WEST BANCORPORATION INC

Previous wording

The Company’s 2024 net income was $24,050, compared to $24,137 in 2023. Basic and diluted earnings per common share for 2024 were $1.43 and $1.42, respectively, compared to $1.44 and $1.44, respectively, in 2023. During 2024, we paid our common stockholders $16,806 ($1.00 per common share) in dividends compared to $16,704 ($1.00 per common share) in 2023. The dividend declared and paid in the first quarter of 2025 was $0.25 per common share.

Current wording

The Company’s 2025 net income was $32,560, compared to $24,050 in 2024. Basic and diluted earnings per common share for 2025 were $1.92 and $1.92, respectively, compared to $1.43 and $1.42, respectively, in 2024. During 2025, we paid our common stockholders $16,914 ($1.00 per common share) in dividends compared to $16,806 ($1.00 per common share) in 2024. The dividend declared and paid in the first quarter of 2026 was $0.25 per common share.

Previous wording

Total assets were $4,014,991 at December 31, 2024, compared to $3,825,758 at December 31, 2023, a 4.9 percent increase. Our loan portfolio grew to $3,004,860 as of December 31, 2024, from $2,927,535 as of December 31, 2023. Deposits increased to $3,357,596 as of December 31, 2024, from $2,973,779 as of December 31, 2023.

Current wording

Total assets were $4,142,244 at December 31, 2025, compared to $4,014,991 at December 31, 2024, a 3.2 percent increase. Our loan portfolio declined to $3,001,690 as of December 31, 2025, from $3,004,860 as of December 31, 2024. Deposits increased to $3,468,470 as of December 31, 2025, from $3,357,596 as of December 31, 2024.

Previous wording

The Company compares three key performance metrics to those of an identified peer group for evaluating its results. The peer group for 2024 consists of 21 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., 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.

Current wording

The Company compares three key performance metrics to those of an identified peer group for evaluating its results. The peer group for 2025 consists of 20 Midwestern, publicly traded financial institutions including Bank First Corporation, Bridgewater Bancshares, Inc., ChoiceOne Financial Services, Inc., Civista Bancshares, 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., 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.

Previous wording

The following discussion describes the consolidated operations and financial condition of the Company, including its subsidiary West Bank and West Bank’s special purpose subsidiaries. Results of operations for the year ended December 31, 2024 are compared to the results for the year ended December 31, 2023 and the consolidated financial condition of the Company as of December 31, 2024 is compared to December 31, 2023. Results of operations and financial condition for the year ended December 31, 2023 compared to the year ended December 31, 2022 can be found in Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company’s 2023 annual report on Form 10-K/A filed with the SEC on February 23, 2024.

Current wording

The following discussion describes the consolidated operations and financial condition of the Company, including its subsidiary West Bank and West Bank’s special purpose subsidiaries. Results of operations for the year ended December 31, 2025 are compared to the results for the year ended December 31, 2024 and the consolidated financial condition of the Company as of December 31, 2025 is compared to December 31, 2024. Results of operations and financial condition for the year ended December 31, 2024 compared to the year ended December 31, 2023 can be found in Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company’s 2024 annual report on Form 10-K filed with the SEC on February 20, 2025.

Previous wording

The allowance for credit losses as of December 31, 2024 was $30,432, or 1.01 percent of outstanding loans, compared to $28,342, or 0.97 percent of outstanding loans as of December 31, 2023.

Current wording

The allowance for credit losses as of December 31, 2025 was $30,525, or 1.02 percent of outstanding loans, compared to $30,432, or 1.01 percent of outstanding loans as of December 31, 2024.

Previous wording

Net income for the year ended December 31, 2024 was $24,050, compared to $24,137 for the year ended December 31, 2023. Basic and diluted earnings per common share for 2024 were $1.43 and $1.42, respectively, and for 2023 were $1.44 and $1.44, respectively.

Current wording

Net income for the year ended December 31, 2025 was $32,560, compared to $24,050 for the year ended December 31, 2024. Basic and diluted earnings per common share for 2025 were $1.92 and $1.92, respectively, and for 2024 were $1.43 and $1.42, respectively.

Previous wording

The modest decrease in net income in 2024 compared to 2023 was primarily due to an increase in noninterest expense and decrease in noninterest income, partially offset by an increase in net interest income and decrease in income tax expense. Net interest income increased $2,331, or 3.4 percent, in 2024 compared to 2023. The increase in net interest income was primarily due to an increase in interest income on loans and interest-bearing deposits in other financial institutions, partially offset by an increase in interest expense on deposits.

