorded in an allowance for credit losses. If the Company intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis, then the security is written down to fair value through income. As of ~~March 31,~~June 30, 2023, the Company did not have the intent to sell, nor was it more likely than not that we would be required to sell any of the securities in an unrealized loss position prior to recovery. As of ~~March 31,~~June 30, 2023, the Company also determined that no individual securities in an unrealized loss position represented credit losses that would require an allowance for credit losses. The Company concluded that the unrealized losses were primarily ~~attributed~~attributable to increases in market interest rates since these securities were purchased and other market conditions. Accrued interest receivable is not included in available-for-sale security balances and is presented in the "Accrued interest receivable" line of the Consolidated Balance Sheets. Interest receivable on securities was ~~$3,553~~$3,354 as of ~~March 31,~~June 30, 2023, and is excluded from the estimate of credit losses.

As of December 31, 2022, the Company believed the unrealized losses on securities available for sale were due to market conditions rather than reduced estimated cash flows. At December 31, 2022, the Company did not intend to sell these securities, did not anticipate that these securities will be required to be sold before anticipated recovery, and expected full principal and interest to be collected. Therefore, under the accounting principles effective at December 31, 2022, the Company did not consider these securities to have other than temporary impairment as of December 31, 2022.

1314

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

4. Loans and Allowance for Credit Losses

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


		March 31, 2023		December 31, 2022			June 30, 2023		December 31, 2022
Commercial	Commercial	$	520,894	$	519,196	Commercial	$	535,085	$	519,196
Real estate:	Real estate:					Real estate:
Construction, land and land development	Construction, land and land development	336,739		363,014		Construction, land and land development	351,461		363,014
1-4 family residential first mortgages	1-4 family residential first mortgages	75,223		75,211		1-4 family residential first mortgages	80,998		75,211
Home equity	Home equity	9,726		10,322		Home equity	12,625		10,322
Commercial	Commercial	1,810,158		1,771,940		Commercial	1,820,718		1,771,940
Consumer and other	Consumer and other	7,381		7,292		Consumer and other	10,289		7,292
		2,760,121		2,746,975			2,811,176		2,746,975
Net unamortized fees and costs	Net unamortized fees and costs	(3,936)		(4,139)		Net unamortized fees and costs	(4,101)		(4,139)
		$	2,756,185	$	2,742,836		$	2,807,075	$	2,742,836

Real estate loans of approximately ~~$1,300,000~~$1,390,000 and $1,190,000 were pledged as security for Federal Home Loan Bank (FHLB) advances as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively.

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

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

Allowance for Credit Losses for Loans

The Company adopted ASU No. 2016-13 on January 1, 2023, at which time the Company implemented the current expected credit loss model in estimating the allowance for credit losses (ACL) valuation account. The following ~~table details~~tables detail the changes in the ACL by loan segment for the three and six months ended ~~March 31,~~June 30, 2023.


				Three Months Ended June 30, 2023
													Real Estate
																			Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Beginning balance																		Beginning balance	$	5,497	$	3,166	$	466	$	88	$	18,645	$	79	$	27,941

Charge-offs																		Charge-offs	(18)		—		—		—		—		—		(18)
Recoveries																		Recoveries	13		—		—		2		—		—		15
Provision for credit loss expense(1)																		Provision for credit loss expense(1)	4		118		6		20		(176)		28		—
Ending balance																		Ending balance	$	5,496	$	3,284	$	472	$	110	$	18,469	$	107	$	27,938

		Three Months Ended March 31, 2023																	Six Months Ended June 30, 2023
					Real Estate																Real Estate
		Commercial			Construction and Land		1-4 Family Residential		Home Equity		Commercial			Consumer and Other		Total			Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Beginning balance	Beginning balance	$	4,804		$	3,548	$	357	$	101	$	16,575		$	88	$	25,473	Beginning balance	$	4,804	$	3,548	$	357	$	101	$	16,575	$	88	$	25,473
Adoption of CECL	Adoption of CECL	677			(234)		121		(8)		1,911			(9)		2,458		Adoption of CECL	677		(234)		121		(8)		1,911		(9)		2,458
Charge-offs	Charge-offs	—			—		—		—		—			—		—		Charge-offs	(18)		—		—		—		—		—		(18)
Recoveries	Recoveries	8			—		1		1		—			—		10		Recoveries	21		—		1		3		—		—		25
Provision for credit loss expense(1)	Provision for credit loss expense(1)	8			(148)		(13)		(6)		159			—		—		Provision for credit loss expense(1)	12		(30)		(7)		14		(17)		28		—
Ending balance	Ending balance	$	5,497		$	3,166	$	466	$	88	$	18,645		$	79	$	27,941	Ending balance	$	5,496	$	3,284	$	472	$	110	$	18,469	$	107	$	27,938

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

1416

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

Prior to the adoption of ASU No. 2016-13 on January 1, 2023, the Company calculated the allowance for loan losses using the incurred loss methodology. The following ~~table presents~~tables present the activity in the allowance for loan losses by segment for the three and six months ended ~~March 31,~~June 30, 2022.


				Three Months Ended June 30, 2022
													Real Estate
																			Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Beginning balance																		Beginning balance	$	4,708	$	3,998	$	348	$	101	$	18,417	$	51	$	27,623

Charge-offs																		Charge-offs	—		—		—		—		(451)		—		(451)
Recoveries																		Recoveries	8		—		—		1		3		—		12
Provision for loan losses(1)																		Provision for loan losses(1)	(55)		45		25		(7)		(1,780)		22		(1,750)
Ending balance																		Ending balance	$	4,661	$	4,043	$	373	$	95	$	16,189	$	73	$	25,434

		Three Months Ended March 31, 2022																	Six Months Ended June 30, 2022
					Real Estate																Real Estate
		Commercial			Construction and Land		1-4 Family Residential		Home Equity		Commercial			Consumer and Other		Total			Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Beginning balance	Beginning balance	$	4,776		$	3,646	$	339	$	91	$	19,466		$	46	$	28,364	Beginning balance	$	4,776	$	3,646	$	339	$	91	$	19,466	$	46	$	28,364
Charge-offs	Charge-offs	—			—		—		—		—			—		—		Charge-offs	—		—		—		—		(451)		—		(451)
Recoveries	Recoveries	4			—		1		1		3			—		9		Recoveries	12		—		1		2		6		—		21
Provision for loan losses(1)	Provision for loan losses(1)	(72)			352		8		9		(1,052)			5		(750)		Provision for loan losses(1)	(127)		397		33		2		(2,832)		27		(2,500)
Ending balance	Ending balance	$	4,708		$	3,998	$	348	$	101	$	18,417		$	51	$	27,623	Ending balance	$	4,661	$	4,043	$	373	$	95	$	16,189	$	73	$	25,434

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

The following tables present a breakdown of the allowance for credit losses by segment, disaggregated based on the evaluation method as of ~~March 31,~~June 30, 2023 and December 31, 2022.


		March 31, 2023															June 30, 2023
				Real Estate															Real Estate
		Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total			Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Ending balance:	Ending balance:															Ending balance:
Individually evaluated for credit losses	Individually evaluated for credit losses	$	—	$	—	$	—	$	—	$	—	$	—	$	—	Individually evaluated for credit losses	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for credit losses	Collectively evaluated for credit losses	5,497		3,166		466		88		18,645		79		27,941		Collectively evaluated for credit losses	5,496		3,284		472		110		18,469		107		27,938
Total	Total	$	5,497	$	3,166	$	466	$	88	$	18,645	$	79	$	27,941	Total	$	5,496	$	3,284	$	472	$	110	$	18,469	$	107	$	27,938

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

1517

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

The following tables present the recorded investment in loans, exclusive of unamortized fees and costs, disaggregated based on the evaluation method by segment as of ~~March 31,~~June 30, 2023 and December 31, 2022.


		March 31, 2023															June 30, 2023
				Real Estate															Real Estate
		Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total			Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Ending balance:	Ending balance:															Ending balance:
Individually evaluated for credit losses	Individually evaluated for credit losses	$	—	$	—	$	316	$	—	$	—	$	—	$	316	Individually evaluated for credit losses	$	—	$	—	$	309	$	—	$	—	$	—	$	309
Collectively evaluated for credit losses	Collectively evaluated for credit losses	520,894		336,739		74,907		9,726		1,810,158		7,381		2,759,805		Collectively evaluated for credit losses	535,085		351,461		80,689		12,625		1,820,718		10,289		2,810,867
Total	Total	$	520,894	$	336,739	$	75,223	$	9,726	$	1,810,158	$	7,381	$	2,760,121	Total	$	535,085	$	351,461	$	80,998	$	12,625	$	1,820,718	$	10,289	$	2,811,176


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

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

Accrued interest on loans of ~~$8,722~~$8,430 and $8,665 at ~~March 31,~~June 30, 2023 and December 31, 2022, respectively, is included in accrued interest receivable on the balance sheet and is excluded from the estimate of credit losses.

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

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

1618

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

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

Nonaccrual Loans and Delinquency Status

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

The following table presents the amortized cost basis of loans on nonaccrual status, loans on nonaccrual status with no allowance for credit losses recorded, and loans past due 90 days or more and still accruing by loan segment.


		Total Nonaccrual				Nonaccrual with no Allowance for Credit Losses				90 Days or More Past Due and Accruing					Total Nonaccrual				Nonaccrual with no Allowance for Credit Losses				90 Days or More Past Due and Accruing
		March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022			June 30, 2023		December 31, 2022		June 30, 2023		December 31, 2022		June 30, 2023		December 31, 2022
Commercial	Commercial	$	—	$	—	$	—	$	—	$	—	$	—	Commercial	$	—	$	—	$	—	$	—	$	—	$	—
Real estate:	Real estate:													Real estate:
Construction, land and land development	Construction, land and land development	—		—		—		—		—		—		Construction, land and land development	—		—		—		—		—		—
1-4 family residential first mortgages	1-4 family residential first mortgages	316		322		316		322		—		—		1-4 family residential first mortgages	309		322		309		322		—		—
Home equity	Home equity	—		—		—		—		—		—		Home equity	—		—		—		—		—		—
Commercial	Commercial	—		—		—		—		—		—		Commercial	—		—		—		—		—		—
Consumer and other	Consumer and other	—		—		—		—		—		—		Consumer and other	—		—		—		—		—		—
Total	Total	$	316	$	322	$	316	$	322	$	—	$	—	Total	$	309	$	322	$	309	$	322	$	—	$	—

There was no interest income recognized on loans that were on nonaccrual for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and ~~March 31,~~June 30, 2022.

1719

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

The following tables provide an analysis of the delinquency status of the amortized cost of loans as of ~~March 31,~~June 30, 2023 and December 31, 2022.


		March 31, 2023													June 30, 2023
		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans			30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans
Commercial	Commercial	$	—	$	—	$	—	$	—	$	520,894	$	520,894	Commercial	$	—	$	229	$	—	$	—	$	534,856	$	535,085
Real estate:	Real estate:													Real estate:
Construction, land and	Construction, land and													Construction, land and
land development	land development	—		—		—		—		336,739		336,739		land development	—		—		—		—		351,461		351,461
1-4 family residential	1-4 family residential													1-4 family residential
first mortgages	first mortgages	—		—		—		—		75,223		75,223		first mortgages	—		—		—		—		80,998		80,998
Home equity	Home equity	—		—		—		—		9,726		9,726		Home equity	—		—		—		—		12,625		12,625
Commercial	Commercial	—		—		—		—		1,810,158		1,810,158		Commercial	—		—		—		—		1,820,718		1,820,718
Consumer and other	Consumer and other	—		—		—		—		7,381		7,381		Consumer and other	—		—		—		—		10,289		10,289
Total	Total	$	—	$	—	$	—	$	—	$	2,760,121	$	2,760,121	Total	$	—	$	229	$	—	$	—	$	2,810,947	$	2,811,176


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

1820

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

Loan Restructurings Made to Borrowers Experiencing Financial Difficulty

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

Credit Quality Indicators

Based upon its ongoing assessment of credit quality within the loan portfolio, the Company maintains a Watch List, which includes loans classified as Doubtful, Substandard and Watch according to the Company's classification criteria. These loans involve the anticipated potential for payment defaults or collateral inadequacies. A loan on the Watch List is analyzed individually to categorize the loan to the appropriate credit risk category.

All loans are subject to the assessment of a credit quality indicator. Risk ratings are assigned for each loan at the time of approval, and they change as circumstances dictate during the term of the loan. The Company utilizes a 9-point risk rating scale as shown below, with ratings 1 - 5 included in the Pass column, rating 6 included in the Watch column, ratings 7 - 8 included in the Substandard column and rating 9 included in the Doubtful column.

Risk rating 1: The loan is secured by cash equivalent collateral.

Risk rating 2: The loan is secured by properly margined marketable securities, bonds or cash surrender value of life insurance.

Risk rating 3: The borrower is in strong financial condition and has strong debt service capacity. The loan is performing as agreed, and the financial characteristics and trends of the borrower exceed industry statistics.

Risk rating 4: The borrower's financial condition is satisfactory and stable. The borrower has satisfactory debt service capacity, and the loan is well secured. The loan is performing as agreed, and the financial characteristics and trends fall in line with industry statistics.

