• West Bancorporation, Inc. Announces First Quarter 2023 Financial Results and Declares Quarterly Dividend

    Source: Nasdaq GlobeNewswire / 27 Apr 2023 07:30:01   America/Chicago

    WEST DES MOINES, Iowa, April 27, 2023 (GLOBE NEWSWIRE) -- West Bancorporation, Inc. (Nasdaq: WTBA; the “Company”), parent company of West Bank, today reported first quarter 2023 net income of $7.8 million, or $0.47 per diluted common share, compared to fourth quarter 2022 net income of $8.9 million, or $0.53 per diluted common share, and first quarter 2022 net income of $13.2 million, or $0.78 per diluted common share. On April 26, 2023, the Company’s Board of Directors declared a regular quarterly dividend of $0.25 per common share. The dividend is payable on May 24, 2023, to stockholders of record on May 10, 2023.

    David Nelson, President and Chief Executive Officer of the Company, commented, “The unprecedented size and pace of the Federal Reserve short-term interest rate increases in 2022 and early 2023 and inverted yield curve have changed the dynamics of our commercial based customers’ deposit pricing. Our deposit and funding mix has changed as depositors react to significant short-term rate competition and utilize accumulated cash for business operations. The resulting increase in our cost of funds has outpaced the repricing benefits in loans and investments, leading to a decline in our net interest income and net interest margin.”

    David Nelson added, “Our credit quality continues to be pristine and for the seventh consecutive quarter end, we had no loans greater than 30 days past due. We remain diligent in monitoring and managing our credit risk as we anticipate an economic downturn ahead along with an uncertain and volatile interest rate environment. Our capital position is strong and we remain focused on delivering high quality services and products through our successful relationship based business model.”

    First Quarter 2023 Financial Highlights

      Quarter Ended March 31, 2023
     Net Income (in thousands)$7,844 
     Return on Average Equity 14.77%
     Return on Average Assets 0.88%
     Efficiency ratio (a non-GAAP measure) 55.34%
     Nonperforming assets to total assets 0.01%

    First Quarter 2023 Compared to Fourth Quarter 2022 Overview

    • Loans increased $13.3 million in the first quarter of 2023, or 2.0 percent annualized.

    • No provision for credit losses was recorded in either the first quarter of 2023 or the fourth quarter of 2022.

    • The allowance for credit losses to total loans was 1.01 percent at March 31, 2023, compared to 0.93 percent at December 31, 2022. The increase in the allowance ratio was due to the adoption of ASU 2016-13, which resulted in a $2.5 million increase to the allowance for credit losses. This adoption also resulted in establishing an allowance for unfunded commitments of $2.3 million which is included in other liabilities, a $3.6 million decrease to retained earnings and $1.2 million increase in deferred tax assets.

    • There were no loans greater than 30 days past due at March 31, 2023, which was the seventh consecutive quarter in which no loans were greater than 30 days past due. Nonaccrual loans at March 31, 2023, consisted of one loan with a balance of $316 thousand.

    • Deposits decreased $82.0 million in the first quarter of 2023. Included in this decrease was a decrease in brokered deposits of $38.5 million. Brokered deposits totaled $234.2 million at March 31, 2023, compared to $272.7 million at December 31, 2022.

    • The efficiency ratio (a non-GAAP measure) was 55.34 percent for the first quarter of 2023, compared to 50.42 percent for the fourth quarter of 2022. The increase in the efficiency ratio is primarily the result of the decline in tax equivalent net interest income and an increase in compensation and employee benefits.

    • Net interest margin, on a fully tax-equivalent basis (a non-GAAP measure), was 2.23 percent for the first quarter of 2023, compared to 2.49 percent for the fourth quarter of 2022. Net interest income for the first quarter of 2023 was $18.7 million, compared to $20.7 million for the fourth quarter of 2022. The rising cost of deposits and borrowed funds and the change in mix of liabilities has increased interest expense faster than the increase in interest income from loan repricing and loan originations.

    • The tangible common equity ratio was 5.99 percent at March 31, 2023, an increase of 15 basis points compared to 5.84 percent at December 31, 2022, due to an increase in the market value of the securities portfolio, which decreased the accumulated other comprehensive loss.

    First Quarter 2023 Compared to First Quarter 2022 Overview

    • Loans increased $270.8 million at March 31, 2023, or 10.9 percent, compared to March 31, 2022.

