West Bancorporation, Inc. Announces Fourth Quarter and Year End 2022 Financial Results, Declares Quarterly Dividend

Rhea-AI Summary

West Bancorporation reported a net income of $46.4 million for 2022, down from $49.6 million in 2021, resulting in $2.76 per diluted share compared to $2.95 per share. In Q4 2022, net income was $8.9 million, with a $0.53 per share, a decrease from $11.9 million in Q4 2021. The company declared a $0.25 dividend per share, payable on February 22, 2023. Despite loan growth of 11.7% year-over-year, net interest income decreased by 3.5% due to rising costs. Credit quality remains strong with no loans overdue by more than 30 days for six consecutive quarters.

Positive

• Loan growth of 11.7% year-over-year.
• No loans greater than 30 days past due for six consecutive quarters.
• Strong capital position and credit quality.

Negative

• Net income declined by 6.5% from 2021 to 2022.
• Net interest income decreased by $3.3 million or 3.5% in 2022.
• Net interest margin fell to 2.76% in 2022 from 3.05% in 2021.

WEST DES MOINES, Iowa, Jan. 26, 2023 (GLOBE NEWSWIRE) -- West Bancorporation, Inc. (Nasdaq: WTBA; the “Company”), parent company of West Bank, today reported 2022 net income of $46.4 million, or $2.76 per diluted common share, compared to 2021 net income of $49.6 million, or $2.95 per diluted common share. Net income for the fourth quarter 2022 was $8.9 million, or $0.53 per diluted common share, compared to fourth quarter 2021 net income of $11.9 million, or $0.71 per diluted common share. On January 25, 2023, the Company’s Board of Directors declared a regular quarterly dividend of $0.25 per common share. The dividend is payable on February 22, 2023, to stockholders of record on February 8, 2023.

David Nelson, President and Chief Executive Officer of the Company, commented, “Our company had another strong year, the second best year in our company’s history. Our credit quality continues to be pristine and we remain diligent in monitoring and managing our credit risk as we anticipate increasing economic challenges resulting from the Federal Reserve’s aggressive interest rate hikes in 2022. Loan growth in 2022 exceeded eleven percent and for the sixth consecutive quarter end, we had no loans greater than 30 days past due.”

David Nelson added, “Rising interest rates in 2022 have increased the average yield of our loan portfolio. However, changes in liquidity and competitive deposit pricing, as a result of volatility and uncertainty in the interest rate environment, have increased our cost of funds and resulted in a decline in our net interest income and net interest margin. We expect to continue to experience a lower than normal net interest margin while the Federal Reserve continues raising short-term rates. Our capital position is strong and we remain focused on delivering high quality services and products through our very successful relationship based business model.”

Fourth Quarter and Year Ended 2022 Financial Highlights

			Quarter Ended December 31, 2022				Year Ended December 31, 2022
	Net Income (in thousands)		$	8,946			$	46,399
	Return on Average Equity			17.75	%			20.71	%
	Return on Average Assets			1.01	%			1.32	%
	Efficiency ratio (a non-GAAP measure)			50.42	%			43.70	%
	Nonperforming assets to total assets			0.01	%			0.01	%

Fourth Quarter 2022 Compared to Third Quarter 2022 Overview

• Loans increased $128.7 million in the fourth quarter of 2022, or 19.7 percent annualized.
  
  
• No provision for loan losses was recorded in either the fourth quarter of 2022 or the third quarter of 2022.
  
  
• The allowance for loan losses to total loans was 0.93 percent at December 31, 2022, compared to 0.97 percent at September 30, 2022. There were no loans greater than 30 days past due at December 31, 2022, which was the sixth consecutive quarter in which no loans were greater than 30 days past due. Nonaccrual loans at December 31, 2022, consisted of one loan with a balance of $322 thousand.
  