Risk rating 5: The borrower's financial condition is less than satisfactory. The loan is still generally paying as agreed, but strained cash flows may cause some slowness in payments. The collateral values adequately preclude loss on the loan. Financial characteristics and trends lag industry statistics. There may be noncompliance with loan covenants.

Risk rating 6: The borrower's financial condition is deficient. Payment delinquencies may be more common. Collateral values still protect from loss, but margins are narrow. The loan may be reliant on secondary sources of repayment, including liquidation of collateral and guarantor support.

Risk rating 7: The loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Well-defined weaknesses exist that jeopardize the liquidation of the debt. The Company is inadequately protected by the valuation or paying capacity of the collateral pledged. If deficiencies are not corrected, there is a distinct possibility that a loss will be sustained.

Risk rating 8: All the characteristics of rating 7 exist with the added condition that the loan is past due more than 90 days or there is reason to believe the Company will not receive its principal and interest according to the terms of the loan agreement.

Risk rating 9: All the weaknesses inherent in risk ratings 7 and 8 exist with the added condition that collection or liquidation, on the basis of currently known facts, conditions and values, is highly questionable and improbable. A loan reaching this category would most likely be charged off.

1921

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

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

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

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

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

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

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

2022

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

The following tables present the amortized cost basis of loans by loan segment, credit quality indicator and origination year, and the current period gross write-off by loan segment and origination year, based on the analysis performed as of ~~March 31,~~June 30, 2023 and December 31, 2022.


		Term Loans by Origination Year																	Term Loans by Origination Year
As of March 31, 2023		2023		2022		2021		2020		2019		Prior		Revolving Loans		Total
As of June 30, 2023																		As of June 30, 2023	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total
Commercial	Commercial																	Commercial
Pass	Pass	$	64,257	$	129,097	$	60,612	$	46,986	$	8,937	$	49,173	$	161,832	$	520,894	Pass	$	94,720	$	140,161	$	54,141	$	43,579	$	8,197	$	45,173	$	149,114	$	535,085
Watch	Watch	—		—		—		—		—		—		—		—		Watch	—		—		—		—		—		—		—		—
Substandard	Substandard	—		—		—		—		—		—		—		—		Substandard	—		—		—		—		—		—		—		—
Doubtful	Doubtful	—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—
Total	Total	$	64,257	$	129,097	$	60,612	$	46,986	$	8,937	$	49,173	$	161,832	$	520,894	Total	$	94,720	$	140,161	$	54,141	$	43,579	$	8,197	$	45,173	$	149,114	$	535,085
Current period gross writeoffs	Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	Current period gross writeoffs	$	—	$	—	$	—	$	—	$	18	$	—	$	—	$	18
Real estate:	Real estate:																	Real estate:
Construction, land and land development	Construction, land and land development																	Construction, land and land development
Pass	Pass	$	6,086	$	53,833	$	21,637	$	2,389	$	1,536	$	193	$	251,021	$	336,695	Pass	$	34,707	$	120,624	$	90,414	$	21,381	$	1,510	$	190	$	82,594	$	351,420
Watch	Watch	—		44		—		—		—		—		—		44		Watch	—		41		—		—		—		—		—		41
Substandard	Substandard	—		—		—		—		—		—		—		—		Substandard	—		—		—		—		—		—		—		—
Doubtful	Doubtful	—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—
Total	Total	$	6,086	$	53,877	$	21,637	$	2,389	$	1,536	$	193	$	251,021	$	336,739	Total	$	34,707	$	120,665	$	90,414	$	21,381	$	1,510	$	190	$	82,594	$	351,461
Current period gross writeoffs	Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
1-4 family residential first mortgages	1-4 family residential first mortgages																	1-4 family residential first mortgages
Pass	Pass	$	5,203	$	22,187	$	21,218	$	13,459	$	3,955	$	4,614	$	4,036	$	74,672	Pass	$	15,101	$	22,114	$	21,435	$	13,031	$	3,890	$	4,415	$	517	$	80,503
Watch	Watch	147		—		—		—		—		—		—		147		Watch	146		—		—		—		—		—		—		146
Substandard	Substandard	—		88		—		—		316		—		—		404		Substandard	—		40		—		—		309		—		—		349
Doubtful	Doubtful	—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—
Total	Total	$	5,350	$	22,275	$	21,218	$	13,459	$	4,271	$	4,614	$	4,036	$	75,223	Total	$	15,247	$	22,154	$	21,435	$	13,031	$	4,199	$	4,415	$	517	$	80,998
Current period gross writeoffs	Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—			$	—	$	—
Home equity	Home equity																	Home equity
Pass	Pass	$	129	$	401	$	585	$	488	$	129	$	162	$	7,832	$	9,726	Pass	$	347	$	264	$	553	$	395	$	136	$	172	$	10,758	$	12,625
Watch	Watch	—		—		—		—		—		—		—		—		Watch	—		—		—		—		—		—		—		—
Substandard	Substandard	—		—		—		—		—		—		—		—		Substandard	—		—		—		—		—		—		—		—
Doubtful	Doubtful	—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—
Total	Total	$	129	$	401	$	585	$	488	$	129	$	162	$	7,832	$	9,726	Total	$	347	$	264	$	553	$	395	$	136	$	172	$	10,758	$	12,625
Current period gross writeoffs	Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial	Commercial																	Commercial
Pass	Pass	$	43,243	$	434,292	$	416,913	$	405,642	$	90,607	$	215,846	$	151,040	$	1,757,583	Pass	$	144,146	$	530,333	$	461,039	$	369,774	$	89,374	$	212,507	$	13,545	$	1,820,718
Watch	Watch	—		22,390		30,185		—		—		—		—		52,575		Watch	—		—		—		—		—		—		—		—
Substandard	Substandard	—		—		—		—		—		—		—		—		Substandard	—		—		—		—		—		—		—		—
Doubtful	Doubtful	—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—
Total	Total	$	43,243	$	456,682	$	447,098	$	405,642	$	90,607	$	215,846	$	151,040	$	1,810,158	Total	$	144,146	$	530,333	$	461,039	$	369,774	$	89,374	$	212,507	$	13,545	$	1,820,718
Current period gross writeoffs	Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	Current period gross writeoffs	$	—			$	—	$	—	$	—	$	—	$	—	$	—
Consumer and other	Consumer and other																	Consumer and other
Pass	Pass	$	297	$	623	$	703	$	85	$	74	$	203	$	5,396	$	7,381	Pass	$	487	$	539	$	582	$	72	$	51	$	304	$	8,254	$	10,289
Watch	Watch	—		—		—		—		—		—		—		—		Watch	—		—		—		—		—		—		—		—
Substandard	Substandard	—		—		—		—		—		—		—		—		Substandard	—		—		—		—		—		—		—		—
Doubtful	Doubtful	—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—
Total	Total	$	297	$	623	$	703	$	85	$	74	$	203	$	5,396	$	7,381	Total	$	487	$	539	$	582	$	72	$	51	$	304	$	8,254	$	10,289
Current period gross writeoffs	Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

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West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)


		Term Loans by Origination Year																	Term Loans by Origination Year
As of December 31, 2022	As of December 31, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans		Total		As of December 31, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans		Total
Commercial	Commercial																	Commercial
Pass	Pass	$	148,637	$	64,984	$	63,072	$	9,873	$	23,771	$	24,103	$	184,756	$	519,196	Pass	$	166,177	$	65,148	$	64,103	$	9,926	$	23,771	$	24,103	$	165,968	$	519,196
Watch	Watch	—		—		—		—		—		—		—		—		Watch	—		—		—		—		—		—		—		—
Substandard	Substandard	—		—		—		—		—		—		—		—		Substandard	—		—		—		—		—		—		—		—
Doubtful	Doubtful	—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—
Total	Total	$	148,637	$	64,984	$	63,072	$	9,873	$	23,771	$	24,103	$	184,756	$	519,196	Total	$	166,177	$	65,148	$	64,103	$	9,926	$	23,771	$	24,103	$	165,968	$	519,196
Current period gross writeoffs	Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Real estate:	Real estate:																	Real estate:
Construction, land and land development	Construction, land and land development																	Construction, land and land development
Pass	Pass	$	75,946	$	24,095	$	2,501	$	1,562	$	196	$	—	$	258,667	$	362,967	Pass	$	151,963	$	96,486	$	39,604	$	1,562	$	196	$	—	$	73,156	$	362,967
Watch	Watch	47		—		—		—		—		—		—		47		Watch	47		—		—		—		—		—		—		47
Substandard	Substandard	—		—		—		—		—		—		—		—		Substandard	—		—		—		—		—		—		—		—
Doubtful	Doubtful	—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—
Total	Total	$	75,993	$	24,095	$	2,501	$	1,562	$	196	$	—	$	258,667	$	363,014	Total	$	152,010	$	96,486	$	39,604	$	1,562	$	196	$	—	$	73,156	$	363,014
Current period gross writeoffs	Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
1-4 family residential first mortgages	1-4 family residential first mortgages																	1-4 family residential first mortgages
Pass	Pass	$	23,608	$	23,460	$	14,879	$	4,229	$	1,283	$	4,267	$	2,927	$	74,653	Pass	$	24,777	$	24,042	$	14,879	$	4,229	$	1,283	$	4,267	$	1,176	$	74,653
Watch	Watch	—		148		—		—		—		—		—		148		Watch	—		148		—		—		—		—		—		148
Substandard	Substandard	88		—		—		322		—		—		—		410		Substandard	88		—		—		322		—		—		—		410
Doubtful	Doubtful	—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—
Total	Total	$	23,696	$	23,608	$	14,879	$	4,551	$	1,283	$	4,267	$	2,927	$	75,211	Total	$	24,865	$	24,190	$	14,879	$	4,551	$	1,283	$	4,267	$	1,176	$	75,211
Current period gross writeoffs	Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	31	$	—	$	31	Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	31	$	—	$	31
Home equity	Home equity																	Home equity
Pass	Pass	$	413	$	613	$	512	$	130	$	169	$	—	$	8,485	$	10,322	Pass	$	413	$	613	$	512	$	130	$	169	$	—	$	8,485	$	10,322
Watch	Watch	—		—		—		—		—		—		—		—		Watch	—		—		—		—		—		—		—		—
Substandard	Substandard	—		—		—		—		—		—		—		—		Substandard	—		—		—		—		—		—		—		—
Doubtful	Doubtful	—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—
Total	Total	$	413	$	613	$	512	$	130	$	169	$	—	$	8,485	$	10,322	Total	$	413	$	613	$	512	$	130	$	169	$	—	$	8,485	$	10,322
Current period gross writeoffs	Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial	Commercial																	Commercial
Pass	Pass	$	429,826	$	421,283	$	403,195	$	92,304	$	54,723	$	169,055	$	147,518	$	1,717,904	Pass	$	543,138	$	440,150	$	405,935	$	92,304	$	54,723	$	169,055	$	12,599	$	1,717,904
Watch	Watch	22,553		30,573		—		910		—		—		—		54,036		Watch	22,553		30,573		—		910		—		—		—		54,036
Substandard	Substandard	—		—		—		—		—		—		—		—		Substandard	—		—		—		—		—		—		—		—
Doubtful	Doubtful	—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—
Total	Total	$	452,379	$	451,856	$	403,195	$	93,214	$	54,723	$	169,055	$	147,518	$	1,771,940	Total	$	565,691	$	470,723	$	405,935	$	93,214	$	54,723	$	169,055	$	12,599	$	1,771,940
Current period gross writeoffs	Current period gross writeoffs	$	—	$	451	$	—	$	—	$	—	$	—	$	—	$	451	Current period gross writeoffs	$	—	$	451	$	—	$	—	$	—	$	—	$	—	$	451
Consumer and other	Consumer and other																	Consumer and other
Pass	Pass	$	1,176	$	1,082	$	136	$	86	$	272	$	72	$	4,468	$	7,292	Pass	$	1,176	$	1,082	$	136	$	86	$	272	$	72	$	4,468	$	7,292
Watch	Watch	—		—		—		—		—		—		—		—		Watch	—		—		—		—		—		—		—		—
Substandard	Substandard	—		—		—		—		—		—		—		—		Substandard	—		—		—		—		—		—		—		—
Doubtful	Doubtful	—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—
Total	Total	$	1,176	$	1,082	$	136	$	86	$	272	$	72	$	4,468	$	7,292	Total	$	1,176	$	1,082	$	136	$	86	$	272	$	72	$	4,468	$	7,292
Current period gross writeoffs	Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

2224

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

Collateral Dependent Loans

Loans that do not share risk characteristics are evaluated on an individual basis. For collateral dependent loans where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loans to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the present value of expected cash flows from the operation of collateral. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the fair value of the underlying collateral less estimated cost to sell. The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the loan.

The following table presents the amortized cost basis of collateral dependent loans, by primary collateral type, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans.