Current wording

The increase in net income in 2025 compared to 2024 was primarily due to an increase in net interest income, partially offset by a decrease in noninterest income and an increase in noninterest expense. Net interest income increased $17,619, or 24.7 percent, in 2025 compared to 2024. The increase in net interest income was primarily due to the increase in interest income on short-term assets consisting of deposits with banks and securities purchased under agreements to resell and decrease in interest expense on deposits and borrowed funds, partially offset by a decrease in interest income on securities.

Previous wording

The Company recorded a credit loss expense of $1,000 in 2024, compared to a credit loss expense of $700 in 2023. The credit loss expense recorded in 2024 included a $2,000 increase in the allowance for credit losses related to loans, which was offset by a $1,000 decrease to the allowance for credit losses related to unfunded commitments.

Current wording

The Company recorded no credit loss expense in 2025, compared to a credit loss expense of $1,000 in 2024. The credit loss expense recorded in 2024 included a $2,000 increase in the allowance for credit losses related to loans, which was offset by a $1,000 decrease to the allowance for credit losses related to unfunded commitments.

Previous wording

Noninterest income decreased $1,632, or 16.2 percent, in 2024 compared to 2023, primarily due to an increase in realized losses on the sales of securities, a decrease in loan swap fees, and a nonrecurring gain from bank-owned life insurance in 2023, partially offset by an increase in trust services revenue. Noninterest expense increased $2,742, or 5.6 percent, in 2024 compared to 2023, primarily due to increases in occupancy and equipment expense, technology and software expense and FDIC insurance, partially offset by a decrease in business development expenses.

Current wording

Noninterest income decreased $2,170, or 25.7 percent, in 2025 compared to 2024, primarily due to an increase in realized losses on the sales of securities, partially offset by a one-time third party contract incentive included in other income. Noninterest expense increased $2,474, or 4.8 percent, in 2025 compared to 2024, primarily due to increases in salaries and employee benefits, occupancy and equipment expense and technology and software expense, partially offset by a decrease in data processing expense and FDIC insurance.

Previous wording

The Company’s ratio of nonperforming assets to total assets was 0.00 percent and 0.01 percent as of December 31, 2024 and 2023, respectively. For more discussion on loan quality, see the “Loan Portfolio” and “Summary of the Allowance for Credit Losses” sections in this Item of this Form 10-K.

Current wording

The Company’s ratio of nonperforming assets to total assets was 0.00 percent as of both December 31, 2025 and 2024. For more discussion on loan quality, see the “Loan Portfolio” and “Summary of the Allowance for Credit Losses” sections in this Item of this Form 10-K.

Previous wording

Net interest income increased to $71,362 for 2024 from $69,031 for 2023, as the impact of the growth of interest-earning assets and increases in average yields on interest-earning assets exceeded the effects of an increase in average balances of interest-bearing liabilities and increase in average rate paid on interest-bearing liabilities. The net interest margin for 2024 decreased 10 basis points to 1.91 percent, compared to 2.01 percent for 2023. The average yield on earning assets increased by 44 basis points, while the average rate paid on interest-bearing liabilities increased by 52 basis points. For additional analysis of net interest income, see the section captioned “Distribution of Assets, Liabilities and Stockholders’ Equity; Interest Rates; and Interest Differential” in this Item of this Form 10-K.

Current wording

Net interest income increased to $88,981 for 2025 from $71,362 for 2024, as the impact of the growth in average balances of interest-earning assets and decline in average rate paid on interest-bearing liabilities exceeded the effects of the increase in average balances of interest-bearing liabilities. The net interest margin for 2025 increased 44 basis points to 2.35 percent, compared to 1.91 percent for 2024. The average yield on earning assets declined by 2 basis points, while the average rate paid on interest-bearing liabilities decreased by 53 basis points. For additional analysis of net interest income, see the section captioned “Distribution of Assets, Liabilities and Stockholders’ Equity; Interest Rates; and Interest Differential” in this Item of this Form 10-K.

Previous wording

A credit loss expense of $1,000 was recorded in 2024, compared to a credit loss expense of $700 in 2023. The credit loss expense recorded in 2024 included a $2,000 increase in the allowance for credit losses related to loans, which was offset by a $1,000 decrease to the allowance for credit losses related to unfunded commitments. The credit loss expense associated with loans recorded in 2024 was primarily due to changes in forecasted loss rates, driven by an increase in forecasted unemployment rate, and an adjustment to qualitative factors within the commercial real estate segment. The negative $1,000 credit loss expense recorded in 2024 related to unfunded commitments was primarily due to a decrease in the balance of unfunded commitments, primarily from the funding of construction loans. The credit loss expense recorded in 2023 included an allocation of $500 to the allowance for credit losses related to loans and $200 to the allowance for credit losses related to unfunded commitments. The credit loss expense in 2023 was primarily due to growth in loans and unfunded loan commitments. Management believed the allowance for credit losses at December 31, 2024 was adequate to absorb expected losses in the loan portfolio as of that date.

