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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended June 30, 2021 |
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| or |
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| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from __________ to __________ |
Commission File Number: 0-49677
WEST BANCORPORATION, INC.
(Exact Name of Registrant as Specified in its Charter)
| | | | | |
| Iowa | 42-1230603 |
| (State of Incorporation) | (I.R.S. Employer Identification No.) |
| | | | | | | | | | | |
| 1601 22nd Street, West Des Moines, Iowa | 50266 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant's telephone number, including area code: (515) 222-2300
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common stock, no par value | WTBA | The Nasdaq Global Select Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | | | | |
| Large accelerated filer | ☐ | | | | |
| Accelerated filer | ☒ | | | | |
| Non-accelerated filer | ☐ | |
| Smaller reporting company | ☐ | | | | |
| Emerging growth company | ☐ | | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
As of July 28, 2021, there were 16,554,846 shares of common stock, no par value, outstanding.
WEST BANCORPORATION, INC.
INDEX
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| Item 4. | | |
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| PART II. | | |
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| Item 1. | | |
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| Item 1A. | | |
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| Item 2. | | |
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| Item 3. | | |
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| Item 4. | | |
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| Item 5. | | |
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| Item 6. | | |
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
West Bancorporation, Inc. and Subsidiary
Consolidated Balance Sheet
(unaudited)
| | | | | | | | | | | | | | |
| (in thousands, except share and per share data) | | June 30, 2021 | | December 31, 2020 |
| ASSETS | | | | |
| Cash and due from banks | | $ | 31,978 | | | $ | 77,693 | |
| Federal funds sold | | 238,845 | | | 318,742 | |
| Cash and cash equivalents | | 270,823 | | | 396,435 | |
| Securities available for sale, at fair value | | 601,462 | | | 420,571 | |
| Federal Home Loan Bank stock, at cost | | 10,189 | | | 11,723 | |
| Loans | | 2,309,527 | | | 2,280,575 | |
| Allowance for loan losses | | (28,042) | | | (29,436) | |
| Loans, net | | 2,281,485 | | | 2,251,139 | |
| Premises and equipment, net | | 30,753 | | | 29,077 | |
| Accrued interest receivable | | 11,415 | | | 11,231 | |
| Bank-owned life insurance | | 43,146 | | | 42,686 | |
| Deferred tax assets, net | | 8,733 | | | 11,289 | |
| Other assets | | 10,754 | | | 11,593 | |
| Total assets | | $ | 3,268,760 | | | $ | 3,185,744 | |
| | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | |
| LIABILITIES | | | | |
| Deposits: | | | | |
| Noninterest-bearing demand | | $ | 703,691 | | | $ | 696,731 | |
| Interest-bearing demand | | 487,642 | | | 553,881 | |
| Savings | | 1,391,231 | | | 1,274,254 | |
| Time of $250 or more | | 46,660 | | | 46,907 | |
| Other time | | 196,065 | | | 129,221 | |
| Total deposits | | 2,825,289 | | | 2,700,994 | |
| Federal funds purchased | | 3,605 | | | 5,375 | |
| Subordinated notes, net | | 20,458 | | | 20,452 | |
| Federal Home Loan Bank advances | | 125,000 | | | 175,000 | |
| Long-term debt | | 20,286 | | | 21,558 | |
| Accrued expenses and other liabilities | | 27,596 | | | 38,670 | |
| Total liabilities | | 3,022,234 | | | 2,962,049 | |
| COMMITMENTS AND CONTINGENCIES (NOTE 8) | | | | |
| STOCKHOLDERS' EQUITY | | | | |
Preferred stock, $0.01 par value; authorized 50,000,000 shares; no shares issued and outstanding at June 30, 2021 and December 31, 2020 | | — | | | — | |
Common stock, no par value; authorized 50,000,000 shares; 16,554,846 and 16,469,272 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively | | 3,000 | | | 3,000 | |
| Additional paid-in capital | | 28,888 | | | 28,823 | |
| Retained earnings | | 221,113 | | | 203,718 | |
| Accumulated other comprehensive loss | | (6,475) | | | (11,846) | |
| Total stockholders' equity | | 246,526 | | | 223,695 | |
| Total liabilities and stockholders' equity | | $ | 3,268,760 | | | $ | 3,185,744 | |
See Notes to Consolidated Financial Statements.