    • Deposits decreased $292.9 million at March 31, 2023, compared to March 31, 2022. Included in deposits were brokered deposits totaling $234.2 million at March 31, 2023, compared to $116.5 million at March 31, 2022. The decline in deposits was primarily attributable to customers using their own liquidity to fund business transactions, instead of incurring debt, and customers seeking higher yielding investment options for excess deposits accumulated over the past couple of years. During the second quarter of 2022, a large corporate customer completed a significant business transaction that was funded by the customer’s deposits held at West Bank, accounting for a significant portion of the decrease in deposits.

    • Borrowed funds increased to $580.2 million at March 31, 2023, compared to $197.0 million at March 31, 2022. The increase included $58.9 million in subordinated notes that were issued in June 2022, $95.0 million in FHLB Advances associated with long-term interest rate swaps and $229.3 million in federal funds purchased and other short-term borrowings.

    • The efficiency ratio (a non-GAAP measure) was 55.34 percent for the first quarter of 2023, compared to 40.14 percent for the first quarter of 2022. Tax-equivalent net interest income decreased in the first quarter of 2023 compared to the first quarter of 2022 due to the increased cost of deposits and borrowed funds. Additionally, salaries and employee benefits increased due to wage increases that have been higher than recent historical averages in response to market conditions and competition in retaining and recruiting talent and increases in full-time equivalent employees with growth in our commercial banking team and information technology department. Occupancy and equipment expense increased primarily due to the increase in depreciation expense related to the new building in St. Cloud, Minnesota which opened in March 2022 and scheduled increases in rent expense on existing leases.

    • Net interest margin, on a fully tax-equivalent basis (a non-GAAP measure), was 2.23 percent for the first quarter of 2023, compared to 2.85 percent for the first quarter of 2022. Net interest income for the first quarter of 2023 was $18.7 million, compared to $23.8 million for the first quarter of 2022. In 2022 and 2023, the rising cost of deposits and borrowed funds and the change in mix of liabilities has increased interest expense faster than the increase in interest income from loan repricing and loan originations.

    The Company filed its report on Form 10-Q with the Securities and Exchange Commission today. Please refer to that document for a more in-depth discussion of the Company’s financial results. The Form 10-Q is available on the Investor Relations section of West Bank’s website at www.westbankstrong.com.

    The Company will discuss its results in a conference call scheduled for 2:00 p.m. Central Time on Thursday, April 27, 2023. The telephone number for the conference call is 844-200-6205. The access code for the conference call is 950386. A recording of the call will be available until May 11, 2023, by dialing 845-709-8569. The replay access code is 943070.

    About West Bancorporation, Inc. (Nasdaq: WTBA)

    West Bancorporation, Inc. is headquartered in West Des Moines, Iowa. Serving customers since 1893, West Bank, a wholly-owned subsidiary of West Bancorporation, Inc., is a community bank that focuses on lending, deposit services, and trust services for small- to medium-sized businesses and consumers. West Bank has six offices in the Des Moines, Iowa metropolitan area, one office in Coralville, Iowa, and four offices in Minnesota in the cities of Rochester, Owatonna, Mankato and St. Cloud.

    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. Forward-looking statements may appear throughout this report. These forward-looking statements are generally identified by the words “believes,” “expects,” “intends,” “anticipates,” “projects,” “future,” “confident,” “may,” “should,” “will,” “strategy,” “plan,” “opportunity,” “will be,” “will likely result,” “will continue” or similar references, or references to estimates, predictions or future events. Such forward-looking statements are based upon certain underlying assumptions, risks and uncertainties. Because of the possibility that the underlying assumptions are incorrect or do not materialize as expected in the future, actual results could differ materially from these forward-looking statements.  Risks and uncertainties that may affect future results include: interest rate risk, including the effects of recent rate increases by the Federal Reserve; fluctuations in the values of the securities held in our investment portfolio, including as a result of rising interest rates, which has resulted in unrealized losses in our portfolio; 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 loan 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; changes in local, national and international economic conditions, including rising rates of inflation; the effects of recent developments and events in the financial services industry, including the large-scale deposit withdrawals over a short period of time at Silicon Valley Bank and Signature Bank that resulted in failure of those institutions; changes in legal and regulatory requirements, limitations and costs including in response to the recent failures of Silicon Valley Bank and Signature Bank; changes in customers’ acceptance of the Company’s products and services; cyber-attacks; unexpected outcomes of existing or new litigation involving the Company; the monetary, trade and other regulatory policies of the U.S. government; acts of war or terrorism, including the Russian invasion of Ukraine, widespread disease or pandemics, such as the COVID-19 pandemic, or other adverse external events; risks related to climate change and the negative impact it may have on our customers and their businesses; 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 reports filed by the Company with the Securities and Exchange Commission. 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.

