WEST BANCORPORATION INC

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 months ended March 31, 2024 are compared to the results for the same period in 2023, and the consolidated financial condition of the Company as of March 31, 2024 is compared to that as of December 31, 2023. 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, as amended, for the year ended December 31, 2023, filed with the SEC on February 23, 2024.

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, 2024 was $5,809, or $0.35 per diluted common share, compared to $7,844, or $0.47 per diluted common share, for the three months ended March 31, 2023. The Company's annualized return on average assets and return on average equity for the three months ended March 31, 2024 were 0.61 percent and 10.63 percent, respectively, compared to 0.88 percent and 14.77 percent, respectively, for the three months ended March 31, 2023.

The decrease in net income for the three months ended March 31, 2024 compared to the same period in 2023 was primarily due to decreases in net interest income and gain from bank-owned life insurance and an increase in technology and software costs, partially offset by a decrease in salaries and employee benefits.

Net interest income for the three months ended March 31, 2024 declined $1,945, or 10.4 percent, compared to the three months ended March 31, 2023. 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.

Noninterest income decreased $658 for the three months ended March 31, 2024 compared to the same period in 2023 primarily due to a gain from bank-owned life insurance in 2023, partially offset by an increase in trust services revenue in 2024. Noninterest expense decreased $203 during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to a decrease in salaries and employee benefits and business development expenses, partially offset by increases in occupancy and equipment, technology and software expense and FDIC insurance.

Total loans outstanding increased $52,598, or 1.8 percent, during the first three months of 2024. 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, 2024 and December 31, 2023. As of March 31, 2024, the allowance for credit losses was 0.95 percent of total outstanding loans, compared to 0.97 percent as of December 31, 2023. Management believed the allowance for credit losses at March 31, 2024 was adequate to absorb expected losses in the loan portfolio as of that date.

On a quarterly basis, the Company compares three key performance metrics to those of our identified peer group. The peer group for 2024 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, MidWest One 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.

(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 24, 2024, the Company's Board of Directors declared a regular quarterly cash dividend of $0.25 per common share. The dividend is payable on May 22, 2024, to stockholders of record on May 8, 2024.