West Bancorporation, Inc. and Subsidiary
Consolidated Statements of Income
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in thousands, except per share data) | | 2021 | | 2020 | | 2021 | | 2020 |
| Interest income: | | | | | | | | |
| Loans, including fees | | $ | 23,139 | | | $ | 22,332 | | | $ | 47,177 | | | $ | 44,643 | |
| Securities: | | | | | | | | |
| Taxable | | 1,895 | | | 1,994 | | | 3,540 | | | 4,377 | |
| Tax-exempt | | 712 | | | 319 | | | 1,270 | | | 616 | |
| Federal funds sold | | 75 | | | 12 | | | 144 | | | 241 | |
| Total interest income | | 25,821 | | | 24,657 | | | 52,131 | | | 49,877 | |
| Interest expense: | | | | | | | | |
| Deposits | | 1,995 | | | 2,351 | | | 3,872 | | | 7,397 | |
| Federal funds purchased | | 1 | | | 3 | | | 2 | | | 19 | |
| Subordinated notes | | 251 | | | 253 | | | 500 | | | 508 | |
| Federal Home Loan Bank advances | | 649 | | | 1,204 | | | 1,632 | | | 2,513 | |
| Long-term debt | | 75 | | | 99 | | | 154 | | | 229 | |
| Total interest expense | | 2,971 | | | 3,910 | | | 6,160 | | | 10,666 | |
| Net interest income | | 22,850 | | | 20,747 | | | 45,971 | | | 39,211 | |
| Provision for loan losses | | (2,000) | | | 3,000 | | | (1,500) | | | 4,000 | |
Net interest income after provision for loan losses | | 24,850 | | | 17,747 | | | 47,471 | | | 35,211 | |
| Noninterest income: | | | | | | | | |
| Service charges on deposit accounts | | 578 | | | 531 | | | 1,160 | | | 1,134 | |
| Debit card usage fees | | 511 | | | 391 | | | 953 | | | 773 | |
| Trust services | | 691 | | | 461 | | | 1,343 | | | 924 | |
| Increase in cash value of bank-owned life insurance | | 240 | | | 136 | | | 460 | | | 294 | |
| Loan swap fees | | 42 | | | 3 | | | 42 | | | 589 | |
| Realized securities gains (losses), net | | 36 | | | (69) | | | 40 | | | (75) | |
| Other income | | 417 | | | 322 | | | 982 | | | 656 | |
| Total noninterest income | | 2,515 | | | 1,775 | | | 4,980 | | | 4,295 | |
| Noninterest expense: | | | | | | | | |
| Salaries and employee benefits | | 5,672 | | | 5,318 | | | 11,280 | | | 10,602 | |
| Occupancy | | 1,199 | | | 1,217 | | | 2,427 | | | 2,430 | |
| Data processing | | 617 | | | 554 | | | 1,219 | | | 1,184 | |
| FDIC insurance | | 426 | | | 292 | | | 830 | | | 529 | |
| Professional fees | | 268 | | | 200 | | | 551 | | | 439 | |
| Director fees | | 214 | | | 194 | | | 405 | | | 428 | |
| Other expenses | | 2,130 | | | 1,642 | | | 4,085 | | | 3,468 | |
| Total noninterest expense | | 10,526 | | | 9,417 | | | 20,797 | | | 19,080 | |
| Income before income taxes | | 16,839 | | | 10,105 | | | 31,654 | | | 20,426 | |
| Income taxes | | 3,600 | | | 2,136 | | | 6,663 | | | 4,368 | |
| Net income | | $ | 13,239 | | | $ | 7,969 | | | $ | 24,991 | | | $ | 16,058 | |
| | | | | | | | | |
| Basic earnings per common share | | $ | 0.80 | | | $ | 0.48 | | | $ | 1.51 | | | $ | 0.98 | |
| Diluted earnings per common share | | $ | 0.79 | | | $ | 0.48 | | | $ | 1.49 | | | $ | 0.97 | |
See Notes to Consolidated Financial Statements.