  
• Deposits increased $57.6 million in the fourth quarter of 2022. Included in deposits were brokered deposits totaling $272.7 million at December 31, 2022, compared to $258.1 million at September 30, 2022.
  
  
• The efficiency ratio (a non-GAAP measure) was 50.42 percent for the fourth quarter of 2022, compared to 43.16 percent for the third quarter of 2022. The increase in the efficiency ratio is primarily the result of the decline in tax equivalent net interest income.
  
  
• Net interest margin, on a fully tax-equivalent basis (a non-GAAP measure), was 2.49 percent for the fourth quarter of 2022, compared to 2.78 percent for the third quarter of 2022. Net interest income for the fourth quarter of 2022 was $20.7 million, compared to $23.0 million for the third 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 growth.
  
  
• The tangible common equity ratio was 5.84 percent at December 31, 2022, an increase of 19 basis points compared to 5.65 percent at September 30, 2022 due to a modest increase in the market value of the securities portfolio, which decreased the accumulated other comprehensive loss.
  
  

Fourth Quarter 2022 Compared to Fourth Quarter 2021 Overview

• Loans increased $286.6 million at December 31, 2022, or 11.7 percent, compared to December 31, 2021.
  
  
• Deposits decreased $135.6 million at December 31, 2022, compared to December 31, 2021. Included in deposits were brokered deposits totaling $272.7 million at December 31, 2022, compared to $176.0 million at December 31, 2021. The decline in deposits was primarily attributable to customers using their own liquidity to fund business transactions, instead of using debt, and customers seeking higher yielding investment options for excess deposits accumulated over the past couple of years.
  
  
• Borrowed funds increased to $485.9 million at December 31, 2022, compared to $199.9 million at December 31, 2021. The increase included $58.9 million in subordinated notes that were issued in June 2022, $30.0 million in FHLB Advances associated with a long-term interest rate swap and $197.1 million in federal funds purchased and other short-term borrowings.
  
  
• The efficiency ratio (a non-GAAP measure) was 50.42 percent for the fourth quarter of 2022, compared to 43.32 percent for the fourth quarter of 2021. Tax-equivalent net interest income decreased in the fourth quarter of 2022 compared to the fourth quarter of 2021 due to the increased cost of deposits and borrowed funds. Additionally, salaries and benefits were higher in the fourth quarter of 2022 compared to the fourth quarter of 2021, due primarily to annual compensation adjustments.
  
  
• Net interest margin, on a fully tax-equivalent basis (a non-GAAP measure), was 2.49 percent for the fourth quarter of 2022, compared to 3.00 percent for the fourth quarter of 2021. Net interest income for the fourth quarter of 2022 was $20.7 million, compared to $24.6 million for the fourth quarter of 2021. Net interest income in the fourth quarter of 2021 included $912 thousand of PPP loan interest income, compared to $5 thousand in the fourth quarter of 2022. In 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 growth.
  
  

Year Ended 2022 Compared to Year Ended 2021 Overview

• The provision for loan losses recorded in 2022 was negative $2.5 million, compared to a negative provision of $1.5 million in 2021. The negative provision in 2022 was primarily due to the reversal of a specific reserve on an impaired loan and the reduction of certain qualitative factors resulting from the sustained performance of loans after the expiration of COVID-19 modifications and continued improvement in classified loans. The negative provision in 2021 was primarily due to the reduction of certain qualitative factors resulting from improvements in economic conditions and lack of loan losses during the COVID-19 pandemic.
  
  
• Net interest income declined $3.3 million, or 3.5 percent, in 2022 compared to 2021. Net interest margin decreased to 2.76 percent in 2022, compared to 3.05 percent in 2021. The decline in both net interest income and net interest margin was primarily due to the rising cost of deposits and borrowed funds and the change in mix of liabilities, which has increased interest expense faster than the increase in interest income from loan repricing and loan growth.
  
  
• Noninterest income increased $479 thousand, or 4.9 percent, in 2022 compared to 2021. This increase was primarily due to the increase in loan swap fees.
  