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


	As of June 30, 2023
	Primary Type of Collateral
	Real Estate		Equipment		Other		Total		ACL Allocation



1-4 family residential first mortgages	$	309	$	—	$	—	$	309	$	—



Total	$	309	$	—	$	—	$	309	$	—

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


	As of December 31, 2022
	Primary Type of Collateral
	Real Estate		Equipment		Other		Total		ACL Allocation



1-4 family residential first mortgages	$	322	$	—	$	—	$	322	$	—



Total	$	322	$	—	$	—	$	322	$	—

~~Table of Contents~~

~~West Bancorporation, Inc. and Subsidiary~~

~~Notes to Consolidated Financial Statements~~

~~(unaudited)~~

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

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

The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The ~~Company has recorded an~~Company's allowance for credit losses for unfunded commitments ofwas $2,344 as of ~~March 31,~~June 30, 2023. The allowance for credit losses for off-balance-sheet credit exposures is presented in the "Accrued expenses and other liabilities" line of the Consolidated Balance Sheets. Changes in the allowance for credit losses for off-balance-sheet credit exposures is reflected in the "Credit loss expense " line of the Consolidated Statements of Income. There were no changes to the allowance for credit losses for off-balance-sheet credit exposures during the ~~three~~six months ended ~~March 31,~~June 30, 2023.

5. Derivatives

The Company has entered into various interest rate swap agreements as part of its interest rate risk management strategy. The Company uses interest rate swaps to manage its interest rate risk exposure on certain loans, variable-rate and short-term borrowings, and deposits due to interest rate movements. The notional amounts of the interest rate swaps do not represent amounts exchanged by the counterparties, but rather, the notional amount is used to determine, along with other terms of the derivative, the amounts to be exchanged between the counterparties.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

Interest Rate Swaps Designated as a Cash Flow Hedge: The Company had interest rate swaps designated as cash flow hedges with total notional amounts of ~~$375,000~~$435,000 and $310,000 at ~~March 31,~~June 30, 2023 and December 31, 2022, respectively. As of ~~March 31,~~June 30, 2023, the Company had swaps with a total notional amount of ~~$245,000~~$285,000 that hedge the interest payments of rolling fixed-rate one-month funding consisting of FHLB advances or brokered deposits. One of these swaps with a total notional amount of $25,000 is a forward-starting swap with a starting date in September 2023. Also as of ~~March 31,~~June 30, 2023, the Company had ~~a swap~~swaps with a total notional amount of ~~$20,000~~$40,000 that effectively converts variable-rate ~~junior subordinated notes~~long-term debt to fixed-rate debt and swaps with a total notional amount of $110,000 that hedge the interest payments of certain deposit accounts.

Derivatives Not Designated as Accounting Hedges: To accommodate customer needs, the Company on occasion offers loan level interest rate swaps to its customers and offsets its exposure from such contracts by entering into mirror image swaps with a swap counterparty (back-to-back swap program). The interest rate swaps are free-standing derivatives and are recorded at fair value. The Company enters into a floating-rate loan and a fixed-rate swap with our customer. Simultaneously, the Company enters into an offsetting fixed-rate swap with a swap counterparty. In connection with each swap transaction, the Company agrees to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on the same notional amount at a fixed interest rate. At the same time, the Company agrees to pay a swap counterparty the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. These transactions allow the Company’s customers to effectively convert variable-rate loans to fixed-rate loans. The customer accommodations and any offsetting swaps are treated as non-hedging derivative instruments which do not qualify for hedge accounting.

The table below identifies the balance sheet category and fair values of the Company's derivative instruments as of June 30, 2023 and December 31, 2022.


	June 30, 2023			December 31, 2022
Cash Flow Hedges:
Gross notional amount	$	435,000		$	310,000
Fair value in other assets	18,386			16,284
Fair value in other liabilities	(59)			—
Weighted-average floating rate received	5.39		%	4.53		%
Weighted-average fixed rate paid	2.85		%	2.25		%
Weighted-average maturity in years	3.0			3.3

Non-Hedging Derivatives:
Gross notional amount	$	251,601		$	254,369
Fair value in other assets	14,895			15,309
Fair value in other liabilities	(14,895)			(15,309)

The following table identifies the pre-tax gains or losses recognized on the Company's derivative instruments designated as cash flow hedges for the three and six months ended June 30, 2023 and 2022.


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Pre-tax gain recognized in other comprehensive
income	$	8,102	$	4,066	$	6,468	$	14,602
Reclassification from AOCI into income:
Increase (decrease) in interest expense	$	(2,467)	$	642	$	(4,425)	$	1,687

2426

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

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

March 31, 2023 December 31, 2022
Cash Flow Hedges:
Gross notional amount $ 375,000 $ 310,000
Fair value in other assets 13,025 16,284
Fair value in other liabilities (333) —
Weighted-average floating rate received 4.93 % 4.53 %
Weighted-average fixed rate paid 2.45 % 2.25 %
Weighted-average maturity in years 3.4 3.3
Non-Hedging Derivatives:
Gross notional amount $ 253,483 $ 254,369
Fair value in other assets 12,508 15,309
Fair value in other liabilities (12,508) (15,309)

~~The following table identifies the pre-tax gains or losses recognized on the Company's derivative instruments designated as cash flow hedges for the three months ended March 31, 2023 and 2022.~~

Three Months Ended March 31,
2023 2022
Pre-tax gain (loss) recognized in other comprehensive income $ (1,634) $ 10,536
Reclassification from AOCI into income:
Increase (decrease) in interest expense $ (1,958) $ 1,045

~~The~~ Company estimates there will be approximately ~~$8,695~~$10,451 reclassified from accumulated other comprehensive income to reduce interest expense through the 12 months ending ~~March 31,~~June 30, 2024 related to cash flow hedges.

The Company is exposed to credit risk in the event of nonperformance by interest rate swap counterparties, which is minimized by collateral-pledging provisions in the agreements. Derivative contracts with swap counterparties are executed with a Credit Support Annex, which is a bilateral ratings-sensitive agreement that requires collateral postings at established credit threshold levels. These agreements protect the interests of the Company and its counterparties should either party suffer a credit rating deterioration. As of both ~~March 31,~~June 30, 2023 and December 31, 2022, the Company pledged $0 of collateral to the counterparties in the form of cash on deposit. As of ~~March 31,~~June 30, 2023 and December 31, 2022, the Company's counterparties pledged ~~$26,280~~$33,880 and $31,560, respectively, of collateral to the Company in the form of cash on deposit. The interest rate swap product with the borrower is cross-collateralized with the underlying loan and therefore there is no pledged cash collateral under swap contracts with customers.

~~Table of Contents~~

~~West Bancorporation, Inc. and Subsidiary~~

~~Notes to Consolidated Financial Statements~~

~~(unaudited)~~

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

6. Income Taxes

Net deferred tax assets consisted of the following as of ~~March 31,~~June 30, 2023 and December 31, 2022.


		March 31, 2023		December 31, 2022			June 30, 2023		December 31, 2022
Deferred tax assets:	Deferred tax assets:					Deferred tax assets:
Allowance for credit losses	Allowance for credit losses	$	7,420	$	6,241	Allowance for credit losses	$	7,419	$	6,241
Net unrealized losses on securities available for sale	Net unrealized losses on securities available for sale	31,639		34,544		Net unrealized losses on securities available for sale	33,838		34,544

Lease liabilities	Lease liabilities	1,069		1,147		Lease liabilities	990		1,147
Accrued expenses	Accrued expenses	213		434		Accrued expenses	212		434
Restricted stock unit compensation	Restricted stock unit compensation	663		1,038		Restricted stock unit compensation	800		1,038
State net operating loss carryforward	State net operating loss carryforward	1,527		1,476		State net operating loss carryforward	1,609		1,476

Other	Other	171		156		Other	174		156
		42,702		45,036			45,042		45,036
Deferred tax liabilities:	Deferred tax liabilities:					Deferred tax liabilities:
Right-of-use assets	Right-of-use assets	1,022		1,099		Right-of-use assets	945		1,099
Deferred loan costs	Deferred loan costs	260		249		Deferred loan costs	261		249

Net unrealized gains on interest rate swaps	Net unrealized gains on interest rate swaps	3,121		4,003		Net unrealized gains on interest rate swaps	4,503		4,003
Premises and equipment	Premises and equipment	1,198		1,219		Premises and equipment	1,147		1,219
New markets tax credit loan	New markets tax credit loan	325		303		New markets tax credit loan	346		303
Other	Other	127		78		Other	125		78
		6,053		6,951			7,327		6,951
Net deferred tax assets before valuation allowance	Net deferred tax assets before valuation allowance	36,649		38,085		Net deferred tax assets before valuation allowance	37,715		38,085
Valuation allowance	Valuation allowance	(1,527)		(1,476)		Valuation allowance	(1,609)		(1,476)
Net deferred tax assets	Net deferred tax assets	$	35,122	$	36,609	Net deferred tax assets	$	36,106	$	36,609

The Company has recorded a valuation allowance against the tax effect of the state net operating loss carryforwards, as management believes it is more likely than not that these carryforwards will expire without being utilized. The state net operating loss carryforwards expire in 2023 and thereafter.

2627

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West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

7. Accumulated Other Comprehensive Income (Loss)

The following table summarizes the changes in the balances of each component of accumulated other comprehensive income (loss), net of tax, for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022.


		Unrealized		Unrealized		Accumulated			Unrealized		Unrealized		Accumulated
		Gains		Gains		Other			Gains		Gains		Other
		(Losses) on		(Losses) on		Comprehensive			(Losses) on		(Losses) on		Comprehensive
		Securities		Derivatives		Income (Loss)			Securities		Derivatives		Income (Loss)
Balance, December 31, 2022	Balance, December 31, 2022	$	(103,680)	$	12,209	$	(91,471)	Balance, December 31, 2022	$	(103,680)	$	12,209	$	(91,471)
Other comprehensive income (loss) before reclassifications		8,762		(1,233)		7,529
Amounts reclassified from accumulated other comprehensive income		(6)		(1,477)		(1,483)
Net current period other comprehensive income (loss)		8,756		(2,710)		6,046
Balance, March 31, 2023		$	(94,924)	$	9,499	$	(85,425)
Other comprehensive income before reclassifications								Other comprehensive income before reclassifications	2,124		4,881		7,005
Amounts reclassified from accumulated other comprehensive income (loss)								Amounts reclassified from accumulated other comprehensive income (loss)	(13)		(3,338)		(3,351)
Net current period other comprehensive income								Net current period other comprehensive income	2,111		1,543		3,654
Balance, June 30, 2023								Balance, June 30, 2023	$	(101,569)	$	13,752	$	(87,817)

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

8. Commitments and Contingencies

Financial instruments with off-balance-sheet risk: The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations that it uses for on-balance-sheet instruments. The Company adopted ASU No. 2016-13 effective January 1, 2023 which requires an allowance for credit losses on off-balance sheet credit exposure. See Note 4 for additional information. The Company's commitments consisted of the following amounts as of ~~March 31,~~June 30, 2023 and December 31, 2022.

March 31, 2023 December 31, 2022
Commitments to fund real estate construction loans $ 403,841 $ 336,900
Other commitments to extend credit 698,520 727,666
Standby letters of credit 19,819 20,557
$ 1,122,180 $ 1,085,123

~~Table of Contents~~

~~West Bancorporation, Inc. and Subsidiary~~

~~Notes to Consolidated Financial Statements~~

~~(unaudited)~~

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


	June 30, 2023		December 31, 2022
Commitments to fund real estate construction loans	$	442,446	$	336,900
Other commitments to extend credit	537,757		727,666
Standby letters of credit	19,161		20,557
	$	999,364	$	1,085,123

West Bank previously executed Mortgage Partnership Finance (MPF) Master Commitments (Commitments) with the FHLB of Des Moines to deliver residential mortgage loans and to guarantee the payment of any realized losses that exceed the FHLB's first loss account for mortgages delivered under the Commitments. West Bank receives credit enhancement fees from the FHLB for providing this guarantee and continuing to assist with managing the credit risk of the MPF Program residential mortgage loans. The outstanding balance of mortgage loans sold under the MPF Program was ~~$22,720~~$21,791 and $23,337 at ~~March 31,~~June 30, 2023 and December 31, 2022, respectively.

Contractual commitments: The Company had remaining commitments to invest in qualified affordable housing projects totaling ~~$3,012~~$2,678 and $3,431 as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

West Bank entered into a construction contract in 2022 for the construction of a new headquarters building in West Des Moines, Iowa. West Bank will pay the contractor a contract price consisting of the cost of work plus a fee, subject to a guaranteed maximum price of $42,309, with anticipated construction completed in 2024. As of ~~March 31,~~June 30, 2023, there was a remaining commitment of ~~$30,415~~$24,511 under this contract. West Bank is also building a new office in Mankato, Minnesota to be completed in the ~~fall~~fourth quarter of 2023, which had a remaining commitment of ~~$5,426~~$3,991 as of ~~March 31,~~June 30, 2023.

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

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

9. Fair Value Measurements

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

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

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

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

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

The following is a description of valuation methodologies used for financial assets and liabilities recorded at fair value on a recurring basis.

Securities available for sale: When available, quoted market prices are used to determine the fair value of securities (Level 1). If quoted market prices are not available, the Company determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable (Level 2). The fair values of these securities are determined by pricing models that consider observable market data such as interest rate volatilities, yield curves, credit spreads, prices from market makers and live trading systems.

~~Table of Contents~~

~~West Bancorporation, Inc. and Subsidiary~~

~~Notes to Consolidated Financial Statements~~

~~(unaudited)~~

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

Management obtains the fair value of securities at the end of each reporting period via a third-party pricing service. Management reviewed the valuation process used by the third party and believed the process was valid. On a quarterly basis, management corroborates the fair values of a randomly selected sample of securities by obtaining pricing from an independent financial market data vendor and comparing the two sets of fair values. Any significant variances are reviewed and investigated. For a sample of securities, prices are further validated by management by obtaining details of the inputs used by the pricing service. Those inputs were independently tested, and management concluded the fair values were consistent with GAAP requirements and the securities were properly classified in the fair value hierarchy.

Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

Derivative instruments: The Company's derivative instruments consist of interest rate swaps accounted for as cash flow hedges, as well as interest rate swaps which are accounted for as non-hedging derivatives. The Company's derivative positions are classified within Level 2 of the fair value hierarchy and are valued using models generally accepted in the financial services industry and that use actively quoted or observable market input values from external market data providers and/or non-binding broker-dealer quotations. The fair value of the derivatives is determined using discounted cash flow models. These models’ key assumptions include the contractual terms of the respective contract along with significant observable inputs, including interest rates, yield curves, nonperformance risk and volatility.

The following tables present the balances of financial assets and liabilities measured at fair value on a recurring basis by level as of ~~March 31,~~June 30, 2023 and December 31, 2022.


		March 31, 2023									June 30, 2023
		Total		Level 1		Level 2		Level 3			Total		Level 1		Level 2		Level 3
Financial assets:	Financial assets:									Financial assets:
Securities available for sale:	Securities available for sale:									Securities available for sale:
State and political subdivisions	State and political subdivisions	$	199,983	$	—	$	199,983	$	—	State and political subdivisions	$	197,396	$	—	$	197,396	$	—
Collateralized mortgage obligations	Collateralized mortgage obligations	278,123		—		278,123		—		Collateralized mortgage obligations	264,834		—		264,834		—
Mortgage-backed securities	Mortgage-backed securities	139,590		—		139,590		—		Mortgage-backed securities	135,580		—		135,580		—
Collateralized loan obligations	Collateralized loan obligations	36,887		—		36,887		—		Collateralized loan obligations	37,263		—		37,263		—
Corporate notes	Corporate notes	10,775		—		10,775		—		Corporate notes	10,018		—		10,018		—
Derivative instruments, interest rate swaps	Derivative instruments, interest rate swaps	25,533		—		25,533		—		Derivative instruments, interest rate swaps	33,281		—		33,281		—

Financial liabilities:	Financial liabilities:									Financial liabilities:
Derivative instruments, interest rate swaps	Derivative instruments, interest rate swaps	$	12,841	$	—	$	12,841	$	—	Derivative instruments, interest rate swaps	$	14,954	$	—	$	14,954	$	—


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

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

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

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Table of Contents

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

Certain assets are measured at fair value on a nonrecurring basis. That is, they are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). As of both ~~March 31,~~June 30, 2023 and December 31, 2022, there were no individually evaluated loans with a fair value adjustment. Individually evaluated loans are classified within Level 3 of the fair value hierarchy and are evaluated and valued at the lower of cost or fair value when the loan is individually evaluated. Fair value is based on the value of the collateral securing these loans.

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

GAAP requires disclosure of the fair value of financial assets and financial liabilities, including those that are not measured and reported at fair value on a recurring or nonrecurring basis. The following table presents the carrying amounts and approximate fair values of financial assets and liabilities as of ~~March 31,~~June 30, 2023 and December 31, 2022.


		March 31, 2023											June 30, 2023
		Carrying Amount		Approximate Fair Value		Level 1		Level 2		Level 3			Carrying Amount		Approximate Fair Value		Level 1		Level 2		Level 3
Financial assets:	Financial assets:											Financial assets:
Cash and due from banks	Cash and due from banks	$	21,579	$	21,579	$	21,579	$	—	$	—	Cash and due from banks	$	29,776	$	29,776	$	29,776	$	—	$	—
Interest-bearing deposits	Interest-bearing deposits	901		901		901		—		—		Interest-bearing deposits	1,968		1,968		1,968		—		—
Securities available for sale	Securities available for sale	665,358		665,358		—		665,358		—		Securities available for sale	645,091		645,091		—		645,091		—
Federal Home Loan Bank stock	Federal Home Loan Bank stock	22,226		22,226		22,226		—		—		Federal Home Loan Bank stock	22,488		22,488		22,488		—		—
Loans, net	Loans, net	2,728,244		2,623,471		—		2,623,471		—		Loans, net	2,779,137		2,644,360		—		2,644,360		—
Accrued interest receivable	Accrued interest receivable	12,284		12,284		12,284		—		—		Accrued interest receivable	11,785		11,785		11,785		—		—
Interest rate swaps	Interest rate swaps	25,533		25,533		—		25,533		—		Interest rate swaps	33,281		33,281		—		33,281		—
Financial liabilities:	Financial liabilities:											Financial liabilities:
Deposits	Deposits	$	2,798,393	$	2,798,370	$	—	$	2,798,370	$	—	Deposits	$	2,836,325	$	2,836,348	$	—	$	2,836,348	$	—
Federal funds purchased and other short-term borrowings	Federal funds purchased and other short-term borrowings	229,290		229,290		229,290		—		—		Federal funds purchased and other short-term borrowings	184,150		184,150		184,150		—		—
Subordinated notes, net	Subordinated notes, net	79,435		69,275		—		69,275		—		Subordinated notes, net	79,500		62,040		—		62,040		—
Federal Home Loan Bank advances	Federal Home Loan Bank advances	220,000		220,000		—		220,000		—		Federal Home Loan Bank advances	280,000		280,000		—		280,000		—
Long-term debt	Long-term debt	51,486		51,486		—		51,486		—		Long-term debt	50,236		50,236		—		50,236		—
Accrued interest payable	Accrued interest payable	5,173		5,173		5,173		—		—		Accrued interest payable	4,477		4,477		4,477		—		—
Interest rate swaps	Interest rate swaps	12,841		12,841		—		12,841		—		Interest rate swaps	14,954		14,954		—		14,954		—
Off-balance sheet financial instruments:	Off-balance sheet financial instruments:											Off-balance sheet financial instruments:
Commitments to extend credit	Commitments to extend credit	—		—		—		—		—		Commitments to extend credit	—		—		—		—		—
Standby letters of credit	Standby letters of credit	—		—		—		—		—		Standby letters of credit	—		—		—		—		—

3031

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West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)


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

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Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

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

"SAFE HARBOR" CONCERNING FORWARD-LOOKING STATEMENTS

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

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of the Company's financial condition and results of operations are based upon the Company's consolidated financial statements that have been prepared in accordance with GAAP. The preparation of the Company's financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, income and expenses. These estimates are based upon historical experience and on various other assumptions that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The estimates and judgments that management believes involve the most complex and subjective estimates and judgments and have the most effect on the Company's reported financial position and results of operations are described as critical accounting policies in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on February 23, 2023. The Company adopted ASU 2016-13 on January 1, 2023 and replaced the allowance for loan losses "incurred loss" model discussed in the Form 10-K for the year ended December 31, 2022 with the allowance for credit losses "current expected credit loss" model, referred to as the CECL model. Refer to Note 1 and 4 for additional information and accounting policies related to the CECL model.

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West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

NON-GAAP FINANCIAL MEASURES

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

The following table reconciles the non-GAAP financial measures of net interest income and net interest margin on a FTE basis and efficiency ratio on an adjusted and FTE basis to their most directly comparable measures under GAAP.


		Three Months Ended March 31,								Three Months Ended June 30,								Six Months Ended June 30,
				2023			2022					2023			2022				2023			2022
Reconciliation of net interest income and net interest margin on a FTE basis to GAAP:	Reconciliation of net interest income and net interest margin on a FTE basis to GAAP:		Reconciliation of net interest income and net interest margin on a FTE basis to GAAP:
Net interest income (GAAP)	Net interest income (GAAP)			$	18,695		$	23,828			Net interest income (GAAP)	$	17,341		$	24,239			$	36,036		$	48,067
Tax-equivalent adjustment (1)	Tax-equivalent adjustment (1)			161			329				Tax-equivalent adjustment (1)	122			326				283			655
Net interest income on a FTE basis (non-GAAP)	Net interest income on a FTE basis (non-GAAP)			18,856			24,157				Net interest income on a FTE basis (non-GAAP)	17,463			24,565				36,319			48,722
Average interest-earning assets	Average interest-earning assets			3,435,988			3,432,114				Average interest-earning assets	3,461,313			3,362,313				3,448,722			3,397,021
Net interest margin on a FTE basis (non-GAAP)	Net interest margin on a FTE basis (non-GAAP)			2.23		%	2.85		%		Net interest margin on a FTE basis (non-GAAP)	2.02		%	2.93		%		2.12		%	2.89		%

Reconciliation of efficiency ratio on an adjusted and FTE basis to GAAP:	Reconciliation of efficiency ratio on an adjusted and FTE basis to GAAP:										Reconciliation of efficiency ratio on an adjusted and FTE basis to GAAP:
Net interest income on a FTE basis (non-GAAP)	Net interest income on a FTE basis (non-GAAP)			$	18,856		$	24,157			Net interest income on a FTE basis (non-GAAP)	$	17,463		$	24,565			$	36,319		$	48,722
Noninterest income	Noninterest income			2,957			2,389				Noninterest income	2,389			2,278				5,346			4,667

Adjustment for losses on disposal of premises and equipment, net	Adjustment for losses on disposal of premises and equipment, net			—			18				Adjustment for losses on disposal of premises and equipment, net	2			9				2			27
Adjusted income	Adjusted income			21,813			26,564				Adjusted income	19,854			26,852				41,667			53,416
Noninterest expense	Noninterest expense			12,071			10,662				Noninterest expense	12,474			11,266				24,545			21,928
Efficiency ratio on an adjusted and FTE basis (non-GAAP) (2)	Efficiency ratio on an adjusted and FTE basis (non-GAAP) (2)			55.34		%	40.14		%		Efficiency ratio on an adjusted and FTE basis (non-GAAP) (2)	62.83		%	41.96		%		58.91		%	41.05		%

(1) Computed on a tax-equivalent basis using a federal income tax rate of 21 percent, adjusted to reflect the effect of the nondeductible interest expense associated with owning tax-exempt securities and loans. Management believes the presentation of this non-GAAP measure provides supplemental useful information for proper understanding of the financial results, as it enhances the comparability of income arising from taxable and nontaxable sources.

(2) The efficiency ratio expresses noninterest expense as a percent of fully taxable equivalent net interest income and noninterest income, excluding specific noninterest income and expenses. Management believes the presentation of this non-GAAP measure provides supplemental useful information for proper understanding of the Company's financial performance. It is a standard measure of comparison within the banking industry. A lower ratio is more desirable.

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Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

OVERVIEW

The following discussion describes the consolidated operations and financial condition of the Company, West Bank and West Bank's special purpose subsidiaries (which are invested in new markets tax credit activities). Results of operations for the three and six months ended ~~March 31,~~June 30, 2023 are compared to the results for the same ~~period~~periods in 2022, and the consolidated financial condition of the Company as of ~~March 31,~~June 30, 2023 is compared to that as of December 31, 2022. This discussion and analysis should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 23, 2023.

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

Net income for the three months ended ~~March 31,~~June 30, 2023 was ~~$7,844,~~$5,862, or ~~$0.47~~$0.35 per diluted common share, compared to ~~$13,184,~~$12,667, or ~~$0.78~~$0.75 per diluted common share, for the three months ended ~~March 31,~~June 30, 2022. The Company's annualized return on average assets and return on average equity for the three months ended ~~March 31,~~June 30, 2023 were ~~0.88~~0.64 percent and ~~14.77~~11.03 percent, respectively, compared to ~~1.51~~1.45 percent and ~~20.96~~22.81 percent, respectively, for the three months ended ~~March 31,~~June 30, 2022.

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

Net interest income for the three months ended ~~March 31,~~June 30, 2023 ~~declined $5,133,~~decreased $6,898, or ~~21.5~~28.5 percent, compared to the three months ended ~~March 31,~~June 30, 2022. The decrease in net interest income was primarily due to the increase in interest expense on deposits and other borrowings resulting from rapidly rising short-term interest rates and an inverted yield curve, and changes in funding mix, partially offset by an increase in interest income on loans and securities.

Noninterest income increased ~~$568~~$111 for the three months ended ~~March 31,~~June 30, 2023, compared to the same period in 2022 primarily due to ~~a gain from bank-owned life insurance.~~an increase in trust services revenue. Noninterest expense increased ~~$1,409~~$1,208 during the three months ended ~~March 31,~~June 30, 2023 compared to the three months ended ~~March 31,~~June 30, 2022, primarily due to increases in salaries and employee benefits and FDIC insurance expense.

Net income for the six months ended June 30, 2023 was $13,706, or $0.82 per diluted common share, compared to $25,851, or $1.54 per diluted common share, for the six months ended June 30, 2022. The Company's annualized return on average assets and return on average equity for the six months ended June 30, 2023 were 0.76 percent and 12.90 percent, respectively, compared to 1.48 percent and 21.83 percent, respectively, for the six months ended June 30, 2022.

The decrease in net income for the six months ended June 30, 2023 compared to the same period in 2022 was primarily due to a decrease in net interest income and an increase in salaries and employee benefits and occupancy costs, partially offset by an increase in trust services revenue and a gain from bank-owned life insurance.

Net interest income for the six months ended June 30, 2023 declined $12,031, or 25.0 percent, compared to the six months ended June 30, 2022. The decrease in net interest income was primarily due to the increase in interest expense on deposits and other borrowings resulting from rapidly rising short-term interest rates and an inverted yield curve, and changes in funding mix, partially offset by an increase in interest income on loans and securities.