West Bancorporation, Inc. and Subsidiary
Consolidated Statements of Comprehensive Income
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in thousands) | | 2021 | | 2020 | | 2021 | | 2020 |
| Net income | | $ | 13,239 | | | $ | 7,969 | | | $ | 24,991 | | | $ | 16,058 | |
| Other comprehensive income (loss): | | | | | | | | |
| Unrealized gains (losses) on securities: | | | | | | | | |
| Unrealized holding gains (losses) arising during the period | | 4,048 | | | 5,622 | | | (4,290) | | | 5,814 | |
Plus: reclassification adjustment for net (gains) losses realized in net income | | (36) | | | 69 | | | (40) | | | 75 | |
| | | | | | | | |
| Income tax (expense) benefit | | (1,011) | | | (1,423) | | | 1,091 | | | (1,472) | |
| Other comprehensive income (loss) on securities | | 3,001 | | | 4,268 | | | (3,239) | | | 4,417 | |
Unrealized gains (losses) on derivatives: | | | | | | | | |
| Unrealized holding gains (losses) arising during the period | | (2,321) | | | (2,910) | | | 5,442 | | | (24,168) | |
| Plus: reclassification adjustment for net losses on derivatives realized in net income | | 1,098 | | | 1,038 | | | 6,068 | | | 1,363 | |
Plus: reclassification adjustment for amortization of derivative termination costs | | — | | | 15 | | | — | | | 31 | |
| Income tax (expense) benefit | | 308 | | | 463 | | | (2,900) | | | 5,692 | |
| Other comprehensive income (loss) on derivatives | | (915) | | | (1,394) | | | 8,610 | | | (17,082) | |
| Total other comprehensive income (loss) | | 2,086 | | | 2,874 | | | 5,371 | | | (12,665) | |
| Comprehensive income | | $ | 15,325 | | | $ | 10,843 | | | $ | 30,362 | | | $ | 3,393 | |
See Notes to Consolidated Financial Statements.
West Bancorporation, Inc. and Subsidiary
Consolidated Statements of Stockholders' Equity
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands, except share and per share data) | | | | | | | | | | |
| | |
| | Three Months Ended June 30, 2021 |
| | | | | | | | | | | | Accumulated | | |
| | | | | | | | Additional | | | | Other | | |
| | Preferred | | Common Stock | | Paid-In | | Retained | | Comprehensive | | |
| | Stock | | Shares | | Amount | | Capital | | Earnings | | Income (Loss) | | Total |
| Balance, March 31, 2021 | | $ | — | | | 16,540,381 | | | $ | 3,000 | | | $ | 28,243 | | | $ | 211,847 | | | $ | (8,561) | | | $ | 234,529 | |
Net income | | — | | | — | | | — | | | — | | | 13,239 | | | — | | | 13,239 | |
Other comprehensive income, net of tax | | — | | | — | | | — | | | — | | | — | | | 2,086 | | | 2,086 | |
Cash dividends declared, $0.24 per common share | | — | | | — | | | — | | | — | | | (3,973) | | | — | | | (3,973) | |
Stock-based compensation costs | | — | | | — | | | — | | | 645 | | | — | | | — | | | 645 | |
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes | | — | | | 14,465 | | | — | | | — | | | — | | | — | | | — | |
| Balance, June 30, 2021 | | $ | — | | | 16,554,846 | | | $ | 3,000 | | | $ | 28,888 | | | $ | 221,113 | | | $ | (6,475) | | | $ | 246,526 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2020 |
| | | | | | | | | | | | Accumulated | | |
| | | | | | | | Additional | | | | Other | | |
| | Preferred | | Common Stock | | Paid-In | | Retained | | Comprehensive | | |
| | Stock | | Shares | | Amount | | Capital | | Earnings | | Income (Loss) | | Total |
| Balance, March 31, 2020 | | $ | — | | | 16,447,272 | | | $ | 3,000 | | | $ | 27,023 | | | $ | 189,470 | | | $ | (18,800) | | | $ | 200,693 | |