  
• Noninterest expense increased $1.7 million, or 3.9 percent, in 2022 compared to 2021. The increase was primarily due to an increase of $2.6 million, or 11.2 percent, in salaries and benefits resulting from an increase in expenses related to the issuance of restricted stock units, an increase in full time equivalent employees and annual compensation adjustments. This was partially offset by a decrease of $822 thousand in FDIC insurance expense primarily due to reductions in the assessment rate resulting from capital injections into the Bank.
  

The Company plans to file its report on Form 10-K with the Securities and Exchange Commission on or before February 23, 2023. Please refer to that document for a more in-depth discussion of the Company’s financial results. The Form 10-K will be 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, January 26, 2023. The telephone number for the conference call is 844-200-6205. The access code for the conference call is 214929. A recording of the call will be available until February 9, 2023, by dialing 866-813-9403. The replay access code is 559343.

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; changes in local, national and international economic conditions, including rising rates of inflation; changes in legal and regulatory requirements, limitations and costs; 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% 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		December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021
Assets
Cash and due from banks		$	24,896			$	58,342			$	26,174			$	21,896			$	17,555
Interest-bearing deposits			1,643				1,049				766				122,359				175,270
Securities available for sale, at fair value			664,115				671,752				731,970				797,912				758,822
Federal Home Loan Bank stock, at cost			19,336				18,350				15,532				10,269				9,965
Loans			2,742,836				2,614,145				2,573,129				2,485,366				2,456,196
Allowance for loan losses			(25,473	)			(25,418	)			(25,434	)			(27,623	)			(28,364	)
Loans, net			2,717,363				2,588,727				2,547,695				2,457,743				2,427,832
Premises and equipment, net			53,124				44,592				41,807				40,898				34,568
Bank-owned life insurance			44,573				44,318				44,072				43,836				43,609
Other assets			88,168				90,387				66,775				52,156				32,580
Total assets		$	3,613,218			$	3,517,517			$	3,474,791			$	3,547,069			$	3,500,201
Liabilities and Stockholders’ Equity
Deposits		$	2,880,408			$	2,822,847			$	2,842,451			$	3,091,252			$	3,016,005
Federal funds purchased and other short-term borrowings			200,000				204,500				133,000				—				2,880
Other borrowings			285,855				255,789				255,751				196,954				196,986
Other liabilities			35,843				35,617				27,400				22,383				24,002
Stockholders’ equity			211,112				198,764				216,189				236,480				260,328
Total liabilities and stockholders’ equity		$	3,613,218			$	3,517,517			$	3,474,791			$	3,547,069			$	3,500,201
		For the quarter ended
AVERAGE BALANCES		December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021
Assets		$	3,511,717			$	3,475,894			$	3,503,686			$	3,544,564			$	3,421,020
Loans			2,649,671				2,579,862				2,537,152				2,449,521				2,379,872
Deposits			2,901,928				2,864,648				3,002,535				3,067,019				2,964,585
Stockholders’ equity			199,947				219,065				222,731				255,130				255,224