Noninterest income increased $679 for the six months ended June 30, 2023 compared to the same period in 2022 primarily due to a gain from bank-owned life insurance and an increase in trust services revenue. Noninterest expense increased $2,617 during the six months ended June 30, 2023 compared to the six months ended June 30, 2022, primarily due to increases in salaries and employee benefits, occupancy and equipment expense and FDIC insurance expense.

Total loans outstanding increased ~~$13,349,~~$64,239, or ~~0.5~~2.3 percent, during the first ~~three~~six months of 2023. The credit quality of the loan portfolio remained strong, as evidenced by the Company's ratio of nonperforming loans to total assets of 0.01 percent as of both ~~March 31,~~June 30, 2023 and December 31, 2022. As of ~~March 31,~~June 30, 2023, the allowance for credit losses was ~~1.01~~1.00 percent of total outstanding loans, compared to 0.93 percent as of December 31, 2022. Management believed the allowance for credit losses at ~~March 31,~~June 30, 2023 was adequate to absorb expected losses in the loan portfolio as of that date.

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Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

On a quarterly basis, the Company compares three key performance metrics to those of our identified peer group. The peer group for 2023 consists of 22 Midwestern, publicly traded financial institutions, including Bank First Corporation, Bridgewater Bancshares Inc., ChoiceOne Financial Services, Inc., Civista Bancshares, Inc., CrossFirst Bankshares, Inc., Equity Bancshares, Inc., Farmers National Banc Corp., Farmers & Merchants Bancorp., First Business Financial Services, Inc., First Financial Corp., First Mid Bancshares, Inc., German American Bancorp, Inc., HBT Financial Inc., Hills Bancorporation, Isabella Bank Corporation, LCNB Corp., Macatawa Bank Corporation, Mercantile Bank Corporation, MidWestOne Financial Group, Inc., Nicolet Bankshares, Inc., Peoples Bancorp, Inc., and Southern Missouri Bancorp, Inc. The Company is in the middle of the group in terms of asset size. The Company's goal is to perform at or near the top of this peer group relative to what we consider to be three key metrics: return on average equity, efficiency ratio and nonperforming assets to total assets. We believe these measures encompass the factors that define the performance of a community bank. Company and peer results for the key financial performance measures are summarized below.


		West Bancorporation, Inc.		Peer Group Range(2)		West Bancorporation, Inc.		Peer Group Range(2)
		As of and for the three months ended March 31, 2023	As of and for the year ended December 31, 2022	As of and for the year ended ended December 31, 2022		As of and for the six months ended June 30, 2023	As of and for the three months ended March 31, 2023	As of and for the three months ended March 31, 2023
Return on average equity	Return on average equity	14.77%	20.71%	9.97% - 17.24%	Return on average equity	12.90%	14.77%	(3.67%) - 19.19%
Efficiency ratio(1)	Efficiency ratio(1)	55.34%	43.70%	41.14% - 63.37%	Efficiency ratio(1)	58.91%	55.34%	39.81% - 70.53%
Nonperforming assets to total assets	Nonperforming assets to total assets	0.01%	0.01%	0.02% - 1.08%	Nonperforming assets to total assets	0.01%	0.01%	0.00% - 0.53%

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

(2) Latest data available.

At its meeting on ~~April~~July 26, 2023, the Company's Board of Directors declared a regular quarterly cash dividend of $0.25 per common share. The dividend is payable on ~~May 24,~~August 23, 2023, to stockholders of record on ~~May 10,~~August 9, 2023.

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Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

RESULTS OF OPERATIONS

The following table shows selected financial results and measures for the three and six months ended ~~March 31,~~June 30, 2023 compared with the same ~~period~~periods in 2022.


		Three Months Ended March 31,							Three Months Ended June 30,															Six Months Ended June 30,
					2023					2022					Change			Change %			2023			2022			Change			Change %				2023					2022					Change			Change %
Net income	Net income				$	7,844				$	13,184				$	(5,340)		(40.50)	%	Net income	$	5,862		$	12,667		$	(6,805)		(53.72)	%			$	13,706				$	25,851				$	(12,145)		(46.98)	%
Average assets	Average assets				3,617,458					3,544,564					72,894			2.06	%	Average assets	3,645,651			3,503,686			141,965			4.05	%			3,631,632					3,524,012					107,620			3.05	%
Average stockholders' equity	Average stockholders' equity				215,391					255,130					(39,739)			(15.58)	%	Average stockholders' equity	213,177			222,731			(9,554)			(4.29)	%			214,278					238,841					(24,563)			(10.28)	%

Return on average assets	Return on average assets				0.88		%			1.51		%			(0.63)		%			Return on average assets	0.64		%	1.45		%	(0.81)		%					0.76		%			1.48		%			(0.72)		%
Return on average equity	Return on average equity				14.77		%			20.96		%			(6.19)		%			Return on average equity	11.03		%	22.81		%	(11.78)		%					12.90		%			21.83		%			(8.93)		%
Net interest margin (1)	Net interest margin (1)				2.23		%			2.85		%			(0.62)		%			Net interest margin (1)	2.02		%	2.93		%	(0.91)		%					2.12		%			2.89		%			(0.77)		%
Efficiency ratio (1) (2)	Efficiency ratio (1) (2)				55.34		%			40.14		%			15.20		%			Efficiency ratio (1) (2)	62.83		%	41.96		%	20.87		%					58.91		%			41.05		%			17.86		%
Dividend payout ratio	Dividend payout ratio				52.31		%			31.39		%			20.92		%			Dividend payout ratio	71.33		%	32.84		%	38.49		%					60.86		%			32.10		%			28.76		%
Average equity to average assets ratio	Average equity to average assets ratio				5.95		%			7.20		%			(1.25)		%			Average equity to average assets ratio	5.85		%	6.36		%	(0.51)		%					5.90		%			6.78		%			(0.88)		%

					As of March 31,																													As of June 30,
					2023					2022					Change																			2023					2022					Change
Nonperforming assets to total assets (2)	Nonperforming assets to total assets (2)		0.01	%				0.25	%				(0.24)	%				Nonperforming assets to total assets (2)														0.01	%				0.01	%				—	%
Equity to assets ratio	Equity to assets ratio				5.99		%			6.67		%			(0.68)		%			Equity to assets ratio														5.90		%			6.22		%			(0.32)		%
Tangible common equity ratio	Tangible common equity ratio		5.99	%				6.67	%				(0.68)	%				Tangible common equity ratio														5.90	%				6.22	%				(0.32)	%

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

(2) A lower ratio is more desirable.

Definitions of ratios:

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

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

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

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

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

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

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

•Equity to assets ratio - equity divided by assets.

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

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Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Net Interest Income

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

are shown on a FTE basis.

~~Data for the three months ended March 31:~~


Data for the three months ended June 30:

	Average Balance								Interest Income/Expense								Yield/Rate
	2023		2022		Change		Change- %		2023		2022		Change		Change- %		2023		2022		Change
Interest-earning assets:
Loans: (1) (2)
Commercial	$	525,025	$	470,486	$	54,539	11.59	%	$	7,973	$	4,949	$	3,024	61.10	%	6.09	%	4.22	%	1.87	%
Real estate (3)	2,249,378		2,061,700		187,678		9.10	%	26,941		19,972		6,969		34.89	%	4.80	%	3.89	%	0.91	%
Consumer and other	9,059		4,966		4,093		82.42	%	155		53		102		192.45	%	6.85	%	4.23	%	2.62	%
Total loans	2,783,462		2,537,152		246,310		9.71	%	35,069		24,974		10,095		40.42	%	5.05	%	3.95	%	1.10	%

Securities:
Taxable	526,390		617,104		(90,714)		(14.70)	%	3,432		3,090		342		11.07	%	2.61	%	2.00	%	0.61	%
Tax-exempt (3)	149,669		156,788		(7,119)		(4.54)	%	947		1,092		(145)		(13.28)	%	2.53	%	2.78	%	(0.25)	%
Total securities	676,059		773,892		(97,833)		(12.64)	%	4,379		4,182		197		4.71	%	2.59	%	2.16	%	0.43	%

Interest-bearing deposits	1,792		51,269		(49,477)		(96.50)	%	25		67		(42)		(62.69)	%	5.46	%	0.52	%	4.94	%
Total interest-earning assets(3)	$	3,461,313	$	3,362,313	$	99,000	2.94	%	39,473		29,223		10,250		35.08	%	4.57	%	3.49	%	1.08	%

Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	483,870	$	517,707	$	(33,837)	(6.54)	%	1,632		324		1,308		403.70	%	1.35	%	0.25	%	1.10	%
Savings and money market	1,390,584		1,582,033		(191,449)		(12.10)	%	10,979		2,439		8,540		350.14	%	3.17	%	0.62	%	2.55	%
Time deposits	416,455		204,755		211,700		103.39	%	3,666		383		3,283		857.18	%	3.53	%	0.75	%	2.78	%
Total deposits	2,290,909		2,304,495		(13,586)		(0.59)	%	16,277		3,146		13,131		417.39	%	2.85	%	0.55	%	2.30	%
Borrowed Funds:
Federal funds purchased and
other short-term borrowings	186,024		44,309		$	141,715	319.83	%	2,264		157		2,107		1,342.04	%	4.88	%	1.42	%	3.46	%
Subordinated notes, net	79,466		31,469		47,997		152.52	%	1,109		394		715		181.47	%	5.60	%	5.02	%	0.58	%
Federal Home Loan Bank
advances	240,110		125,000		115,110		92.09	%	1,621		635		986		155.28	%	2.71	%	2.04	%	0.67	%
Long-term debt	50,703		51,486		(783)		(1.52)	%	739		326		413		126.69	%	5.84	%	2.54	%	3.30	%
Total borrowed funds	556,303		252,264		304,039		120.52	%	5,733		1,512		4,221		279.17	%	4.13	%	2.40	%	1.73	%
Total interest-bearing
liabilities	$	2,847,212	$	2,556,759	$	290,453	11.36	%	22,010		4,658		17,352		372.52	%	3.10	%	0.73	%	2.37	%

Net interest income (FTE) (4)									$	17,463	$	24,565	$	(7,102)	(28.91)	%
Net interest spread (FTE)																	1.47	%	2.76	%	(1.29)	%
Net interest margin (FTE) (4)																	2.02	%	2.93	%	(0.91)	%

Average Balance Interest Income/Expense Yield/Rate
2023 2022 Change Change-
% 2023 2022 Change Change-
% 2023 2022 Change
Interest-earning assets:
Loans: (1) (2)
Commercial $ 522,034 $ 470,105 $ 51,929 11.05 % $ 7,567 $ 4,658 $ 2,909 62.45 % 5.88 % 4.02 % 1.86 %
Real estate (3)
2,215,355 1,975,858 239,497 12.12 % 25,333 18,725 6,608 35.29 % 4.64 % 3.84 % 0.80 %
Consumer and other 7,992 3,558 4,434 124.62 % 125 34 91 267.65 % 6.35 % 3.90 % 2.45 %
Total loans 2,745,381 2,449,521 295,860 12.08 % 33,025 23,417 9,608 41.03 % 4.88 % 3.88 % 1.00 %

Securities:
Taxable 538,158 633,654 (95,496) (15.07) % 3,316 2,889 427 14.78 % 2.46 % 1.82 % 0.64 %
Tax-exempt (3)
150,311 170,898 (20,587) (12.05) % 974 1,056 (82) (7.77) % 2.59 % 2.47 % 0.12 %
Total securities 688,469 804,552 (116,083) (14.43) % 4,290 3,945 345 8.75 % 2.49 % 1.96 % 0.53 %

Interest-bearing deposits 2,138 178,041 (175,903) (98.80) % 25 82 (57) (69.51) % 4.81 % 0.19 % 4.62 %
Total interest-earning assets (3)
$ 3,435,988 $ 3,432,114 $ 3,874 0.11 % 37,340 27,444 9,896 36.06 % 4.41 % 3.24 % 1.17 %

Interest-bearing liabilities:
Deposits:
Interest-bearing demand $ 500,392 $ 546,237 $ (45,845) (8.39) % 1,570 250 1,320 528.00 % 1.27 % 0.19 % 1.08 %
Savings and money market 1,277,676 1,610,639 (332,963) (20.67) % 8,655 1,620 7,035 434.26 % 2.75 % 0.41 % 2.34 %
Time 417,427 195,638 221,789 113.37 % 3,114 281 2,833 1,008.19 % 3.03 % 0.58 % 2.45 %
Total deposits 2,195,495 2,352,514 (157,019) (6.67) % 13,339 2,151 11,188 520.13 % 2.46 % 0.37 % 2.09 %
Borrowed funds:
Federal funds purchased and
other short-term borrowings 186,333 1,506 184,827 12,272.71 % 2,079 — 2,079 N/A 4.53 % 0.05 % 4.48 %
Subordinated notes, net 79,400 20,467 58,933 287.94 % 1,106 248 858 345.97 % 5.65 % 4.91 % 0.74 %
Federal Home Loan Bank
advances 203,722 125,000 78,722 62.98 % 1,262 630 632 100.32 % 2.51 % 2.04 % 0.47 %
Long-term debt 51,486 51,497 (11) (0.02) % 698 258 440 170.54 % 5.50 % 2.03 % 3.47 %
Total borrowed funds 520,941 198,470 322,471 162.48 % 5,145 1,136 4,009 352.90 % 4.01 % 2.32 % 1.69 %
Total interest-bearing
liabilities $ 2,716,436 $ 2,550,984 $ 165,452 6.49 % 18,484 3,287 15,197 462.34 % 2.76 % 0.52 % 2.24 %