Net income | | — | | | — | | | — | | | — | | | 7,969 | | | — | | | 7,969 | |
| Other comprehensive income, net of tax | | — | | | — | | | — | | | — | | | — | | | 2,874 | | | 2,874 | |
Cash dividends declared, $0.21 per common share | | — | | | — | | | — | | | — | | | (3,458) | | | — | | | (3,458) | |
Stock-based compensation costs | | — | | | — | | | — | | | 609 | | | — | | | — | | | 609 | |
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes | | — | | | 22,000 | | | — | | | — | | | — | | | — | | | — | |
| Balance, June 30, 2020 | | $ | — | | | 16,469,272 | | | $ | 3,000 | | | $ | 27,632 | | | $ | 193,981 | | | $ | (15,926) | | | $ | 208,687 | |
| | | | | | | | | | | | | | |
| See Notes to Consolidated Financial Statements. | | | | | | | | | | |
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West Bancorporation, Inc. and Subsidiary
Consolidated Statements of Stockholders' Equity
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands, except share and per share data) | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2021 |
| | | | | | | | | | | | Accumulated | | |
| | | | | | | | Additional | | | | Other | | |
| | Preferred | | Common Stock | | Paid-In | | Retained | | Comprehensive | | |
| | Stock | | Shares | | Amount | | Capital | | Earnings | | Income (Loss) | | Total |
| Balance, December 31, 2020 | | $ | — | | | 16,469,272 | | | $ | 3,000 | | | $ | 28,823 | | | $ | 203,718 | | | $ | (11,846) | | | $ | 223,695 | |
Net income | | — | | | — | | | — | | | — | | | 24,991 | | | — | | | 24,991 | |
| Other comprehensive income, net of tax | | — | | | — | | | — | | | — | | | — | | | 5,371 | | | 5,371 | |
Cash dividends declared, $0.46 per common share | | — | | | — | | | — | | | — | | | (7,596) | | | | | (7,596) | |
Stock-based compensation costs | | — | | | — | | | — | | | 1,278 | | | — | | | — | | | 1,278 | |
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes | | — | | | 85,574 | | | — | | | (1,213) | | | — | | | — | | | (1,213) | |
| Balance, June 30, 2021 | | $ | — | | | 16,554,846 | | | $ | 3,000 | | | $ | 28,888 | | | $ | 221,113 | | | $ | (6,475) | | | $ | 246,526 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2020 |
| | | | | | | | | | | | Accumulated | | |
| | | | | | | | Additional | | | | Other | | |
| | Preferred | | Common Stock | | Paid-In | | Retained | | Comprehensive | | |
| | Stock | | Shares | | Amount | | Capital | | Earnings | | Income (Loss) | | Total |
| Balance, December 31, 2019 | | $ | — | | | 16,379,752 | | | $ | 3,000 | | | $ | 27,260 | | | $ | 184,821 | | | $ | (3,261) | | | $ | 211,820 | |
Net income | | — | | | — | | | — | | | — | | | 16,058 | | | — | | | 16,058 | |
| Other comprehensive loss, net of tax | | — | | | — | | | — | | | — | | | — | | | (12,665) | | | (12,665) | |
Cash dividends declared, $0.42 per common share | | — | | | — | | | — | | | — | | | (6,898) | | | — | | | (6,898) | |
Stock-based compensation costs | | — | | | — | | | — | | | 1,121 | | | — | | | — | | | 1,121 | |
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes | | — | | | 89,520 | | | — | | | (749) | | | — | | | — | | | (749) | |
| Balance, June 30, 2020 | | $ | — | | | 16,469,272 | | | $ | 3,000 | | | $ | 27,632 | | | $ | 193,981 | | | $ | (15,926) | | | $ | 208,687 | |
See Notes to Consolidated Financial Statements.
