West Bancorporation Inc (WTBA) is a regional community bank headquartered in West Des Moines, Iowa, serving customers across central Iowa, eastern Iowa, and southern Minnesota. Founded in 1893, the bank has a long history of providing personalized banking services to individuals and businesses in its local markets.

Business Overview and History West Bancorporation’s origins date back to 1893 when the bank was first established as West Des Moines Bank in West Des Moines, Iowa. For decades, the bank grew steadily, establishing itself as a trusted financial institution in the region. In the 1980s and 1990s, the company expanded its footprint beyond West Des Moines, opening new branches in central and eastern Iowa as well as southern Minnesota. This geographic diversification allowed West Bancorporation to serve a larger customer base and weather economic downturns in any one local market.

During the late 2000s, West Bancorporation faced a significant challenge during the global financial crisis. Like many banks, the company experienced an increase in non-performing loans and had to bolster its allowance for credit losses. However, the bank’s prudent risk management practices and diversified loan portfolio allowed it to navigate the crisis relatively well compared to its peers.

In the 2010s, West Bancorporation continued to grow organically and through selective acquisitions. It opened new branches, expanded its commercial and retail banking offerings, and strengthened its wealth management and trust services. The company also made investments in technology to enhance the customer experience and operating efficiency.

Today, West Bancorporation, Inc. is a diversified financial holding company with over $3.8 billion in assets. Its wholly-owned subsidiary, West Bank, operates 35 banking centers across Iowa and Minnesota, providing a full suite of banking, wealth management, and treasury management services to individuals and businesses. The company has established itself as a leading community bank in its markets, known for its exceptional customer service, sound risk management, and commitment to the local communities it serves.

Financial Overview For the fiscal year ended December 31, 2023, West Bancorporation reported net income of $24.14 million, or $1.44 per diluted share, on total revenue of $78.47 million. The company’s net interest margin for the year was 2.05%, and its return on average equity stood at 12.22%. As of December 31, 2023, West Bancorporation had total assets of $3.83 billion and a tangible common equity ratio of 5.88%.

During the first nine months of 2024, the company generated net income of $16.95 million, or $1.00 per diluted share, on total revenue of $58.94 million. The net interest margin for the period was 1.88%, and the return on average equity was 10.18%. As of September 30, 2024, West Bancorporation’s total assets had grown to $3.99 billion, and its tangible common equity ratio had increased to 5.90%.

In the most recent quarter (Q3 2024), West Bancorporation reported revenue of $20.15 million, a 0.15% increase year-over-year, and net income of $5.95 million, up 0.71% from the same period last year. Operating cash flow for the quarter was $12.93 million, a slight decrease of 0.08% year-over-year, while free cash flow was $6.96 million, down 0.37% compared to Q3 2023.

Loan Portfolio and Credit Quality West Bancorporation’s loan portfolio is primarily composed of commercial real estate loans (54.4%), commercial and industrial loans (16.9%), and residential real estate loans (12.0%) as of September 30, 2024. The company has maintained excellent credit quality, with a nonperforming asset ratio of just 0.01% at the end of the third quarter of 2024.

Management has attributed the strength of the loan portfolio to the company’s disciplined underwriting practices and the economic diversity of its local markets. West Bancorporation’s customers operate in a wide range of industries, including healthcare, education, technology, and agribusiness, which has helped to mitigate concentration risk.

Despite the challenges posed by the pandemic and rising interest rates, West Bancorporation has continued to grow its loan portfolio, with a 3.2% increase in total loans during the first nine months of 2024. The bank’s construction and land development loans have been a particular area of focus, as the company has funded several large vertical construction projects in its markets.

As of September 30, 2024, West Bancorporation’s total loans outstanding were $3.02 billion, an increase of $93.69 million or 3.20% from December 31, 2023. The largest increases were in the construction, land and land development loan segment, which grew $107.04 million, while commercial loans decreased $18.71 million. The company has slightly over $87 million in unfunded commitments on large vertical construction projects with anticipated draws that should occur over the next 12 months.

The allowance for credit losses was 0.97% of total outstanding loans as of September 30, 2024, which management believed was adequate to absorb expected losses. In the third quarter of 2024, West Bancorporation recorded a $1 million provision for credit losses, primarily due to an increase in forecasted unemployment rates, and a $1 million negative provision for credit losses related to unfunded commitments.

Deposit Growth and Funding West Bancorporation has also demonstrated success in growing its deposit base, with a 10.2% increase in total deposits during the first nine months of 2024. The bank has focused on building core deposit relationships, particularly in the commercial and public fund sectors, to support its lending activities.