Current wording

No credit loss expense was recorded in 2025, compared to a net credit loss expense of $1,000 in 2024. The credit loss expense recorded in 2024 included a $2,000 increase in the allowance for credit losses related to loans, which was offset by a $1,000 decrease to the allowance for credit losses related to unfunded commitments. The credit loss expense associated with loans recorded in 2024 was primarily due to changes in forecasted loss rates, driven by an increase in forecasted unemployment rate, and an adjustment to qualitative factors within the commercial real estate segment. The negative $1,000 credit loss expense recorded in 2024 related to unfunded commitments was primarily due to a decrease in the balance of unfunded commitments, primarily from the funding of construction loans. Management believed the allowance for credit losses on loans at December 31, 2025 was adequate to absorb expected losses in the loan portfolio as of that date.

Previous wording

In 2024, the Company sold $11,841 of securities from the available for sale securities portfolio and realized a net loss of $1,172, compared to sales of $11,285 of securities available for sale and a realized net loss of $431 in 2023. The proceeds from both periods were reinvested in the loan portfolio. The estimated earn back period of the 2024 transaction is approximately two years.

Current wording

In 2025, the Company sold $63,690 of securities from the available for sale securities portfolio and realized a net loss of $3,959, compared to sales of $11,841 of securities available for sale and a realized net loss of $1,172 in 2024. The transaction in 2025 improves balance sheet flexibility and will be used to improve our long-term earnings profile through redeployment of the proceeds into higher-earning assets or repayment of higher-costing borrowings.

Previous wording

The Company records a provision for income tax expense currently payable, along with a provision for those taxes payable or refundable in the future (deferred taxes). Deferred taxes arise from differences in the timing of certain items for financial statement reporting compared to income tax reporting and are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Federal income tax expense for 2024 and 2023 was $1,928 and $3,711, respectively, while state income tax expense was $1,465 and $1,938, respectively. The effective rate of income tax expense as a percent of income before income taxes was 12.3 percent and 18.9 percent, respectively, for 2024 and 2023. In 2024, income tax expense included a $1,842 tax benefit for an energy-related investment tax credit associated with the construction of the Company’s new headquarters building.

Current wording

The Company records a provision for income tax expense currently payable, along with a provision for those taxes payable or refundable in the future (deferred taxes). Deferred taxes arise from differences in the timing of certain items for financial statement reporting compared to income tax reporting and are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Federal income tax expense for 2025 and 2024 was $6,928 and $1,928, respectively, while state income tax expense was $1,930 and $1,465, respectively. The effective rate of income tax expense as a percent of income before income taxes was 21.3 percent and 12.3 percent, respectively, for 2025 and 2024. In 2024, income tax expense included a $1,842 tax benefit for an energy-related investment tax credit associated with the construction of the Company’s new headquarters building. In 2025, the Company recorded an additional tax benefit of $614 due to a change in estimate of this same 2024 energy-related investment tax credit.

Previous wording

The effective income tax rates differ from the federal statutory income tax rates primarily due to tax-exempt interest income, the tax-exempt increase in cash value of bank-owned life insurance, tax-exempt gain from bank-owned life insurance, disallowed interest expense, stock compensation, state income taxes and the investment tax credit mentioned above. The effective tax rate for both 2024 and 2023 was also impacted by federal income tax credits, including low income housing tax credits and a new markets tax credit from West Bank’s investment in a qualified community development entity, of approximately $1,508 and $1,498, respectively. The Company continues to maintain a valuation allowance against the tax effect of state net operating losses carryforwards as management believes it is likely that a portion of such carryforwards will expire without being utilized.

Current wording

The effective income tax rates differ from the federal statutory income tax rates primarily due to tax-exempt interest income, the tax-exempt increase in cash value of bank-owned life insurance, disallowed interest expense, stock compensation, state income taxes and the investment tax credit mentioned above. The effective tax rate for both 2025 and 2024 was also impacted by federal low income housing and new markets tax credits of approximately $660 and $1,508, respectively. The decrease in these federal income tax credits was primarily due to the expiration of the new markets tax credit at the end of 2024. The Company continues to maintain a valuation allowance against the tax effect of state net operating losses carryforwards as management believes it is likely that a portion of such carryforwards will expire without being utilized.