WEST BANCORPORATION, INC. AND SUBSIDIARY
Financial Information (unaudited)
(in thousands)
		As of
ANALYSIS OF LOAN PORTFOLIO		December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021
Loan mix:
Commercial		$	519,196			$	526,336			$	475,704			$	466,874			$	492,815
Real estate:
Construction, land and land development			363,015				341,549				390,137				388,424				359,258
1-4 family residential first mortgages			75,211				69,991				69,829				65,978				66,216
Home equity			10,322				10,271				8,564				9,213				8,422
Commercial			1,771,940				1,661,907				1,627,150				1,555,001				1,530,218
Consumer and other			7,291				7,884				5,912				4,068				3,797
			2,746,975				2,617,938				2,577,296				2,489,558				2,460,726
Net unamortized fees and costs			(4,139	)			(3,793	)			(4,167	)			(4,192	)			(4,530	)
Total loans		$	2,742,836			$	2,614,145			$	2,573,129			$	2,485,366			$	2,456,196
Less allowance for loan losses			(25,473	)			(25,418	)			(25,434	)			(27,623	)			(28,364	)
Net loans		$	2,717,363			$	2,588,727			$	2,547,695			$	2,457,743			$	2,427,832
ANALYSIS OF DEPOSITS
Deposit mix:
Noninterest-bearing demand		$	693,563			$	712,722			$	690,335			$	710,697			$	720,136
Interest-bearing demand			536,226				469,257				472,919				554,235				548,242
Savings and money market			1,237,954				1,252,694				1,360,020				1,632,690				1,550,636
Time			412,665				388,174				319,177				193,630				196,991
Total deposits		$	2,880,408			$	2,822,847			$	2,842,451			$	3,091,252			$	3,016,005
ANALYSIS OF BORROWINGS
Borrowings mix:
Federal funds purchased and other short-term borrowings		$	200,000			$	204,500			$	133,000			$	—			$	2,880
Subordinated notes, net			79,369				79,303				79,265				20,468				20,465
Federal Home Loan Bank advances			155,000				125,000				125,000				125,000				125,000
Long-term debt			51,486				51,486				51,486				51,486				51,521
Total borrowings		$	485,855			$	460,289			$	388,751			$	196,954			$	199,866
STOCKHOLDERS’ EQUITY
Preferred stock		$	—			$	—			$	—			$	—			$	—
Common stock			3,000				3,000				3,000				3,000				3,000
Additional paid-in capital			32,021				31,152				30,283				29,421				30,183
Retained earnings			267,562				262,776				255,334				246,827				237,782
Accumulated other comprehensive loss			(91,471	)			(98,164	)			(72,428	)			(42,768	)			(10,637	)
Total Stockholders’ Equity		$	211,112			$	198,764			$	216,189			$	236,480			$	260,328

WEST BANCORPORATION, INC. AND SUBSIDIARY
Financial Information (unaudited)
(in thousands)
		For the Quarter Ended
CONSOLIDATED STATEMENTS OF INCOME		December 31, 2022			September 30, 2022			June 30, 2022				March 31, 2022				December 31, 2021
Interest income:
Loans, including fees		$	30,859		$	28,102		$	24,848			$	23,286			$	24,179
Securities:
Taxable			3,398			3,147			3,090				2,889				2,590
Tax-exempt			887			890			892				858				829
Interest-bearing deposits			24			30			67				82				66
Total interest income			35,168			32,169			28,897				27,115				27,664
Interest expense:
Deposits			11,043			6,289			3,146				2,151				2,055
Federal funds purchased and other short-term borrowings			952			655			157				—				1
Subordinated notes			1,119			1,106			394				248				254
Federal Home Loan Bank advances			755			649			635				630				656
Long-term debt			630			466			326				258				96
Total interest expense			14,499			9,165			4,658				3,287				3,062
Net interest income			20,669			23,004			24,239				23,828				24,602
Provision for loan losses			—			—			(1,750	)			(750	)			—
Net interest income after provision for loan losses			20,669			23,004			25,989				24,578				24,602
Noninterest income:
Service charges on deposit accounts			476			553			585				580				603
Debit card usage fees			492			498			507				472				505
Trust services			678			780			622				629				633
Increase in cash value of bank-owned life insurance			255			246			236				227				233
Loan swap fees			—			835			—				—				24
Other income			364			364			328				481				350
Total noninterest income			2,265			3,276			2,278				2,389				2,348
Noninterest expense:
Salaries and employee benefits			6,552			6,578			6,410				6,298				5,928
Occupancy			1,270			1,315			1,242				1,086				1,532
Data processing			673			644			656				624				630
FDIC insurance			243			127			289				337				460
Professional fees			205			250			202				217				183
Director fees			215			209			222				168				184
Other expenses			2,507			2,335			2,245				1,932				2,954
Total noninterest expense			11,665			11,458			11,266				10,662				11,871
Income before income taxes			11,269			14,822			17,001				16,305				15,079
Income taxes			2,323			3,220			4,334				3,121				3,169
Net income		$	8,946		$	11,602		$	12,667			$	13,184			$	11,910
Basic earnings per common share		$	0.54		$	0.70		$	0.76			$	0.80			$	0.72
Diluted earnings per common share		$	0.53		$	0.69		$	0.75			$	0.78			$	0.71