    WEST BANCORPORATION, INC. AND SUBSIDIARY      
    Financial Information (unaudited)          
    (in thousands)          
      As of
    CONDENSED BALANCE SHEETS March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022
    Assets          
    Cash and due from banks $21,579  $24,896  $58,342  $26,174  $21,896 
    Interest-bearing deposits  901   1,643   1,049   766   122,359 
    Securities available for sale, at fair value  665,358   664,115   671,752   731,970   797,912 
    Federal Home Loan Bank stock, at cost  22,226   19,336   18,350   15,532   10,269 
    Loans  2,756,185   2,742,836   2,614,145   2,573,129   2,485,366 
    Allowance for credit losses  (27,941)  (25,473)  (25,418)  (25,434)  (27,623)
    Loans, net  2,728,244   2,717,363   2,588,727   2,547,695   2,457,743 
    Premises and equipment, net  59,565   53,124   44,592   41,807   40,898 
    Bank-owned life insurance  44,830   44,573   44,318   44,072   43,836 
    Other assets  82,240   88,168   90,387   66,775   52,156 
    Total assets $3,624,943  $3,613,218  $3,517,517  $3,474,791  $3,547,069 
               
    Liabilities and Stockholders’ Equity          
    Deposits $2,798,393  $2,880,408  $2,822,847  $2,842,451  $3,091,252 
    Federal funds purchased and other short-term borrowings  229,290   200,000   204,500   133,000   — 
    Other borrowings  350,921   285,855   255,789   255,751   196,954 
    Other liabilities  29,347   35,843   35,617   27,400   22,383 
    Stockholders’ equity  216,992   211,112   198,764   216,189   236,480 
    Total liabilities and stockholders’ equity $3,624,943  $3,613,218  $3,517,517  $3,474,791  $3,547,069 
               
      For the Quarter Ended
    AVERAGE BALANCES March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022
    Assets $3,617,458  $3,511,717  $3,475,894  $3,503,686  $3,544,564 
    Loans  2,745,381   2,649,671   2,579,862   2,537,152   2,449,521 
    Deposits  2,846,926   2,901,928   2,864,648   3,002,535   3,067,019 
    Stockholders’ equity  215,391   199,947   219,065   222,731   255,130 


    WEST BANCORPORATION, INC. AND SUBSIDIARY      
    Financial Information (unaudited)          
    (in thousands)          
      As of
    ANALYSIS OF LOAN PORTFOLIO March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022
    Loan mix:          
    Commercial $520,894  $519,196  $526,336  $475,704  $466,874 
    Real estate:          
    Construction, land and land development  336,739   363,015   341,549   390,137   388,424 
    1-4 family residential first mortgages  75,223   75,211   69,991   69,829   65,978 
    Home equity  9,726   10,322   10,271   8,564   9,213 
    Commercial  1,810,158   1,771,940   1,661,907   1,627,150   1,555,001 
    Consumer and other  7,381   7,291   7,884   5,912   4,068 
       2,760,121   2,746,975   2,617,938   2,577,296   2,489,558 
    Net unamortized fees and costs  (3,936)  (4,139)  (3,793)  (4,167)  (4,192)
    Total loans $2,756,185  $2,742,836  $2,614,145  $2,573,129  $2,485,366 
    Less allowance for credit losses  (27,941)  (25,473)  (25,418)  (25,434)  (27,623)
    Net loans $2,728,244  $2,717,363  $2,588,727  $2,547,695  $2,457,743 
               
    ANALYSIS OF DEPOSITS          
    Deposit mix:          
    Noninterest-bearing demand $605,666  $693,563  $712,722  $690,335  $710,697 
    Interest-bearing demand  486,656   536,226   469,257   472,919   554,235 
    Savings and money market  1,295,280   1,237,954   1,252,694   1,360,020   1,632,690 
    Time  410,791   412,665   388,174   319,177   193,630 
    Total deposits $2,798,393  $2,880,408  $2,822,847  $2,842,451  $3,091,252 
               