Previous wording

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 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 the actions of regulatory authorities. The Federal Reserve increased the target federal funds interest rate by a total of 425 basis points in 2022 and an additional 100 basis points in 2023. In 2024, the Federal Reserve decreased the target federal funds rate by a total of 100 basis points. The timing and extent of additional interest rate changes by the Federal Reserve is not known at this time.

Current wording

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 the actions of regulatory authorities. The FOMC decreased the target federal funds interest rate by a total of 100 basis points from September through December of 2024, and an additional 75 basis points from September through December of 2025, which impacted the comparability of the net interest margin between 2025 and 2024.

Previous wording

Net interest margin on an 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. For the years ended December 31, 2024, 2023 and 2022, the Company’s net interest margin on a tax-equivalent basis was 1.91, 2.01 and 2.76 percent, respectively. Tax-equivalent net interest income increased $2,022 in 2024 compared to 2023.

Current wording

Net interest margin on an 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. For the years ended December 31, 2025, 2024 and 2023, the Company’s net interest margin on a tax-equivalent basis was 2.35, 1.91 and 2.01 percent, respectively. Tax-equivalent net interest income increased $17,693 in 2025 compared to 2024.

Previous wording

Tax-equivalent interest income and fees on loans increased $23,154 for the year ended December 31, 2024, compared to 2023. The improvement was driven by a combination of an increase in the average balance of loans and an increase in loan yields in 2024 compared to 2023. The average balance of loans increased $185,567 in 2024 compared to 2023, while loan yields increased by 46 basis points in 2024 compared to 2023. Loan originations and renewals in 2024 continued to reprice at prevailing market rates which exceeded the current weighted average portfolio rate.

Current wording

Tax-equivalent interest income and fees on loans increased $650 for the year ended December 31, 2025, compared to 2024. The improvement was driven by a combination of an increase in the average balance of total loans and an increase in the total loan yield in 2025 compared to 2024. The average balance of total loans increased $1,130 in 2025 compared to 2024, while total loan yield increased by 2 basis points in 2025 compared to 2024. Loan originations and renewals for the fixed-rate loan portfolio continued to reprice at prevailing market rates in 2025, which exceeded the current weighted average portfolio rate. This repricing benefit in the fixed-rate loan portfolio was partially offset by a decrease in loan yields on the variable-rate loan portfolio. The decrease in the yield on variable-rate loans was primarily due to reductions in the prime rate and Secured Overnight Financing Rates (SOFR) driven by the reductions in the federal funds target rate that occurred in 2024 and 2025.

Previous wording

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 flat and rising rate environments as variable-rate loans reprice at higher rates and renewals and new originations are priced at prevailing market rates, which exceed the roll-off rate of principal repayments and maturities of existing loans. In a declining rate environment, the yield on variable-rate loans will decline; however, as long as market rates remain higher than the yield on the fixed-rate portfolio, renewals and originations will continue to increase the yield on the fixed-rate portfolio. The political and economic environments can also influence the volume of new loan originations and the mix of variable-rate versus fixed-rate loans.

Current wording

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 flat and rising rate environments as variable-rate loans reprice at higher rates and renewals and new originations are priced at prevailing market rates, which exceed the roll-off rate of principal repayments and maturities of existing loans. In a declining rate environment, the yield on variable-rate loans will decline; however, as long as market rates remain higher than the yield on the fixed-rate portfolio, renewals and originations will continue to increase the yield on the fixed-rate portfolio, which is what we experienced in 2025. The political and economic environments can also influence the volume of new loan originations and the mix of variable-rate versus fixed-rate loans.

Previous wording

Tax-equivalent interest income on securities decreased $1,128 for the year ended December 31, 2024, compared to 2023. The average balance of securities available for sale in 2024 was $49,468 lower than in 2023, primarily due to principal paydowns on securities, sales of securities, and the decline in fair value of available for sale securities during 2024 resulting from the increase in market interest rates during 2024. The yield on available for sale securities increased by 3 basis points in 2024 compared to 2023.

Current wording

Tax-equivalent interest income on securities decreased $2,831 for the year ended December 31, 2025, compared to 2024. The average balance of securities available for sale in 2025 was $70,990 lower than in 2024, primarily due to principal paydowns and sales of securities. The proceeds from principal paydowns and sales of securities have increased liquidity and improved balance sheet flexibility to allow for improvement in our long-term earnings profile. Additionally, the yield on available for sale securities decreased by 17 basis points in 2025 compared to 2024.

Previous wording

Interest expense on deposits increased $30,488 for the year ended December 31, 2024, compared to 2023. The average balance of interest bearing deposits increased $416,483 in 2024 compared to 2023, while the rates paid on deposits increased 68 basis points in 2024 compared to 2023. The increase in interest expense on deposits was primarily due to the increase in deposit balances, higher deposit rates resulting from higher market rates and increased competition for deposit balances, and changes in deposit mix.