West Bancorporation, Inc. and Subsidiary
Consolidated Statements of Cash Flows
(unaudited)
| | | | | | | | | | | | | | |
| | Six Months Ended June 30, |
| (in thousands) | | 2021 | | 2020 |
| Cash Flows from Operating Activities: | | | | |
| Net income | | $ | 24,991 | | | $ | 16,058 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | |
| Provision for loan losses | | (1,500) | | | 4,000 | |
| Net amortization and accretion | | 929 | | | 1,269 | |
| Securities (gains) losses, net | | (40) | | | 75 | |
| Stock-based compensation | | 1,278 | | | 1,121 | |
| Increase in cash value of bank-owned life insurance | | (460) | | | (294) | |
| | | | |
| | | | |
| Depreciation | | 759 | | | 753 | |
| (Benefit) provision for deferred income taxes | | 746 | | | (540) | |
| Change in assets and liabilities: | | | | |
| Increase in accrued interest receivable | | (184) | | | (1,333) | |
| (Increase) decrease in other assets | | 3,170 | | | (119) | |
| Increase (decrease) in accrued expenses and other liabilities | | (1,181) | | | 2,540 | |
| Net cash provided by operating activities | | 28,508 | | | 23,530 | |
| Cash Flows from Investing Activities: | | | | |
| Proceeds from sales of securities available for sale | | 28,961 | | | 78,581 | |
| Proceeds from maturities and calls of securities available for sale | | 43,153 | | | 32,814 | |
| Purchases of securities available for sale | | (258,216) | | | (49,748) | |
| Purchases of Federal Home Loan Bank stock | | (861) | | | (6,853) | |
| Proceeds from redemption of Federal Home Loan Bank stock | | 2,395 | | | 7,037 | |
| Net increase in loans | | (28,846) | | | (257,897) | |
| | | | |
| | | | |
| Purchases of premises and equipment | | (3,150) | | | (428) | |
| | | | |
| Net cash used in investing activities | | (216,564) | | | (196,494) | |
| Cash Flows from Financing Activities: | | | | |
| Net increase in deposits | | 124,295 | | | 240,953 | |
| Net increase (decrease) in federal funds purchased | | (1,770) | | | 3,095 | |
| | | | |
| Net decrease in Federal Home Loan Bank advances | | (50,000) | | | — | |
| Principal payments on long-term debt | | (1,272) | | | (58) | |
| Common stock dividends paid | | (7,596) | | | (6,898) | |
| Restricted stock units withheld for payroll taxes | | (1,213) | | | (749) | |
| Net cash provided by financing activities | | 62,444 | | | 236,343 | |
| Net increase (decrease) in cash and cash equivalents | | (125,612) | | | 63,379 | |
| Cash and Cash Equivalents: | | | | |
| Beginning | | 396,435 | | | 53,290 | |
| Ending | | $ | 270,823 | | | $ | 116,669 | |
| | | | |
| Supplemental Disclosures of Cash Flow Information: | | | | |
| Cash payments for: | | | | |
| Interest | | $ | 6,499 | | | $ | 11,377 | |
| Income taxes | | 5,530 | | | 1,020 | |
See Notes to Consolidated Financial Statements.
West Bancorporation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(dollars in thousands, except per share data)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared by West Bancorporation, Inc. (the Company) pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to such rules and regulations. Although management believes that the disclosures are adequate to make the information presented understandable, it is suggested that these interim consolidated financial statements be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 1, 2021. In the opinion of management, the accompanying consolidated financial statements of the Company contain all adjustments necessary to fairly present its financial position as of June 30, 2021 and December 31, 2020, net income, comprehensive income and changes in stockholders' equity for the three and six months ended June 30, 2021 and 2020, and cash flows for the six months ended June 30, 2021 and 2020. The results for these interim periods may not be indicative of results for the entire year or for any other period.