    ANALYSIS OF BORROWINGS          
    Borrowings mix:          
    Federal funds purchased and other short-term borrowings $229,290  $200,000  $204,500  $133,000  $— 
    Subordinated notes, net  79,435   79,369   79,303   79,265   20,468 
    Federal Home Loan Bank advances  220,000   155,000   125,000   125,000   125,000 
    Long-term debt  51,486   51,486   51,486   51,486   51,486 
    Total borrowings $580,211  $485,855  $460,289  $388,751  $196,954 
               
    STOCKHOLDERS’ EQUITY          
    Preferred stock $—  $—  $—  $—  $— 
    Common stock  3,000   3,000   3,000   3,000   3,000 
    Additional paid-in capital  31,797   32,021   31,152   30,283   29,421 
    Retained earnings  267,620   267,562   262,776   255,334   246,827 
    Accumulated other comprehensive loss  (85,425)  (91,471)  (98,164)  (72,428)  (42,768)
    Total Stockholders’ Equity $216,992  $211,112  $198,764  $216,189  $236,480 


    WEST BANCORPORATION, INC. AND SUBSIDIARY        
    Financial Information (unaudited)          
    (in thousands)          
      For the Quarter Ended
    CONSOLIDATED STATEMENTS OF INCOME March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022
    Interest income:          
    Loans, including fees $32,948 $30,859 $28,102 $24,848  $23,286 
    Securities:          
    Taxable  3,316  3,398  3,147  3,090   2,889 
    Tax-exempt  885  887  890  892   858 
    Interest-bearing deposits  30  24  30  67   82 
    Total interest income  37,179  35,168  32,169  28,897   27,115 
    Interest expense:          
    Deposits  13,339  11,043  6,289  3,146   2,151 
    Federal funds purchased and other short-term borrowings  2,079  952  655  157   — 
    Subordinated notes  1,106  1,119  1,106  394   248 
    Federal Home Loan Bank advances  1,262  755  649  635   630 
    Long-term debt  698  630  466  326   258 
    Total interest expense  18,484  14,499  9,165  4,658   3,287 
    Net interest income  18,695  20,669  23,004  24,239   23,828 
    Credit loss expense (benefit)  —  —  —  (1,750)  (750)
    Net interest income after credit loss expense (benefit)  18,695  20,669  23,004  25,989   24,578 
    Noninterest income:          
    Service charges on deposit accounts  462  476  553  585   580 
    Debit card usage fees  486  492  498  507   472 
    Trust services  706  678  780  622   629 
    Increase in cash value of bank-owned life insurance  257  255  246  236   227 
    Gain from bank-owned life insurance  691  —  —  —   — 
    Loan swap fees  —  —  835  —   — 
    Other income  355  364  364  328   481 
    Total noninterest income  2,957  2,265  3,276  2,278   2,389 
    Noninterest expense:          
    Salaries and employee benefits  6,867  6,552  6,578  6,410   6,298 
    Occupancy and equipment  1,327  1,270  1,315  1,242   1,086 
    Data processing  635  673  644  656   624 
    Technology and software  513  518  651  492   476 
    FDIC insurance  416  243  127  289   337 
    Professional fees  250  205  250  202   217 
    Director fees  205  215  209  222   168 
    Other expenses  1,858  1,989  1,684  1,753   1,456 
    Total noninterest expense  12,071  11,665  11,458  11,266   10,662 
    Income before income taxes  9,581  11,269  14,822  17,001   16,305 
    Income taxes  1,737  2,323  3,220  4,334   3,121 
    Net income $7,844 $8,946 $11,602 $12,667  $13,184 
               
    Basic earnings per common share $0.47 $0.54 $0.70 $0.76  $0.80 
    Diluted earnings per common share $0.47 $0.53 $0.69 $0.75  $0.78 


         


    WEST BANCORPORATION, INC. AND SUBSIDIARY  
    Financial Information (unaudited)          
               
      As of and for the Quarter Ended
    COMMON SHARE DATA March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022
    Earnings per common share (basic) $0.47  $0.54  $0.70  $0.76  $0.80 
    Earnings per common share (diluted)  0.47   0.53   0.69   0.75   0.78 
    Dividends per common share  0.25   0.25   0.25   0.25   0.25 
    Book value per common share(1)  12.98   12.69   11.94   12.99   14.22 
    Closing stock price  18.27   25.55   20.81   24.34   27.21 
    Market price/book value(2)  140.76%  201.34%  174.29%  187.37%  191.35%
    Price earnings ratio(3)  9.56   11.93   7.49   7.98   8.39 
    Annualized dividend yield(4)  5.47%  3.91%  4.81%  4.11%  3.68%
               