Current wording

Interest expense on deposits decreased $9,534 for the year ended December 31, 2025, compared to 2024. The rates paid on deposits decreased 55 basis points in 2025 compared to 2024, while the average balance of interest-bearing deposits increased $166,967. The decrease in cost of deposits was primarily driven by the reductions in the federal funds target rate since September 2024.

Previous wording

Interest expense on borrowed funds decreased $3,058 for the year ended December 31, 2024, compared to 2023. The average balance of borrowed funds decreased $76,971 in 2024 compared to 2023. The average balance of federal funds purchased and other short-term borrowings decreased $119,066 in 2024 compared to 2023 primarily due to increases in deposits. The average balance of FHLB advances increased by $46,719 in 2024 compared to 2023. This increase in average balances was primarily due to an increase in rolling one-month FHLB advances that are hedged with long-term interest rate swap agreements to provide fixed-cost wholesale funding. The average rate paid on FHLB advances increased 40 basis points in 2024 compared to 2023.

Current wording

Interest expense on borrowed funds decreased $5,926 for the year ended December 31, 2025, compared to 2024, due to a combination of lower average balances of borrowed funds and lower average rate paid on borrowed funds. The average balance of borrowed funds decreased $122,949 in 2025 compared to 2024. The average balance of federal funds purchased and other short-term borrowings decreased $75,736 in 2025 compared to 2024 primarily due to increases in average customer deposits and decline in average balance of securities available for sale. The average balance of FHLB advances declined by $42,363 in 2025 compared to 2024. This decline in average balances was primarily due to FHLB advances with a total balance of $45,000 maturing in the fourth quarter of 2024.

Previous wording

The balance of securities available for sale decreased by $79,354 as of December 31, 2024, compared to December 31, 2023. This decrease was primarily due to principal paydowns on securities, a decline in fair value of securities during 2024 resulting from the increase in market interest rates and the sale of $11,841 of securities in the fourth quarter of 2024. The proceeds from this sale were reinvested into the loan portfolio. 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.

Current wording

The balance of securities available for sale decreased by $76,118 as of December 31, 2025, compared to December 31, 2024. This decrease was primarily due to principal paydowns on securities and the sale of $63,690 of securities in the fourth quarter of 2025, partially offset by a decrease in unrealized losses on securities since December 31, 2024. The proceeds from the sale in December 2025 improve balance sheet flexibility and will be used to improve our long-term earnings profile through redeployment of the net proceeds into higher-earning assets or repayment of higher-cost borrowings.

Previous wording

As of December 31, 2024, approximately 62 percent of the available for sale securities portfolio consisted of government agency guaranteed collateralized mortgage obligations and mortgage-backed securities. We believe those securities have little to no credit risk and provide cash flows for liquidity and repricing opportunities. All collateralized mortgage obligations and mortgage-backed securities consist of residential and commercial mortgage pass-through securities and collateralized mortgage obligations guaranteed by the Federal Home Loan Mortgage Corporation (FHLMC), Federal National Mortgage Association (FNMA), Government National Mortgage Association (GNMA), or the Small Business Administration (SBA). The securities issued by state and political subdivisions are diversified among municipalities in 26 states.

Current wording

As of December 31, 2025, approximately 62 percent of the available for sale securities portfolio consisted of government agency guaranteed collateralized mortgage obligations and mortgage-backed securities. We believe those securities have little to no credit risk and provide cash flows for liquidity and repricing opportunities. All collateralized mortgage obligations and mortgage-backed securities consist of residential and commercial mortgage pass-through securities and collateralized mortgage obligations guaranteed by the Federal Home Loan Mortgage Corporation (FHLMC), Federal National Mortgage Association (FNMA), Government National Mortgage Association (GNMA), or the Small Business Administration (SBA). The securities issued by state and political subdivisions are diversified among municipalities in 25 states.

Previous wording

Total gross unrealized losses in the securities available for sale portfolio were $128,838 at December 31, 2024 compared to $121,806 at December 31, 2023. As of December 31, 2024, 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 December 31, 2024, the Company also determined that no individual securities in an unrealized loss position represented credit losses that would require an allowance for credit losses. Management concluded that the unrealized losses in the portfolio 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.

Current wording

Total gross unrealized losses in the securities available for sale portfolio were $93,270 at December 31, 2025 compared to $128,838 at December 31, 2024. As of December 31, 2025, 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 December 31, 2025, the Company also determined that no individual securities in an unrealized loss position represented credit losses that would require an allowance for credit losses. Management concluded that the unrealized losses in the portfolio 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.