WEST BANCORPORATION, INC. AND SUBSIDIARY
Financial Information (unaudited)
(in thousands)
		For the Year Ended
CONSOLIDATED STATEMENTS OF INCOME		December 31, 2022				December 31, 2021
Interest income:
Loans, including fees		$	107,095			$	95,585
Securities:
Taxable			12,524				8,542
Tax-exempt			3,527				2,861
Interest-bearing deposits			203				292
Total interest income			123,349				107,280
Interest expense:
Deposits			22,629				7,948
Federal funds purchased and other short-term borrowings			1,764				5
Subordinated notes			2,867				1,008
Federal Home Loan Bank advances			2,669				2,944
Long-term debt			1,680				316
Total interest expense			31,609				12,221
Net interest income			91,740				95,059
Provision for loan losses			(2,500	)			(1,500	)
Net interest income after provision for loan losses			94,240				96,559
Noninterest income:
Service charges on deposit accounts			2,194				2,352
Debit card usage fees			1,969				1,948
Trust services			2,709				2,671
Increase in cash value of bank-owned life insurance			964				923
Loan swap fees			835				66
Realized securities gains, net			—				51
Other income			1,537				1,718
Total noninterest income			10,208				9,729
Noninterest expense:
Salaries and employee benefits			25,838				23,226
Occupancy			4,913				5,162
Data processing			2,597				2,465
FDIC insurance			996				1,818
Professional fees			874				946
Director fees			814				765
Other expenses			9,019				8,998
Total noninterest expense			45,051				43,380
Income before income taxes			59,397				62,908
Income taxes			12,998				13,301
Net income		$	46,399			$	49,607
Basic earnings per common share		$	2.79			$	3.00
Diluted earnings per common share		$	2.76			$	2.95

WEST BANCORPORATION, INC. AND SUBSIDIARY
Financial Information (unaudited)
		As of and for the Quarter Ended																				For the Year Ended
COMMON SHARE DATA		December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021				December 31, 2022				December 31, 2021
Earnings per common share (basic)		$	0.54			$	0.70			$	0.76			$	0.80			$	0.72			$	2.79			$	3.00
Earnings per common share (diluted)			0.53				0.69				0.75				0.78				0.71				2.76				2.95
Dividends per common share			0.25				0.25				0.25				0.25				0.24				1.00				0.94
Book value per common share(1)			12.69				11.94				12.99				14.22				15.73
Closing stock price			25.55				20.81				24.34				27.21				31.07
Market price/book value(2)			201.34	%			174.29	%			187.37	%			191.35	%			197.52	%
Price earnings ratio(3)			11.93				7.49				7.98				8.39				10.88
Annualized dividend yield(4)			3.91	%			4.81	%			4.11	%			3.68	%			3.89	%
REGULATORY CAPITAL RATIOS
Consolidated:
Total risk-based capital ratio			12.08	%			12.34	%			12.53	%			10.72	%			10.89	%
Tier 1 risk-based capital ratio			9.55				9.72				9.81				9.81				9.92
Tier 1 leverage capital ratio			8.81				8.85				8.59				8.39				8.49
Common equity tier 1 ratio			8.96				9.11				9.17				9.16				9.24
West Bank:
Total risk-based capital ratio			13.08	%			13.38	%			13.62	%			11.88	%			12.10	%
Tier 1 risk-based capital ratio			12.33				12.60				12.81				10.98				11.13
Tier 1 leverage capital ratio			11.37				11.47				11.22				9.39				9.53
Common equity tier 1 ratio			12.33				12.60				12.81				10.98				11.13
KEY PERFORMANCE RATIOS AND OTHER METRICS
Return on average assets(5)			1.01	%			1.32	%			1.45	%			1.51	%			1.38	%			1.32	%			1.52	%
Return on average equity(6)			17.75				21.01				22.81				20.96				18.51				20.71				20.33
Net interest margin(7)(13)			2.49				2.78				2.93				2.85				3.00				2.76				3.05
Yield on interest-earning assets(8)			4.21				3.87				3.49				3.24				3.36				3.70				3.44
Cost of interest-bearing liabilities			2.24				1.45				0.73				0.52				0.50				1.24				0.53
Efficiency ratio(9)(13)			50.42				43.16				41.96				40.14				43.32				43.70				40.91
Non-performing assets to total assets(10)			0.01				0.01				0.01				0.25				0.26
ALLL ratio(11)			0.93				0.97				0.99				1.11				1.15
Loans/total assets			75.91				74.32				74.05				70.07				70.17
Loans/total deposits			95.22				92.61				90.53				80.40				81.44
Tangible common equity ratio(12)			5.84				5.65				6.22				6.67				7.44