Net interest income (FTE) (4)
$ 18,856 $ 24,157 $ (5,301) (21.94) %
Net interest spread (FTE) 1.65 % 2.72 % (1.07) %
Net interest margin (FTE) (4)
2.23 % 2.85 % (0.62) %

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)


Data for the six months ended June 30:

	Average Balance								Interest Income/Expense								Yield/Rate
	2023		2022		Change		Change- %		2023		2022		Change		Change- %		2023		2022		Change
Interest-earning assets:
Loans: (1) (2)
Commercial	$	523,538	$	470,296	$	53,242	11.32	%	$	15,535	$	9,607	$	5,928	61.71	%	5.98	%	4.12	%	1.86	%
Real estate (3)	2,232,461		2,019,017		213,444		10.57	%	52,274		38,697		13,577		35.09	%	4.72	%	3.87	%	0.85	%
Consumer and other	8,529		4,266		4,263		99.93	%	280		87		193		221.84	%	6.61	%	4.09	%	2.52	%
Total loans	2,764,528		2,493,579		270,949		10.87	%	68,089		48,391		19,698		40.71	%	4.97	%	3.91	%	1.06	%

Securities:
Taxable	532,242		625,333		(93,091)		(14.89)	%	6,748		5,979		769		12.86	%	2.54	%	1.91	%	0.63	%
Tax-exempt (3)	149,988		163,804		(13,816)		(8.43)	%	1,921		2,148		(227)		(10.57)	%	2.56	%	2.62	%	(0.06)	%
Total securities	682,230		789,137		(106,907)		(13.55)	%	8,669		8,127		542		6.67	%	2.54	%	2.06	%	0.48	%

Interest-bearing deposits	1,964		114,305		(112,341)		(98.28)	%	55		149		(94)		(63.09)	%	5.62	%	0.26	%	5.36	%
Total interest-earning assets (3)	$	3,448,722	$	3,397,021	$	51,701	1.52	%	76,813		56,667		20,146		35.55	%	4.49	%	3.36	%	1.13	%

Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	492,086	$	531,893	$	(39,807)	(7.48)	%	3,202		574		2,628		457.84	%	1.31	%	0.22	%	1.09	%
Savings and money market	1,334,442		1,596,257		(261,815)		(16.40)	%	19,634		4,059		15,575		383.72	%	2.97	%	0.51	%	2.46	%
Time	416,939		200,221		216,718		108.24	%	6,780		664		6,116		921.08	%	3.28	%	0.67	%	2.61	%
Total deposits	2,243,467		2,328,371		(84,904)		(3.65)	%	29,616		5,297		24,319		459.11	%	2.66	%	0.46	%	2.20	%
Borrowed funds:
Federal funds purchased and
other short-term borrowings	186,178		23,026		163,152		708.56	%	4,343		157		4,186		2,666.24	%	4.70	%	1.38	%	3.32	%
Subordinated notes, net	79,433		25,998		53,435		205.54	%	2,215		642		1,573		245.02	%	5.62	%	4.98	%	0.64	%
Federal Home Loan Bank
advances	222,017		125,000		97,017		77.61	%	2,883		1,265		1,618		127.91	%	2.62	%	2.04	%	0.58	%
Long-term debt	51,092		51,492		(400)		(0.78)	%	1,437		584		853		146.06	%	5.67	%	2.29	%	3.38	%
Total borrowed funds	538,720		225,516		313,204		138.88	%	10,878		2,648		8,230		310.80	%	4.07	%	2.37	%	1.70	%
Total interest-bearing
liabilities	$	2,782,187	$	2,553,887	$	228,300	8.94	%	40,494		7,945		32,549		409.68	%	2.94	%	0.63	%	2.31	%

Net interest income (FTE) (4)									$	36,319	$	48,722	$	(12,403)	(25.46)	%
Net interest spread (FTE)																	1.55	%	2.73	%	(1.18)	%
Net interest margin (FTE) (4)																	2.12	%	2.89	%	(0.77)	%

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

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

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

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

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

The Company's largest component of net income is net interest income, which is the difference between interest earned on interest-earning assets, consisting primarily of loans and securities, and interest paid on interest-bearing liabilities, consisting of deposits and borrowings. Fluctuations in net interest income can result from the combination of changes in the average balances of asset and liability categories and changes in interest rates. Interest rates earned and paid are also affected by general economic conditions, particularly changes in market interest rates, and by competitive factors, government policies and actions of regulatory authorities. The Federal Reserve increased the target federal funds interest rate by a total of 425 basis points in 2022 and 5075 basis points during the first ~~three months~~half of 2023. At this time ~~it is unknown whether~~the extent to which additional target federal funds interest rate changes ~~will~~may occur during the remainder of ~~2023.~~2023 is unknown. The increases that occurred throughout 2022 and 2023 will have an impact on the comparability of net interest income between 2023 and 2022.

Net interest margin on a FTE basis, a non-GAAP financial measure, is a measure of the net return on interest-earning assets and is computed by dividing annualized tax-equivalent net interest income by total average interest-earning assets for the period. The net interest margin for the three and six months ended ~~March 31,~~June 30, 2023 decreased by 6291 and 77 basis points, respectively, compared to the three and six months ended ~~March 31,~~June 30, 2022. The primary driver of the decrease in the net interest margin was an increase in rates paid on deposits and borrowed funds, which have repriced faster than loans and securities, and an increase in average borrowed funds balances. Tax-equivalent net interest income ~~decreased $5,301~~ for the three and six months ended ~~March 31,~~June 30, 2023 decreased $7,102 and $12,403, respectively, compared to the same time ~~period~~periods in 2022. The decrease in net interest income for the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022 was primarily due to the increase in rates paid on deposits and borrowed funds and increases in average borrowed funds balances.

Tax-equivalent interest income on loans increased ~~$9,603~~$10,095 and $19,698 for the three and six months ended ~~March 31,~~June 30, 2023 compared to the three and six months ended ~~March 31,~~June 30, 2022. This increase in interest income on loans was driven by a combination of an increase in the average balance of loans and an increase in loan yields. The average ~~balance~~balances of loans for the three and six months ended ~~March 31,~~June 30, 2023 increased ~~$295,860~~$246,310 and $270,949, respectively, compared to the three and six months ended ~~March 31,~~June 30, 2022, while loan yields increased ~~100~~110 and 106 basis ~~points.~~points, respectively. Rising market interest rates have resulted in increasing rates on variable-rate loans and higher interest rates on renewed and originated loans. The Company continues to focus on expanding existing and entering into new customer relationships while maintaining strong credit quality. The yield on the Company's loan portfolio is affected by the portfolio's loan mix, the interest rate environment, the effects of competition, the level of nonaccrual loans and reversals of previously accrued interest on charged-off loans. The yield on the loan portfolio is expected to increase in a rising rate environment as variable-rate loans and loan renewals reprice at higher rates. The political and economic environments can also influence the volume of new loan originations and the mix of variable-rate versus fixed-rate loans.

The average balance of deposits decreased ~~$157,019~~$13,586 and $84,904 for the three and six months ended ~~March 31,~~June 30, 2023, compared to the three and six months ended ~~March 31,~~June 30, 2022. The rates paid on deposits increased ~~209~~230 and 220 basis points for the three and six months ended ~~March 31,~~June 30, 2023 compared to the same ~~period~~periods in 2022. The increase in the cost of deposits was primarily due to ~~higher~~increases in deposit interest rates in response to increases in the target federal funds rate and market interest rates, increased competition for deposit balances, and changes in deposit mix. The Federal Reserve increased the target federal funds rate by a total of 425 basis points in 2022 and 5075 basis points in the first ~~three~~six months of 2023. These increases have had ~~a direct~~an adverse impact on the cost of deposits and have increased market competition.

Interest expense on borrowed funds increased ~~$4,009~~$4,221 and $8,230 for the three and six months ended ~~March 31,~~June 30, 2023 compared to the three and six months ended ~~March 31,~~June 30, 2022. The average balance of borrowed funds increased ~~$322,471~~$304,039 and $313,204 for the three and six months ended ~~March 31,~~June 30, 2023 compared to the three and six months ended ~~March 31,~~June 30, 2022. The Company issued $60,000 of subordinated debt in June 2022. Additionally, average balances of federal funds purchased and other short-term borrowings increased ~~$184,827~~$141,715 and $163,152 for the three and six months ended ~~March 31,~~June 30, 2023 compared to the same ~~period~~periods in 2022. The average rate of ~~the~~ federal funds purchased and other short-term borrowings increased by ~~448~~346 and 332 basis points in the three and six months ended ~~March 31,~~June 30, 2023 compared to the three and six months ended ~~March 31,~~June 30, 2022. This increase in average rates paid on federal funds purchased and other short-term borrowings was driven by the increases in the target federal funds rate by the Federal Reserve. The average balances of Federal Home Loan Bank advances increased by $115,110 and $97,017 for the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022. This increase in average balances was primarily due to additional rolling one-month FHLB advances added in the first six months of 2023 that are hedged with long-term interest rate swap agreements to provide fixed cost wholesale funding.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Credit Loss Expense and the Related Allowance for Credit Losses

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

~~Table of Contents~~

~~West Bancorporation, Inc.~~

~~Management's Discussion and Analysis~~

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

The credit loss expense recorded on the income statement represents a charge made to earnings to maintain an adequate allowance for credit losses. The adequacy of the allowance for credit losses is evaluated quarterly by management and reviewed by the Board of Directors. The allowance for credit losses is management's estimate of expected lifetime losses in the loan portfolio as of the balance sheet date. There was no provision for credit losses for the three and six months ended ~~March 31,~~June 30, 2023. The credit loss expense was negative ~~$750~~$1,750 and negative $2,500 for the three and six months ended ~~March 31, 2022.~~June 30, 2022, respectively. The negative credit loss ~~expense~~expenses recorded in 2022 ~~was~~were due to sustained improvement in the ~~sustained~~ performance of loans after the expiration of COVID ~~modifications and improvement~~modifications. Management believed the allowance for credit losses at June 30, 2023 was adequate to absorb expected losses in ~~classified loans.~~the loan portfolio as of that date.

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

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

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

3941

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

West Bank's policy is to charge off loans when, in management's opinion, a loan or a portion of a loan is deemed uncollectible. Commercially reasonable efforts are made to maximize subsequent recoveries. The following table summarizes the activity in the Company's allowance for credit losses on loans for the three and six months ended ~~March 31,~~June 30, 2023 and 2022 and related ratios.


		Three Months Ended March 31,				Three Months Ended June 30,										Six Months Ended June 30,
			2023				2022			Change			2023			2022			Change		2023			2022			Change
Balance at beginning of period	Balance at beginning of period		$	25,473			$	28,364		$	(2,891)	Balance at beginning of period	$	27,941		$	27,623		$	318	$	25,473		$	28,364		$	(2,891)
Adoption of CECL	Adoption of CECL		2,458				—			2,458		Adoption of CECL	—			—			—		2,458			—			2,458
Charge-offs	Charge-offs		—				—			—		Charge-offs	(18)			(451)			433		(18)			(451)			433
Recoveries	Recoveries		10				9			1		Recoveries	15			12			3		25			21			4
Net (charge-offs) recoveries	Net (charge-offs) recoveries		10				9			1		Net (charge-offs) recoveries	(3)			(439)			436		7			(430)			437
Provision for credit losses charged (credited) to operations	Provision for credit losses charged (credited) to operations		—				(750)			750		Provision for credit losses charged (credited) to operations	—			(1,750)			1,750		—			(2,500)			2,500
Balance at end of period	Balance at end of period		$	27,941			$	27,623		$	318	Balance at end of period	$	27,938		$	25,434		$	2,504	$	27,938		$	25,434		$	2,504

Average loans outstanding	Average loans outstanding		$	2,745,381			$	2,449,521				Average loans outstanding	$	2,783,463		$	2,537,152				$	2,764,527		$	2,493,578

Ratio of annualized net (charge-offs) recoveries during the period to average loans outstanding	Ratio of annualized net (charge-offs) recoveries during the period to average loans outstanding		—		%		—		%			Ratio of annualized net (charge-offs) recoveries during the period to average loans outstanding	0.00		%	(0.07)		%			0.00		%	(0.03)		%

Ratio of allowance for credit losses for loans to average loans outstanding	Ratio of allowance for credit losses for loans to average loans outstanding		1.02		%		1.13		%			Ratio of allowance for credit losses for loans to average loans outstanding	1.00		%	1.00		%			1.01		%	1.02		%

Ratio of allowance for credit losses for loans to total loans at end of period	Ratio of allowance for credit losses for loans to total loans at end of period		1.01		%		1.11		%			Ratio of allowance for credit losses for loans to total loans at end of period	1.00		%	0.99		%			1.00		%	0.99		%

The U.S. economy continues to be affected by federal government programs and the Federal Reserve's accommodative monetary policies initiated during the COVID-19 pandemic. Current economic concerns include the impact of sharp increases in interest rates as the Federal Reserve responds to inflationary trends, labor shortages and wage pressures, and the uncertainty of additional increases in the Federal Reserve target federal funds rate. In response to increasing inflation rates, the Federal Reserve increased the target federal funds rate by a total of 425 basis points in 2022 and 50 basis points in the first three months of 2023. The forecast for future rate increases is uncertain at this time. Management believed the allowance for credit losses at March 31, 2023 was adequate to absorb expected losses in the loan portfolio as of that date.