Previous wording

The Company seeks to create growth in commercial lending, which primarily includes commercial real estate, multi-family, and commercial and industrial lending, by offering customer-focused products and competitive pricing and by capitalizing on the positive trends in its market areas. It is the objective of the Company’s credit policies to diversify the commercial loan portfolio to limit concentrations in any single industry. As of December 31, 2024, total loans were approximately 89.5 percent of total deposits and 74.8 percent of total assets.

Current wording

The Company seeks to create growth in commercial lending, which primarily includes commercial real estate, multi-family, and commercial and industrial lending, by offering customer-focused products and competitive pricing and by capitalizing on the positive trends in its market areas. It is the objective of the Company’s credit policies to diversify the commercial loan portfolio to limit concentrations in any single industry. As of December 31, 2025, total loans were approximately 86.5 percent of total deposits and 72.5 percent of total assets.

Previous wording

Loans outstanding at the end of 2024 increased 2.6 percent compared to the end of 2023. Changes in the loan portfolio during 2024 included an increase of $94,670 in construction, land and land development loans and decreases of $18,830 in 1-4 family residential first mortgage loans and $17,362 in commercial and industrial loans. The Company continues to focus on business development efforts in all of its markets. The political and economic environments could influence the volume of future loan originations and the mix of variable-rate versus fixed-rate loans.

Current wording

Loans outstanding at the end of 2025 decreased 0.1 percent compared to the end of 2024. Changes in the loan portfolio during 2025 included decreases of $81,314 in construction, land and land development loans and $9,173 in commercial and industrial loans and an increase of $68,571 in commercial real estate loans. The Company continues to focus on business development efforts in all of its markets. The political and economic environments could influence the volume of future loan originations and the mix of variable-rate versus fixed-rate loans.

Previous wording

Nonperforming loans declined to $133 at December 31, 2024, compared to $296 at December 31, 2023. The decrease was due to a payoff on the single loan included in nonperforming loans as of December 31, 2023, partially offset by the addition of one loan as of December 31, 2024.

Current wording

Nonperforming loans declined to $0 at December 31, 2025, compared to $133 at December 31, 2024. The decrease was due to a full payoff on the single loan included in nonperforming loans as of December 31, 2024.

Previous wording

Commercial loans secured by real estate, including construction, land and land development, totaled $2,369,342, or 78.8 percent of total loans, at December 31, 2024. Non-owner occupied commercial real estate loan concentrations and the weighted average LTV by property type as of December 31, 2024 and 2023 are shown in the following table. LTV is determined using the maximum credit exposure of the loan compared to the most recent appraisal data on the property obtained in accordance with the Company’s lending policies.

Current wording

Commercial loans secured by real estate, including construction, land and land development, totaled $2,356,599, or 78.4 percent of total loans, at December 31, 2025. Non-owner occupied commercial real estate loan concentrations and the weighted average LTV by property type as of December 31, 2025 and 2024 are shown in the following table. LTV is determined using the maximum credit exposure of the loan compared to the most recent appraisal data on the property obtained in accordance with the Company’s lending policies.

Previous wording

Nonperforming loans at December 31, 2024 totaled $133, or 0.00 percent of total loans, a slight decrease from $296, or 0.01 percent of total loans, at December 31, 2023. The decrease in nonperforming loans at December 31, 2024, compared to December 31, 2023, was due a payoff on the single loan included in the nonaccrual balance on December 31, 2023, partially offset by the addition of one loan as of December 31, 2024. Nonperforming loans include loans on nonaccrual status, loans past due 90 days or more and still accruing interest, and loans that have been considered to be loan restructurings made to borrowers experiencing financial difficulty. The Company held no other real estate owned properties as of December 31, 2024 or 2023.

Current wording

Nonperforming loans at December 31, 2025 totaled $0, a slight decrease from $133, or 0.00 percent of total loans, at December 31, 2024. The decrease in nonperforming loans at December 31, 2025, compared to December 31, 2024, was due to a full payoff on the single loan included in the nonaccrual balance on December 31, 2024. Nonperforming loans include loans on nonaccrual status, loans past due 90 days or more and still accruing interest, and loans that have been considered to be loan restructurings made to borrowers experiencing financial difficulty. The Company held no other real estate owned properties as of December 31, 2025 or 2024.