The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (GAAP) established by the Financial Accounting Standards Board (FASB). References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codification™, sometimes referred to as the Codification or ASC. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses for the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term are the fair value of financial instruments and the allowance for loan losses.
The accompanying unaudited consolidated financial statements include the accounts of the Company, West Bank and West Bank's special purpose subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. In accordance with GAAP, West Bancorporation Capital Trust I is recorded on the books of the Company using the equity method of accounting and is not consolidated.
Current accounting developments: In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326). The amendments in this update require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net carrying value at the amount expected to be collected on the financial assets. Under the update, the income statement will reflect the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount of financial assets. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. The allowance for credit losses for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination that are measured at amortized cost basis is determined in a similar manner to other financial assets measured at amortized cost basis; however, the initial allowance for credit losses is added to the purchase price rather than being reported as a credit loss expense. Only subsequent changes in the allowance for credit losses are recorded as a credit loss expense for these assets. Off-balance-sheet arrangements such as commitments to extend credit, guarantees, and standby letters of credit that are not considered derivatives under ASC 815 and are not unconditionally cancellable are also within the scope of this update. Credit losses relating to available for sale debt securities should be recorded through an allowance for credit losses.
In December 2019, the FASB issued ASU No. 2019-10, Financial Instruments-Credit Losses (Topic 326). This update amends the effective date of ASU No. 2016-13 for certain entities, including smaller reporting companies until fiscal years beginning after December 15, 2022, including interim periods within those fiscal periods. Early adoption is permitted. The one-time determination date for identifying as a smaller reporting company was November 15, 2019. The Company met the definition of a smaller reporting company as of that date and plans to adopt the standard with the amended effective date. The Company does not plan to early adopt this standard, but continues to work through implementation. The Company continues collecting and retaining loan and credit data and evaluating various loss estimation models. While we currently cannot reasonably estimate the impact of adopting this standard, we expect the impact will be influenced by the composition, characteristics and quality of our loan and securities portfolios, as well as the general economic conditions and forecasts as of the adoption date.
West Bancorporation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(dollars in thousands, except per share data)
In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Financial Instruments - Credit Losses (ASC 326), Derivatives and Hedging (ASC 815), and Financial Instruments (ASC 825). The amendments in the ASU improve the Codification by eliminating inconsistencies and providing clarifications. The amended guidance in this ASU related to the credit losses will be effective for the Company for fiscal years and interim periods beginning after December 15, 2022. The Company is currently evaluating the impact of the ASU on the Company’s consolidated financial statements.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this update provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. It provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact of the reference rate reform on the Company’s consolidated financial statements.
In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope. The amendments in this update refine the scope for certain optional expedients and exceptions for contract modifications and hedge accounting to apply to derivative contracts and certain hedging relationships affected by the discounting transition. The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact of the reference rate reform on the Company's consolidated financial statements.