4042

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Noninterest Income

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


				Three Months Ended June 30,

Noninterest income:											Noninterest income:	2023		2022		Change		Change %
Service charges on deposit accounts											Service charges on deposit accounts	$	458	$	585	$	(127)	(21.71)	%
Debit card usage fees											Debit card usage fees	511		507		4		0.79	%
Trust services											Trust services	749		622		127		20.42	%
Increase in cash value of bank-owned life insurance											Increase in cash value of bank-owned life insurance	250		236		14		5.93	%
Other income:											Other income:
All other income											All other income	421		328		93		28.35	%
Total other income											Total other income	421		328		93		28.35	%
Total noninterest income											Total noninterest income	$	2,389	$	2,278	$	111	4.87	%

		Three Months Ended March 31,										Six Months Ended June 30,
Noninterest income:	Noninterest income:	2023			2022		Change		Change %		Noninterest income:	2023		2022		Change		Change %
Service charges on deposit accounts	Service charges on deposit accounts	$	462		$	580	$	(118)	(20.34)	%	Service charges on deposit accounts	$	920	$	1,165	$	(245)	(21.03)	%
Debit card usage fees	Debit card usage fees	486			472		14		2.97	%	Debit card usage fees	997		979		18		1.84	%
Trust services	Trust services	706			629		77		12.24	%	Trust services	1,455		1,251		204		16.31	%
Increase in cash value of bank-owned life insurance	Increase in cash value of bank-owned life insurance	257			227		30		13.22	%	Increase in cash value of bank-owned life insurance	507		463		44		9.50	%
Gain from bank-owned life insurance	Gain from bank-owned life insurance	691			—		691		N/A		Gain from bank-owned life insurance	691		—		691		N/A
Other income:	Other income:										Other income:
All other income	All other income	355			481		(126)		(26.20)	%	All other income	776		809		(33)		(4.08)	%
Total other income	Total other income	355			481		(126)		(26.20)	%	Total other income	776		809		(33)		(4.08)	%
Total noninterest income	Total noninterest income	$	2,957		$	2,389	$	568	23.78	%	Total noninterest income	$	5,346	$	4,667	$	679	14.55	%

The decline in service charges on deposit accounts is primarily attributable to a higher earnings credit rate on commercial accounts. Revenue from trust services was higher for the three and six months ended ~~March 31,~~June 30, 2023 compared to the three and six months ended ~~March 31,~~June 30, 2022 primarily due to ~~an increase~~increases in one-time estate fees. An increase in trust assets and accounts since ~~March 31,~~June 30, 2022 also contributed to the increase in trust service fees. The gain from bank-owned life insurance for the six months ended June 30, 2023 was from a death benefit claim. ~~The decrease in other income was primarily due to $97 of income recognized in the three months ended March 31, 2022 related to the purchase of discounted transferable state income tax credits.~~

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Noninterest Expense

The following ~~table shows~~tables show the variance from the prior year ~~period~~periods in the noninterest expense categories shown in the Consolidated Statements of Income. In addition, accounts within the “other expenses” category that represent a significant portion of the total or a significant variance are shown below.


				Three Months Ended June 30,

Noninterest expense:											Noninterest expense:	2023		2022		Change		Change %
Salaries and employee benefits											Salaries and employee benefits	$	7,029	$	6,410	$	619	9.66	%
Occupancy and equipment											Occupancy and equipment	1,322		1,242		80		6.44	%
Data processing											Data processing	729		656		73		11.13	%
Technology and software											Technology and software	579		492		87		17.68	%
FDIC insurance											FDIC insurance	420		289		131		45.33	%
Professional fees											Professional fees	287		202		85		42.08	%
Director fees											Director fees	251		222		29		13.06	%
Other expenses:											Other expenses:
Business development											Business development	415		291		124		42.61	%
Insurance expense											Insurance expense	217		156		61		39.10	%
Trust											Trust	138		138		—		—	%
Consulting fees											Consulting fees	70		125		(55)		(44.00)	%
Marketing											Marketing	40		70		(30)		(42.86)	%
Charitable contributions											Charitable contributions	60		—		60		N/A
Low income housing projects amortization											Low income housing projects amortization	172		130		42		32.31	%
New markets tax credit project amortization and management fees											New markets tax credit project amortization and management fees	229		229		—		—	%
All other											All other	516		614		(98)		(15.96)	%
Total other expenses											Total other expenses	1,857		1,753		104		5.93	%
Total noninterest expense											Total noninterest expense	$	12,474	$	11,266	$	1,208	10.72	%

		Three Months Ended March 31,										Six Months Ended June 30,
Noninterest expense:	Noninterest expense:	2023			2022		Change		Change %		Noninterest expense:	2023		2022		Change		Change %
Salaries and employee benefits	Salaries and employee benefits	$	6,867		$	6,298	$	569	9.03	%	Salaries and employee benefits	$	13,896	$	12,708	$	1,188	9.35	%
Occupancy and equipment	Occupancy and equipment	1,327			1,086		241		22.19	%	Occupancy and equipment	2,649		2,328		321		13.79	%
Data processing	Data processing	635			624		11		1.76	%	Data processing	1,364		1,280		84		6.56	%
Technology and software	Technology and software	513			476		37		7.77	%	Technology and software	1,092		968		124		12.81	%
FDIC insurance	FDIC insurance	416			337		79		23.44	%	FDIC insurance	836		626		210		33.55	%
Professional fees	Professional fees	250			217		33		15.21	%	Professional fees	537		419		118		28.16	%
Director fees	Director fees	205			168		37		22.02	%	Director fees	456		390		66		16.92	%
Other expenses:	Other expenses:										Other expenses:
Business development	Business development	333			236		97		41.10	%	Business development	748		527		221		41.94	%
Insurance expense	Insurance expense	215			151		64		42.38	%	Insurance expense	432		307		125		40.72	%
Trust	Trust	165			137		28		20.44	%	Trust	303		275		28		10.18	%
Charitable contributions	Charitable contributions	60			—		60		N/A		Charitable contributions	120		—		120		N/A
Consulting fees	Consulting fees	49			50		(1)		(2.00)	%	Consulting fees	119		175		(56)		(32.00)	%
Marketing	Marketing	41			54		(13)		(24.07)	%	Marketing	81		124		(43)		(34.68)	%
Low income housing projects amortization	Low income housing projects amortization	161			142		19		13.38	%	Low income housing projects amortization	333		272		61		22.43	%
New markets tax credit project amortization and management fees	New markets tax credit project amortization and management fees	230			230		—		—	%	New markets tax credit project amortization and management fees	459		459		—		—	%
All other	All other	604			456		148		32.46	%	All other	1,120		1,070		50		4.67	%
Total other expenses	Total other expenses	1,858			1,456		402		27.61	%	Total other expenses	3,715		3,209		506		15.77	%
Total noninterest expense	Total noninterest expense	$	12,071		$	10,662	$	1,409	13.22	%	Total noninterest expense	$	24,545	$	21,928	$	2,617	11.93	%

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West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Salaries and employee benefits increased for the three and six months ended ~~March 31,~~June 30, 2023 when compared to the three and six months ended ~~March 31,~~June 30, 2022, due to wage increases ~~that have been higher than recent historical averages~~ in response to market conditions and competition in retaining and recruiting talent. Additionally, there has been an increase in full-time equivalent employees with growth in our commercial banking team and information technology department. Occupancy and equipment expense increased for the ~~three~~six months ended ~~March 31,~~June 30, 2023 compared to the same period in 2022 primarily due to an increase in depreciation expense related to the new bank building in St. Cloud, Minnesota which opened in March 2022 and scheduled increases in rent expense on existing leases. FDIC insurance expense increased during the three and six months ended ~~March 31,~~June 30, 2023 when compared to the same time ~~period~~periods in 2022 primarily due to the FDIC's increase in the minimum assessment rate, which was announced in 2022 and effective for the first quarter of 2023.

Technology and software expenses increased for the three and six months ended June 30, 2023 due to inflationary pricing pressures and the addition of new technology, software and information security solutions. Business development expenses increased in 2023 compared to 2022 due to an increase in the size of our commercial banking team and a general increase in sponsorships and business development activity. Insurance expense increased for the three and six months ended ~~March 31,~~June 30, 2023 compared to the same ~~period~~periods in 2022 primarily due to insurance costs related to bank buildings that are under construction.

Income Tax Expense

The Company recorded income tax expense of ~~$1,737 (18.1~~$1,394 (19.2 percent of pre-tax income) and $3,131 (18.6 percent of pre-tax income) for the three and six months ended ~~March 31,~~June 30, 2023, compared with ~~$3,121 (19.1~~$4,334 (25.5 percent of pre-tax income) and $7,455 (22.4 percent of pre-tax income) for the three and six months ended ~~March 31,~~June 30, 2022. The Company's consolidated income tax rate differs from the federal statutory income tax rate in each period, primarily due to tax-exempt interest income, the tax-exempt increase in cash value of bank-owned life insurance, gain from bank-owned life insurance, disallowed interest expense, and state income taxes. For the three and six months ended June 30, 2022, income tax expense included a one-time increase in state income tax expense related to the June 2022 enactment of changes in the Iowa bank franchise tax rates. This legislation reduced the Iowa bank franchise tax rate applied to apportioned income for 2023 and future years. The future reduction in the state tax rate required the Company to reduce net deferred tax assets as of June 30, 2022 by $671 and in turn caused the one-time increase in 2022 tax expense.

Additionally, for the ~~three~~six months ended ~~March 31,~~June 30, 2023 ~~and~~a tax expense of $5 was recorded as a result of the decrease in fair value of restricted stock over the vesting period. For the six months ended June 30, 2022, a tax benefit of ~~$11 and $377, respectively,~~$385 was recorded as a result of the increase in fair value of restricted stock over the vesting period. The tax rates for the first ~~three~~six months of 2023 and 2022 were also impacted by year-to-date federal low income housing tax credits and a new markets tax credit of approximately ~~$375~~$749 and ~~$367,~~$734, respectively.

FINANCIAL CONDITION

The Company had total assets of ~~$3,624,943~~$3,678,555 as of ~~March 31,~~June 30, 2023, compared to total assets of $3,613,218 as of December 31, 2022. Fluctuations in the balance sheet included increases in loans, premises and equipment, and borrowed funds and a decrease in deposits.

Securities

Securities available for sale ~~increased~~decreased by ~~$1,243~~$19,024 during the ~~three~~six months ended ~~March 31,~~June 30, 2023. This ~~slight increase~~decrease was primarily attributable to ~~the~~principal paydowns on securities, partially offset by a decrease in unrealized losses in the securities ~~portfolio, partially offset by principal paydowns on securities.~~portfolio. In the first ~~three~~six months of 2023, net unrealized losses on the available for sale securities portfolio decreased by ~~$11,667.~~$2,830. This slight decrease in unrealized losses was ~~primarily~~ due to ~~falling~~a combination of lower amortized cost within the securities portfolio and decreases in market yields since December 31, 2022. Management concluded the unrealized losses are primarily attributed to increases in risk-free market interest rates since these securities were purchased and were not credit-related losses. Unrealized losses are recorded in accumulated other comprehensive loss, net of tax. The Company expects the securities portfolio as a percentage of total assets to decrease over time as the proceeds from paydowns and maturities may be used for loan growth or repayment of borrowed funds.

As of ~~March 31,~~June 30, 2023, approximately 6362 percent of the available for sale securities portfolio consisted of government agency guaranteed collateralized mortgage obligations and mortgage-backed securities. ~~These~~We believe these securities have little to no credit risk and provide cash flows for liquidity and repricing opportunities.

~~Loans and Nonperforming Assets~~

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

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West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Loans and Nonperforming Assets

Loans outstanding increased $64,239 from $2,742,836 as of December 31, 2022 to $2,807,075 as of June 30, 2023. Changes in the loan portfolio during the first six months of 2023 included increases of $48,778 in commercial real estate loans and $15,889 in commercial loans. The Company continues to focus on business development efforts in all of its markets.

In accordance with regulatory guidelines, the Company exercises heightened risk management practices when non-owner occupied commercial real estate lending exceeds 300 percent of total risk-based capital or construction, land development, and other land loans exceed 100 percent of total risk-based capital. Although the commercial real estate portfolio exceeds these regulatory guidelines, they are within the Company's established policy limits and the Company has appropriate risk management policies and procedures to regularly monitor the commercial real estate portfolio. An analysis of the Company's non-owner occupied commercial real estate portfolio as of December 31, 2022 was presented in the Company's Form 10-K filed with the SEC on February 23, 2023, and the Company has not experienced any material changes to that portfolio since December 31, 2022.