To supplement its deposit funding, West Bancorporation has also utilized brokered deposits and other wholesale funding sources. As of September 30, 2024, the company had $425.87 million in brokered deposits, representing approximately 13% of its total deposits.

West Bancorporation’s total deposits grew $304.77 million or 10.20% during the first nine months of 2024, reaching $3.28 billion as of September 30, 2024. Excluding brokered deposits, organic deposit growth was $184.31 million or 6.90%. The company’s core deposit growth was approximately 3.5% for the third quarter of 2024. Management expects that approximately half of the 7% year-to-date increase in core deposit balances is related to temporary funds that they anticipate will be withdrawn in 2025.

Liquidity and Capital Strength West Bancorporation maintains a strong liquidity position, with $157.80 million in cash and cash equivalents as of September 30, 2024. The company also has significant borrowing capacity available from the Federal Home Loan Bank and the Federal Reserve, providing additional flexibility to support its growth initiatives. Specifically, West Bancorporation has $628 million in additional borrowing capacity available from the FHLB, as well as $125 million through the Federal Reserve discount window and $75 million in unsecured federal funds lines of credit.

The bank’s capital ratios remain well above regulatory minimums, with a total risk-based capital ratio of 11.95% and a Tier 1 leverage ratio of 8.15% as of September 30, 2024. This strong capital position allows West Bancorporation to continue investing in its operations and exploring strategic opportunities while maintaining a prudent risk profile.

West Bancorporation’s debt-to-equity ratio stood at 1.97 as of Q3 2024, while its current ratio was 1.05 and quick ratio was 0.95, indicating a solid liquidity position.

Securities Portfolio West Bancorporation’s securities available for sale portfolio totaled $597.75 million as of September 30, 2024, down from $623.92 million at the end of 2023. The portfolio is primarily composed of government agency guaranteed collateralized mortgage obligations and mortgage-backed securities, which management views as having little to no credit risk. The decrease in the securities portfolio was due to paydowns and maturities, partially offset by a decrease in unrealized losses.

Competitive Landscape and Outlook West Bancorporation operates in a highly competitive regional banking market, facing competition from larger national banks, regional banks, and local community banks. The company has responded to this challenge by emphasizing its personalized customer service, deep community roots, and strong local market knowledge.

Looking ahead, West Bancorporation’s management team is cautiously optimistic about the company’s prospects, despite the ongoing economic uncertainties. The bank’s focus on building lasting customer relationships, maintaining credit discipline, and diversifying its funding sources should position it well to navigate the current environment.

Management expects to benefit from further Federal Reserve rate cuts, as their margin has stabilized and is improving. The company’s net interest margin increased 5 basis points in the third quarter of 2024 compared to the second quarter, indicating a positive trend.

While the company does not provide formal guidance, management has indicated that they will continue to pursue organic growth opportunities, with a particular emphasis on commercial and small business lending, as well as core deposit gathering. West Bancorporation’s strong capital levels and liquidity position also give the bank the flexibility to consider strategic acquisitions that align with its growth objectives and risk profile.

The banking industry in the Midwest region has seen moderate growth in recent years, with a compound annual growth rate (CAGR) of around 4-5%. West Bancorporation has generally kept pace with these industry trends.

Risks and Challenges Like any financial institution, West Bancorporation faces a variety of risks and challenges, including interest rate risk, credit risk, and competitive pressures. The company’s geographic concentration in the Midwest, while a strength in terms of local market knowledge, also exposes it to economic conditions in that region.

Additionally, the ongoing regulatory environment and the potential for changes in banking regulations represent an area of uncertainty for the company. West Bancorporation must continually adapt its policies and procedures to ensure compliance with evolving rules and requirements.

Conclusion West Bancorporation’s long history, conservative management approach, and focus on community banking have enabled the company to navigate various economic cycles and maintain a strong financial position. The bank’s solid credit quality, deposit growth, and capital strength provide a solid foundation for future growth and expansion.

As West Bancorporation continues to execute its strategy of building deep relationships with customers and supporting the local communities it serves, the company is well-positioned to capitalize on opportunities in its regional markets. While challenges persist, the bank’s experienced management team and proven business model suggest that West Bancorporation is poised to deliver long-term value for its shareholders.

The company’s performance in recent quarters, including modest revenue growth and improved net income, demonstrates its resilience in a challenging economic environment. With a strong liquidity position, ongoing investment in vertical construction projects, and a focus on core deposit growth, West Bancorporation appears well-equipped to navigate the evolving banking landscape and continue its trajectory of steady growth in the Midwest region.

Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.