WEST BANCORPORATION INC

The Company had total assets of $3,986,669 as of March 31, 2025, compared to total assets of $4,014,991 as of December 31, 2024. Changes in the balance sheet included increases in loans and stockholders' equity and decreases in interest-bearing cash deposits and total deposits.

Securities

Securities available for sale increased by $2,054 during the three months ended March 31, 2025. This increase was due to a decrease in unrealized losses on securities since December 31, 2024, partially offset by calls and principal paydowns on securities. Management concluded unrealized losses in the portfolio as of March 31, 2025 are the result of increases in risk-free market interest rates since the securities were purchased and are not an indication of declining credit quality. 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, 2025, approximately 63 percent of the available for sale securities portfolio consisted of government agency guaranteed collateralized mortgage obligations and mortgage-backed securities. Management believes these securities have little to no credit risk and provide cash flows for liquidity and repricing opportunities.

Loans and Nonperforming Assets

Loans outstanding increased $11,611 from $3,004,860 as of December 31, 2024 to $3,016,471 as of March 31, 2025. Changes in the loan portfolio during the first three months of 2025 included increases of $48,135 in commercial real estate loans and $17,035 in commercial loans and a decrease of $56,917 in construction, land and land development loans.

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 and land development loans exceed 100 percent of total risk-based capital. Although the commercial real estate portfolio exceeded these regulatory guidelines as of March 31, 2025, they were within the Company's established policy limits and management believes that 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, 2024 was presented in the Company's Form 10-K, filed with the SEC on February 20, 2025, and the Company has not experienced any material changes to that portfolio since December 31, 2024.

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.

(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, 2025 or December 31, 2024.

Deposits

Deposits decreased $33,078, or 1.0 percent, during the first three months of 2025. Brokered deposits increased to $335,494 at March 31, 2025, from $266,418 at December 31, 2024. Excluding brokered deposits, deposits decreased $102,154, or 3.3 percent, during the first three months of 2025. The decline in deposits was due to normal cash flow fluctuations of our core depositors. Deposit inflows and outflows can be influenced by prevailing market interest rates, competition, local and national economic conditions and fluctuations in our business customers' own liquidity needs.

West Bank participates in the 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, 2025, estimated uninsured deposits, which exclude deposits in the IntraFi® reciprocal network, brokered deposits and public funds protected by state programs, were approximately 28.0 percent of total deposits.

Borrowed Funds

The Company had $270,000 of FHLB advances outstanding at March 31, 2025, all of which are one-month rolling advances hedged with long-term interest rate swaps. The interest rate swaps that hedge the interest rates on these FHLB advances have maturity dates ranging from July 2026 through June 2029 and fixed rates ranging from 1.86 percent to 4.32 percent. This strategy of hedging short-term rolling funding provides cost effective fixed-rate 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 $210,610 as of March 31, 2025 compared with $243,478 as of December 31, 2024.

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. 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®, and through other third party brokers. At March 31, 2025, the Company had $335,494 in brokered deposits, which included fixed-rate deposits with terms through September 2026 and variable-rate deposits with terms through February 2026.

As of March 31, 2025, West Bank had additional borrowing capacity available from the FHLB of approximately $635,000, as well as approximately $119,000 through the Federal Reserve discount window and $75,000 through unsecured federal funds lines of credit with correspondent banks. Net cash from operating activities contributed $9,749 to liquidity for the three months ended March 31, 2025. Management believed that the combination of high levels of liquid assets, unencumbered securities, cash flows from operations, and additional borrowing capacity were sufficient to meet our liquidity needs as of March 31, 2025.

The Company had remaining commitments to invest in qualified affordable housing projects totaling $663 and $861 as of March 31, 2025 and December 31, 2024, respectively.

Capital

The Company's total stockholders' equity increased to $237,873 at March 31, 2025 from $227,875 at December 31, 2024. The increase was primarily the result of retained net income and the increase in the market value of our available for sale investment portfolio. While accumulated other comprehensive losses reduce tangible common equity, they have no impact on regulatory capital. At March 31, 2025, the Company's tangible common equity as a percent of tangible assets was 5.97 percent compared to 5.68 percent as of December 31, 2024.

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, 2025.

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

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, 2025, the capital ratios for the Company and West Bank were sufficient to meet the conservation buffer.