    REGULATORY CAPITAL RATIOS          
    Consolidated:          
    Total risk-based capital ratio  12.17%  12.08%  12.34%  12.53%  10.72%
    Tier 1 risk-based capital ratio  9.51   9.55   9.72   9.81   9.81 
    Tier 1 leverage capital ratio  8.60   8.81   8.85   8.59   8.39 
    Common equity tier 1 ratio  8.92   8.96   9.11   9.17   9.16 
    West Bank:          
    Total risk-based capital ratio  13.16%  13.08%  13.38%  13.62%  11.88%
    Tier 1 risk-based capital ratio  12.26   12.33   12.60   12.81   10.98 
    Tier 1 leverage capital ratio  11.10   11.37   11.47   11.22   9.39 
    Common equity tier 1 ratio  12.26   12.33   12.60   12.81   10.98 
               
    KEY PERFORMANCE RATIOS AND OTHER METRICS          
    Return on average assets(5)  0.88%  1.01%  1.32%  1.45%  1.51%
    Return on average equity(6)  14.77   17.75   21.01   22.81   20.96 
    Net interest margin(7)(13)  2.23   2.49   2.78   2.93   2.85 
    Yield on interest-earning assets(8)(13)  4.41   4.21   3.87   3.49   3.24 
    Cost of interest-bearing liabilities  2.76   2.24   1.45   0.73   0.52 
    Efficiency ratio(9)(13)  55.34   50.42   43.16   41.96   40.14 
    Non-performing assets to total assets(10)  0.01   0.01   0.01   0.01   0.25 
    ACL ratio(11)  1.01   0.93   0.97   0.99   1.11 
    Loans/total assets  76.03   75.91   74.32   74.05   70.07 
    Loans/total deposits  98.49   95.22   92.61   90.53   80.40 
    Tangible common equity ratio(12)  5.99   5.84   5.65   6.22   6.67 

    (1) Includes accumulated other comprehensive income (loss).
    (2) Closing stock price divided by book value per common share.
    (3) Closing stock price divided by annualized earnings per common share (basic).
    (4) Annualized dividend divided by period end closing stock price.
    (5) Annualized net income divided by average assets.
    (6) Annualized net income divided by average stockholders’ equity.
    (7) Annualized tax-equivalent net interest income divided by average interest-earning assets.
    (8) Annualized tax-equivalent interest income on interest-earning assets divided by average interest-earning assets.
    (9) 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.
    (10) Total nonperforming assets divided by total assets.
    (11) Allowance for credit losses divided by total loans.        
    (12) Common equity less intangible assets (none held) divided by tangible assets.
    (13) A non-GAAP measure.

    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 fully taxable equivalent basis and efficiency ratio on an adjusted and FTE basis.

    (in thousands) As of and for the Quarter Ended
      March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022
    Reconciliation of net interest income and net interest margin on a FTE basis to GAAP:          
    Net interest income (GAAP) $18,695  $20,669  $23,004  $24,239  $23,828 
    Tax-equivalent adjustment (1)  161   197   270   326   329 
    Net interest income on a FTE basis (non-GAAP)  18,856   20,866   23,274   24,565   24,157 
    Average interest-earning assets  3,435,988   3,328,941   3,322,522   3,362,313   3,432,114 
    Net interest margin on a FTE basis (non-GAAP)  2.23%  2.49%  2.78%  2.93%  2.85%
               
    Reconciliation of efficiency ratio on an adjusted and FTE basis to GAAP:          
    Net interest income on a FTE basis (non-GAAP) $18,856  $20,866  $23,274  $24,565  $24,157 
    Noninterest income  2,957   2,265   3,276   2,278   2,389 
    Adjustment for losses on disposal of premises and equipment, net  —   2   —   9   18 
    Adjusted income  21,813   23,133   26,550   26,852   26,564 
    Noninterest expense  12,071   11,665   11,458   11,266   10,662 
    Efficiency ratio on an adjusted and FTE basis (non-GAAP) (2)  55.34%  50.42%  43.16%  41.96%  40.14%

    (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.

    For more information contact:
    Jane Funk, Executive Vice President, Treasurer and Chief Financial Officer (515) 222-5766


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