Previous wording

As of December 31, 2024 and 2023 there was no allowance for credit losses related to loans individually evaluated for credit losses. The portion of the allowance for credit losses related to loans collectively evaluated for credit losses increased to $30,432, or 1.01 percent of outstanding loans as of December 31, 2024, compared to $28,342, or 0.97 percent of outstanding loans as of December 31, 2023. The increase was primarily due to the credit loss expense of $2,000 for the year ended December 31, 2024. The credit loss expense for loans in 2024 was primarily due to changes in forecasted loss rates, driven by an increase in forecasted unemployment rate, and an adjustment to qualitative factors within the commercial real estate segment. The Company recorded a credit loss expense related to loans of $500 in 2023. The credit loss expense in 2023 was primarily due to growth in loans. Management believed the allowance for credit losses as of December 31, 2024 was adequate to absorb the expected losses in the portfolio as of that date.

Current wording

As of December 31, 2025 and 2024, there was no allowance for credit losses related to loans individually evaluated for credit losses. The portion of the allowance for credit losses related to loans collectively evaluated for credit losses increased to $30,525, or 1.02 percent of outstanding loans as of December 31, 2025, compared to $30,432, or 1.01 percent of outstanding loans as of December 31, 2024. The increase was primarily due to net recoveries for the year ended December 31, 2025. Management believed the allowance for credit losses as of December 31, 2025 was adequate to absorb the expected losses in the portfolio as of that date.

Previous wording

Deposits totaled $3,357,596 as of December 31, 2024, which was an increase of 12.9 percent compared to December 31, 2023. Deposit growth in 2024 included a mix of public funds and commercial and consumer deposits. 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.

Current wording

Deposits totaled $3,468,470 as of December 31, 2025, which was an increase of 3.3 percent compared to December 31, 2024. Deposit growth in 2025 included a mix of public funds and commercial and consumer deposits. 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.

Previous wording

At December 31, 2024, the Company had $266,418 in brokered deposits, compared to $305,411 at December 31, 2023. Brokered deposits included fixed-rate time deposits with maturities through September 2025 and variable-rate deposits with terms through February 2026. The decrease in brokered deposits during 2024 was primarily due to core deposit growth. When necessary, brokered deposits are utilized, along with other wholesale funding sources, to fund loan growth and offset core deposit outflows.

Current wording

At December 31, 2025, the Company had $154,564 in brokered deposits, compared to $266,418 at December 31, 2024. Brokered deposits included fixed-rate time deposits with maturities through September 2026 and variable-rate deposits with terms through February 2027. The decrease in brokered deposits during 2025 was primarily due to core deposit growth. When necessary, brokered deposits are utilized, along with other wholesale funding sources, to fund loan growth and offset core deposit outflows.

Previous wording

Management reduced interest rates on deposits in the fourth quarter of 2024 as a result of the reductions in the target federal funds rate by the Federal Reserve. Any deposit rate changes in 2025 will be dependent on market rates, liquidity needs and competition for deposit balances. To limit the Company’s exposure to market interest rate changes, interest rate swaps are in place on $110,000 of deposit balances that effectively convert certain customer deposits with variable rates to fixed-rate instruments.

Current wording

Management reduced interest rates on deposits in 2024 and 2025 as a result of the reductions in the target federal funds rate by the Federal Reserve in 2024 and 2025. Any deposit rate changes in 2026 will be dependent on market rates, liquidity needs and competition for deposit balances. To limit the Company’s exposure to market interest rate changes, interest rate swaps are in place on $70,000 of deposit balances that effectively convert certain customer deposits with variable rates to fixed-rate instruments.

Previous wording

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. We consider these reciprocal deposits to be in-market deposits as distinguished from traditional out-of-market brokered deposits. Time deposits as of December 31, 2024 and 2023, included $162,148 and $152,160, respectively, of reciprocal deposits. Included in total deposits as of December 31, 2024 and 2023, were $220,627 and $165,858, respectively, of reciprocal interest-bearing checking and $273,126 and $254,504, respectively, of reciprocal money market deposits.

Current wording

West Bank participates in a reciprocal deposit network, which enables depositors to receive FDIC insurance coverage on deposits otherwise exceeding the maximum insurable amount. We consider these reciprocal deposits to be in-market deposits as distinguished from traditional out-of-market brokered deposits. Time deposits as of December 31, 2025 and 2024, included $155,150 and $162,148, respectively, of reciprocal deposits. Included in total deposits as of December 31, 2025 and 2024, were $244,476 and $220,627, respectively, of reciprocal interest-bearing checking and $264,033 and $273,126, respectively, of reciprocal money market deposits.

Previous wording

Total estimated uninsured deposits were $1,562,981, $1,435,406 and $1,412,955 as of December 31, 2024, 2023 and 2022, respectively. The uninsured deposit amounts are estimated based on the methodologies and assumptions used for regulatory reporting requirements and include collateralized public unit deposits. The following table shows the amount of time deposits in excess of the insurance limit by maturity.