2. Earnings per Common Share
Basic earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per common share reflect the potential dilution that could occur if the Company's outstanding restricted stock units were vested. The dilutive effect was computed using the treasury stock method, which assumes all stock-based awards were exercised and the hypothetical proceeds from exercise were used by the Company to purchase common stock at the average market price during the period. The incremental shares, to the extent they would have been dilutive, were included in the denominator of the diluted earnings per common share calculation. The calculations of earnings per common share and diluted earnings per common share for the three and six months ended June 30, 2021 and 2020 are presented in the following table.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| (in thousands, except per share data) | 2021 | | 2020 | | 2021 | | 2020 |
| Net income | $ | 13,239 | | | $ | 7,969 | | | $ | 24,991 | | | $ | 16,058 | |
| | | | | | | | |
| Weighted average common shares outstanding | 16,551 | | | 16,464 | | | 16,513 | | | 16,424 | |
Weighted average effect of restricted stock units outstanding | 209 | | | 42 | | | 213 | | | 55 | |
| Diluted weighted average common shares outstanding | 16,760 | | | 16,506 | | | 16,726 | | | 16,479 | |
| | | | | | | | |
| Basic earnings per common share | $ | 0.80 | | | $ | 0.48 | | | $ | 1.51 | | | $ | 0.98 | |
| Diluted earnings per common share | $ | 0.79 | | | $ | 0.48 | | | $ | 1.49 | | | $ | 0.97 | |
Number of anti-dilutive common stock equivalents excluded from diluted earnings per share computation | — | | | 249 | | | 56 | | | 267 | |
West Bancorporation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(dollars in thousands, except per share data)
3. Securities Available for Sale
The following tables show the amortized cost, gross unrealized gains and losses, and fair value of securities available for sale, by security type as of June 30, 2021 and December 31, 2020.
| | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2021 |
| | Amortized
Cost | | Gross
Unrealized
Gains | | Gross
Unrealized
(Losses) | | Fair
Value |
| Securities available for sale: | | | | | | | |
| State and political subdivisions | $ | 200,660 | | | $ | 3,471 | | | $ | (2,012) | | | $ | 202,119 | |
Collateralized mortgage obligations (1) | 232,133 | | | 3,544 | | | (744) | | | 234,933 | |
Mortgage-backed securities (1) | 112,387 | | | 540 | | | (1,107) | | | 111,820 | |
| Collateralized loan obligations | 42,849 | | | 46 | | | (98) | | | 42,797 | |
| Corporate notes | 9,750 | | | 43 | | | — | | | 9,793 | |
| | $ | 597,779 | | | $ | 7,644 | | | $ | (3,961) | | | $ | 601,462 | |
| | | | | | | |
| | | | | | | |
| | December 31, 2020 |
| | Amortized
Cost | | Gross
Unrealized
Gains | | Gross
Unrealized
(Losses) | | Fair
Value |
| Securities available for sale: | | | | | | | |
| State and political subdivisions | $ | 141,405 | | | $ | 3,441 | | | $ | (514) | | | $ | 144,332 | |
Collateralized mortgage obligations (1) | 135,338 | | | 5,650 | | | (26) | | | 140,962 | |
Mortgage-backed securities (1) | 82,994 | | | 651 | | | (122) | | | 83,523 | |
| | | | | | | |
| Collateralized loan obligations | 52,822 | | | 50 | | | (1,118) | | | 51,754 | |
| | | | | | | |
| | $ | 412,559 | | | $ | 9,792 | | | $ | (1,780) | | | $ | 420,571 | |
(1)Collateralized mortgage obligations and mortgage-backed securities consist of residential and commercial mortgage pass-through securities and collateralized mortgage obligations guaranteed by FNMA, FHLMC, GNMA and SBA.
Securities with an amortized cost of approximately $297,417 and $232,206 as of June 30, 2021 and December 31, 2020, respectively, were pledged to secure access to the Federal Reserve discount window, for public fund deposits, and for other purposes as required or permitted by law or regulation.
The amortized cost and fair value of securities available for sale as of June 30, 2021, by contractual maturity, are shown below. Certain securities have call features that allow the issuer to call the securities prior to maturity. Expected maturities may differ from contractual maturities for collateralized mortgage obligations and mortgage-backed securities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Therefore, collateralized mortgage obligations and mortgage-backed securities are not included in the maturity categories within the following maturity summary.
| | | | | | | | | | | |
| | June 30, 2021 |
| | Amortized Cost | | Fair Value |
| | | |
| | | |
| Due after five years through ten years | $ | 36,927 | | | $ | 36,872 | |
| Due after ten years | 216,332 | | | 217,837 | |
| | 253,259 | | | 254,709 | |
| Collateralized mortgage obligations and mortgage-backed securities | 344,520 | | | 346,753 | |
| | $ | 597,779 | | < |