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


		March 31, 2023			December 31, 2022			Change				June 30, 2023			December 31, 2022			Change
Nonaccrual loans	Nonaccrual loans	$	316		$	322		$	(6)		Nonaccrual loans	$	309		$	322		$	(13)
Loans past due 90 days and still accruing interest	Loans past due 90 days and still accruing interest	—			—			—			Loans past due 90 days and still accruing interest	—			—			—
Loan restructurings (1)	Loan restructurings (1)	—			—			—			Loan restructurings (1)	—			—			—
Total nonperforming loans	Total nonperforming loans	316			322			(6)			Total nonperforming loans	309			322			(13)
Other real estate owned	Other real estate owned	—			—			—			Other real estate owned	—			—			—
Total nonperforming assets	Total nonperforming assets	$	316		$	322		$	(6)		Total nonperforming assets	$	309		$	322		$	(13)

Nonperforming loans to total loans	Nonperforming loans to total loans	0.01		%	0.01		%	—		%	Nonperforming loans to total loans	0.01		%	0.01		%	—		%
Nonperforming assets to total assets	Nonperforming assets to total assets	0.01		%	0.01		%	—		%	Nonperforming assets to total assets	0.01		%	0.01		%	—		%

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

Premises and Equipment

The Company purchased land in the first quarter of 2022 for its new corporate headquarters to be located in West Des Moines, Iowa and construction began in the second quarter of 2022. Construction is expected to be completed in the first half of 2024. Additionally, construction of a new office in Mankato, Minnesota also began in the first quarter of 2022 and is expected to be completed in the fourth quarter of 2023.

Deposits

Deposits decreased ~~$82,015,~~$44,083, or ~~2.8~~1.5 percent, during the first ~~three~~six months of 2023. A large part of this decrease was ~~attributbale~~attributable to a decrease in brokered deposits. Brokered deposits decreased to ~~$234,213~~$230,701 at ~~March 31,~~June 30, 2023, from ~~$272,691~~$272,692 at December 31, 2022. Excluding brokered deposits, deposits decreased ~~$43,537,~~$2,093, or ~~1.5~~0.1 percent, during the first ~~three~~six months of 2023. Deposit inflows and outflows are influenced by prevailing market interest rates, competition, local and national economic conditions, and fluctuations in our business customers' own liquidity needs and may also be influenced by recent developments in the financial services industry. Significant competition for deposits driven by high interest rate alternatives for depositors is currently impacting deposit fluctuations and increasing our cost of deposits.

West Bank participates in the ~~IntraFi®~~IntraFi® ICS and CDARS reciprocal deposit network which enables depositors to receive FDIC insurance coverage on deposits otherwise exceeding the maximum insurable amount. As of ~~March 31,~~June 30, 2023, estimated uninsured deposits, which excludes deposits in the ~~IntraFi®~~IntraFi® reciprocal network, brokered deposits and public funds protected by state programs, were approximately ~~33.3~~27.5 percent of total ~~deposits, compared to approximately 34.9 percent as of December 31, 2022.~~deposits.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Borrowed Funds

Federal funds purchased and other short-term borrowings ~~increased~~decreased from $200,000 at December 31, 2022 to ~~$229,290~~$184,150 as of ~~March 31,~~June 30, 2023. The fluctuations in the balances of federal funds purchased and other short-term borrowings is based on customer loan and deposit activity and the Company's balance sheet management objectives, which from time to time may require the Company to draw on the federal funds purchased lines with our correspondent banks, FHLB advances or ~~FHLB advances.~~other liquidity sources.

~~Table of Contents~~

~~West Bancorporation, Inc.~~

~~Management's Discussion and Analysis~~

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

The Company had ~~$220,000~~$280,000 of short-term FHLB advances outstanding at ~~March 31,~~June 30, 2023, $260,000 of which are associated with long-term interest rate ~~swaps, which is an increase of $65,000 from December 31, 2022.~~swaps. In the first ~~quarter~~six months of 2023, the Company entered into ~~four~~six additional long-term interest rate swap agreements hedging interest payments of one-month rolling funding with a total notional amount of $105,000. As of June 30, 2023, the Company had long-term interest rate swap agreements with a total notional amount of ~~$65,000. As of March 31, 2023, the Company has long-term interest rate swap agreements with a total notional amount of $220,000~~$260,000 to hedge the interest payments of one-month rolling funding consisting of FHLB advances or brokered deposits. These interest rate swaps have maturity dates ranging from September 2023 through June 2029 and fixed rates ranging from 1.63 percent to ~~3.64~~4.65 percent. This strategy of hedging short-term rolling funding effectively provides fixed cost wholesale funding through the maturity dates of the various interest rate swaps.

Liquidity

The objectives of liquidity management are to ensure the availability of sufficient cash flows to meet all financial commitments and to capitalize on opportunities for profitable business expansion. The Company's principal source of funds is deposits. Other sources include loan principal repayments, proceeds from the maturity and sale of securities, principal payments on amortizing securities, federal funds purchased, advances from the FHLB, other wholesale funding and funds provided by operations. Liquidity management is conducted on both a daily and a long-term basis. Investments in liquid assets are adjusted based on expected loan demand, projected loan and securities maturities and payments, expected deposit flows and the objectives set by the Company's asset-liability management policy. The Company had liquid assets (cash and cash equivalents) of ~~$22,480~~$31,744 as of ~~March 31,~~June 30, 2023 compared with $26,539 as of December 31, 2022.

Our deposit growth strategy emphasizes core deposit growth. Deposit inflows and outflows can vary widely and are influenced by prevailing market interest rates, competition, local and national economic conditions and fluctuations in our business customers' own liquidity needs and may also be influenced by recent developments in the financial services industry. The Company utilizes brokered deposits and other wholesale funding to supplement core deposit fluctuations and loan growth. Brokered deposits are obtained through various programs administered by IntraFi®, including IntraFi® Network Deposits and IntraFi® Funding, and through other third parties. At ~~March 31,~~June 30, 2023, the Company had ~~$234,213~~$230,701 in brokered deposits, which included fixed-rate deposits with terms through September 2024 and variable-rate deposits with terms through February 2024.

As of ~~March 31,~~June 30, 2023, West Bank had additional borrowing capacity available from the FHLB of approximately ~~$434,000,~~$549,000, as well as approximately $3,000 through the Federal Reserve discount window, $35,000 through unsecured federal funds lines of credit with correspondent banks, and ~~$14,067~~approximately $99,000 through the new Federal Reserve Bank Term Funding Program. The Bank Term Funding Program was established by the Federal Reserve in March 2023 to provide an additional source of liquidity against high-quality securities. As of ~~March 31,~~June 30, 2023, West Bank had pledged ~~$14,067~~approximately $99,000 in eligible securities to facilitate participation in the program. No funds were borrowed from the Federal Reserve discount window or Bank Term Funding Program during the ~~three~~six months ended ~~March 31,~~June 30, 2023. Net cash from operating activities contributed ~~$2,494~~$10,264 to liquidity for the ~~three~~six months ended ~~March 31,~~June 30, 2023. Management believed that the combination of high levels of potentially liquid assets, unencumbered securities, cash flows from operations, and additional borrowing capacity are sufficient to meet our liquidity and capital needs.

The Company had remaining commitments to invest in qualified affordable housing projects totaling ~~$3,012~~$2,678 and $3,431 as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively.

Table of Contents

West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

Capital

The Company's total stockholders' equity increased to ~~$216,992~~$217,126 at ~~March 31,~~June 30, 2023 from $211,112 at December 31, 2022. The increase was primarily the result of the decrease in accumulated other comprehensive loss and net income less dividends paid, partially offset by the adjustment made upon the adoption of ASU 2016-13. The decrease in accumulated other comprehensive loss is ~~primarily~~due to a combination of the ~~result~~reduction in amortized cost of ~~falling~~the securities portfolio and a decrease in market yields since December 31, 2022. At ~~March 31,~~June 30, 2023, the Company's tangible common equity as a percent of tangible assets was ~~5.99~~5.90 percent compared to 5.84 percent as of December 31, 2022. While accumulated other comprehensive losses reduce tangible common equity, they have no impact on regulatory capital.

~~Table of Contents~~

~~West Bancorporation, Inc.~~

~~Management's Discussion and Analysis~~

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

The Company and West Bank are subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements (as shown in the following table) can result in certain mandatory and possibly additional discretionary actions by regulators, which, if undertaken, could have a direct material effect on the Company's consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and West Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Company's and West Bank's capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Management believed the Company and West Bank met all capital adequacy requirements to which they were subject as of ~~March 31,~~June 30, 2023.

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

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

Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 322,417 9.51 % 203,524 6.00 % 288,326 8.50 % 271,365 8.00 %
West Bank 415,741 12.26 % 203,419 6.00 % 288,177 8.50 % 271,226 8.00 %
Common Equity Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 302,417 8.92 % 152,643 4.50 % 237,445 7.00 % 220,484 6.50 %
West Bank 415,741 12.26 % 152,564 4.50 % 237,322 7.00 % 220,371 6.50 %

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

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

Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 322,583 9.55 % 202,666 6.00 % 287,110 8.50 % 270,221 8.00 %
West Bank 416,155 12.33 % 202,540 6.00 % 286,931 8.50 % 270,053 8.00 %
Common Equity Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 302,583 8.96 % 151,999 4.50 % 236,443 7.00 % 219,555 6.50 %
West Bank 416,155 12.33 % 151,905 4.50 % 236,296 7.00 % 219,418 6.50 %
Tier 1 Capital (to Average Assets)
Consolidated 322,583 8.81 % 146,439 4.00 % 146,439 4.00 % 183,049 5.00 %
West Bank 416,155 11.37 % 146,367 4.00 % 146,367 4.00 % 182,958 5.00 %

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West Bancorporation, Inc.

Management's Discussion and Analysis

(in thousands, except share and per share data)

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


	Actual				For Capital Adequacy Purposes				For Capital Adequacy Purposes With Capital Conservation Buffer				To Be Well-Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
As of June 30, 2023:
Total Capital (to Risk-Weighted Assets)
Consolidated	$	415,225	12.15	%	$	273,486	8.00	%	$	358,951	10.50	%	$	341,858	10.00	%
West Bank	448,570		13.13	%	273,324		8.00	%	358,737		10.50	%	341,655		10.00	%

Tier 1 Capital (to Risk-Weighted Assets)
Consolidated	324,943		9.51	%	205,115		6.00	%	290,579		8.50	%	273,486		8.00	%
West Bank	418,288		12.24	%	204,993		6.00	%	290,406		8.50	%	273,324		8.00	%

Common Equity Tier 1 Capital (to Risk-Weighted Assets)
Consolidated	304,943		8.92	%	153,836		4.50	%	239,300		7.00	%	222,208		6.50	%
West Bank	418,288		12.24	%	153,745		4.50	%	239,158		7.00	%	222,075		6.50	%

Tier 1 Capital (to Average Assets)
Consolidated	324,943		8.60	%	151,121		4.00	%	151,121		4.00	%	188,901		5.00	%
West Bank	418,288		11.08	%	151,073		4.00	%	151,073		4.00	%	188,841		5.00	%

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

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

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

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

The Company and West Bank are subject to a 2.5 percent capital conservation buffer that is added to the minimum requirements for capital adequacy purposes. A banking organization with a capital conservation buffer of less than the required amount will be subject to limitations on capital distributions, including dividend payments, and certain discretionary bonus payments to executive officers. At ~~March 31,~~June 30, 2023, the capital ratios for the Company and West Bank were sufficient to meet the conservation buffer.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

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

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

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


		Net Interest Income at March 31, 2023			Net Interest Income at June 30, 2023
Change in Interest Rates	Change in Interest Rates	Amount	% Change	Change in Interest Rates	Amount	% Change
300 basis points rising	300 basis points rising	$77,792	(9.12)%	300 basis points rising	$67,678	(11.42)%
200 basis points rising	200 basis points rising	80,220	(6.29)	200 basis points rising	70,435	(7.81)
100 basis points rising	100 basis points rising	82,533	(3.59)	100 basis points rising	73,050	(4.39)
Base	Base	85,602	—	Base	76,405	—
100 basis points falling	100 basis points falling	88,827	3.77	100 basis points falling	79,768	4.40
200 basis points falling	200 basis points falling	96,423	12.64	200 basis points falling	87,488	14.51

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

Item 4. Controls and Procedures

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

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b. Changes in internal control over financial reporting. There were no changes in the Company's internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

Management does not believe there have been any material changes in the risk factors that were disclosed in the Company's Form 10-K filed with the Securities and Exchange Commission on February 23, 2023.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~None.~~During the fiscal quarter ended June 30, 2023, none of the Company's directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any "non-Rule 10b5-1 trading arrangement."

Item 6. Exhibits

The following exhibits are filed as part of this report:


Exhibits			Description
3.1			Restatement of the Restated Articles of Incorporation of West Bancorporation, Inc. (incorporated herein by reference to Exhibit 3.1 filed with the Form 10-K on March 1, 2017)
3.2			Amended and Restated Bylaws of West Bancorporation, Inc. as of January 23, 2019 (incorporated herein by reference to Exhibit 3.1 filed with the Form 8-K on January 24, 2019)
31.1			Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002
31.2			Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002
32.1			Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2			Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS			Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH			Inline XBRL Taxonomy Extension Schema Document
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document
104			Cover Page Interactive Data File (formatted as Inline XBRL and combined in Exhibit 101)

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SIGNATURES

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


West Bancorporation, Inc.
(Registrant)


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

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

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