Current wording

Total estimated uninsured deposits were $1,744,989, $1,562,981 and $1,435,406 as of December 31, 2025, 2024 and 2023, respectively. The uninsured deposit amounts are estimated based on the methodologies and assumptions used for regulatory reporting requirements and include collateralized public unit deposits. The following table shows the amount of time deposits in excess of the insurance limit by maturity.

Previous wording

The Company had $270,000 of FHLB advances outstanding at December 31, 2024, compared to $315,000 at December 31, 2023. This decrease was due to two FHLB advances that matured in 2024 and were not renewed. One advance, with a balance of $20,000, was a term advance and the other advance, with a balance of $25,000, was part of the Company’s rolling funding program and associated with a corresponding interest rate swap agreement that also matured. As of December 31, 2024, all FHLB advances were hedged with long-term interest rate swaps as part of the Company’s rolling funding program. These interest rate swaps 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 effectively provides fixed cost wholesale funding through the maturity dates of the various interest rate swaps.

Current wording

The Company had $270,000 of FHLB advances outstanding at December 31, 2025, and 2024. As of December 31, 2025, all FHLB advances were hedged with long-term interest rate swaps as part of the Company’s rolling funding program. These interest rate swaps 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 effectively provides fixed cost wholesale funding through the maturity dates of the various interest rate swaps.

Previous wording

The Company has a credit agreement with an unaffiliated commercial bank. As of December 31, 2024, this borrowing had a balance of $31,250. Interest is payable quarterly. Required quarterly principal payments are $1,250, with the remaining balance due February 2027. The Company may make additional principal payments without penalty. The interest rate is variable at the Wall Street Journal Prime Rate minus 1.00 percent, which was 6.50 percent as of December 31, 2024. The Company has an interest rate swap contract that effectively converts $20,000 of this borrowing to a fixed rate of 6.40 percent through its maturity date.

Current wording

The Company has a credit agreement with an unaffiliated commercial bank. As of December 31, 2025, this borrowing had a balance of $26,250. Interest is payable quarterly. Required quarterly principal payments are $1,250, with the remaining balance due February 2027. The Company may make additional principal payments without penalty. The interest rate is variable at the Wall Street Journal Prime Rate minus 1.00 percent, which was 5.75 percent as of December 31, 2025. The Company has an interest rate swap contract that effectively converts $20,000 of this borrowing to a fixed rate of 6.40 percent through its maturity date.

Previous wording

In June 2022, the Company issued $60,000 of subordinated notes (Notes). The Notes initially bear interest at 5.25 percent per annum, with interest payable semi-annually for the first five years of the Notes. Beginning June 15, 2027, the interest rate will reset quarterly to a floating rate per annum that will be three-month term Secured Overnight Financing Rate (SOFR) plus 2.41 percent, with payments due quarterly. The Company may redeem the Notes, in whole or in part, on and after June 15, 2027 at a price equal to 100 percent of the principal amount of the Notes being redeemed plus accrued and unpaid interest. The Notes will mature on June 15, 2032 if they are not earlier redeemed. Proceeds from this debt issuance were used to make a $58,650 capital injection into West Bank, the Company’s subsidiary to fund organic growth.

Current wording

In June 2022, the Company issued $60,000 of subordinated notes (Notes). The Notes initially bear interest at 5.25 percent per annum, with interest payable semi-annually for the first five years of the Notes. Beginning June 15, 2027, the interest rate will reset quarterly to a floating rate per annum that will be three-month term SOFR plus 2.41 percent, with payments due quarterly. The Company may redeem the Notes, in whole or in part, on and after June 15, 2027 at a price equal to 100 percent of the principal amount of the Notes being redeemed plus accrued and unpaid interest. The Notes will mature on June 15, 2032 if they are not earlier redeemed.

Previous wording

The Company has an interest rate swap with a notional amount of $20,000 which converts variable-rate subordinated debentures to fixed-rate debt. The interest rate is a variable rate based on the 3-month term SOFR plus 0.26161 percent tenor spread adjustment plus 3.05 percent. This interest rate swap has a fixed rate of 4.81 percent and matures in September 2026.

Current wording

The Company has $20,619 in junior subordinated debentures which mature in 2033 and carry a variable interest rate. The Company has an interest rate swap with a notional amount of $20,000 which converts the variable-rate subordinated debentures to fixed-rate debt based on the 3-month term SOFR plus 0.26161 percent tenor spread adjustment plus 3.05 percent. This interest rate swap has a fixed rate of 4.81 percent and matures in September 2026.