(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 loan 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																				For the Year Ended
		December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021				December 31, 2022				December 31, 2021
Reconciliation of net interest income and net interest margin on a FTE basis to GAAP:
Net interest income (GAAP)		$	20,669			$	23,004			$	24,239			$	23,828			$	24,602			$	91,740			$	95,059
Tax-equivalent adjustment (1)			197				270				326				329				397				1,122				1,202
Net interest income on a FTE basis (non-GAAP)			20,866				23,274				24,565				24,157				24,999				92,862				96,261
Average interest-earning assets			3,328,941				3,322,522				3,362,313				3,432,114				3,309,625				3,361,091				3,152,138
Net interest margin on a FTE basis (non-GAAP)			2.49	%			2.78	%			2.93	%			2.85	%			3.00	%			2.76	%			3.05	%
Reconciliation of efficiency ratio on an adjusted and FTE basis to GAAP:
Net interest income on a FTE basis (non-GAAP)		$	20,866			$	23,274			$	24,565			$	24,157			$	24,999			$	92,862			$	96,261
Noninterest income			2,265				3,276				2,278				2,389				2,348				10,208				9,729
Adjustment for realized securities gains, net			—				—				—				—				—				—				(51	)
Adjustment for losses on disposal of premises and equipment, net			2				—				9				18				55				29				84
Adjusted income			23,133				26,550				26,852				26,564				27,402				103,099				106,023
Noninterest expense			11,665				11,458				11,266				10,662				11,871				45,051				43,380
Efficiency ratio on an adjusted and FTE basis (non-GAAP) (2)			50.42	%			43.16	%			41.96	%			40.14	%			43.32	%			43.70	%			40.91	%

(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

FAQ

What were the 2022 earnings for West Bancorporation (WTBA)?

West Bancorporation reported net income of $46.4 million for 2022, or $2.76 per share.

How did West Bancorporation's Q4 2022 results compare to Q4 2021?

In Q4 2022, West Bancorporation had a net income of $8.9 million, down from $11.9 million in Q4 2021.

What is the dividend declared by West Bancorporation (WTBA)?

The Board of Directors declared a regular quarterly dividend of $0.25 per common share, payable on February 22, 2023.

What is the loan growth percentage for West Bancorporation in 2022?

West Bancorporation reported loan growth of 11.7% in 2022.

What factors led to a decline in net interest income for West Bancorporation?

Net interest income decreased due to rising costs of deposits and borrowed funds, and increased interest expenses.