wtba-20231231

Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to the Company’s business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meanings of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Forward-looking statements may appear throughout this report. These forward-looking statements are generally identified by the words “believes,” “expects,” “intends,” “anticipates,” “projects,” “future,” “confident,” “may,” “should,” “will,” “strategy,” “plan,” “opportunity,” “will be,” “will likely result,” “will continue” or similar references, or references to estimates, predictions or future events. Such forward-looking statements are based upon certain underlying assumptions, risks and uncertainties. Because of the possibility that the underlying assumptions are incorrect or do not materialize as expected in the future, actual results could differ materially from these forward-looking statements. Risks and uncertainties that may affect future results include: interest rate risk, including the effects of recent rate increases by the Federal Reserve; fluctuations in the values of the securities held in our investment portfolio, including as a result of rising interest rates; competitive pressures, including from non-bank competitors such as “fintech” companies and digital asset service providers; pricing pressures on loans and deposits; our ability to successfully manage liquidity risk; changes in credit and other risks posed by the Company’s loan portfolio, including declines in commercial or residential real estate values or changes in the allowance for credit losses dictated by new market conditions, accounting standards or regulatory requirements; the concentration of large deposits from certain clients, who have balances above current FDIC insurance limits; changes in local, national and international economic conditions, including rising rates of inflation and possible recession; the effects of recent developments and events in the financial services industry, including the large-scale deposit withdrawals over a short period of time at Silicon Valley Bank, Signature Bank and First Republic Bank that resulted in failure of those institutions; changes in legal and regulatory requirements, limitations and costs, including in response to the recent failures of Silicon Valley Bank, Signature Bank and First Republic Bank; changes in customers’ acceptance of the Company’s products and services; the occurrence of fraudulent activity, breaches or failures of our or our third-party partners’ information security controls or cyber-security related incidents, including as a result of sophisticated attacks using artificial intelligence and similar tools; unexpected outcomes of existing or new litigation involving the Company; the monetary, trade and other regulatory policies of the U.S. government; acts of war or terrorism, including the Israeli-Palestinian conflict and the Russian invasion of Ukraine; widespread disease or pandemics, or other adverse external events; risks related to climate change and the negative impact it may have on our customers and their businesses; changes to U.S. tax laws, regulations and guidance; potential changes in federal policy and at regulatory agencies as a result of the upcoming 2024 presidential election; talent and labor shortages; the new 1 percent excise tax on stock buybacks by publicly traded companies; and any other risks described in the “Risk Factors” sections of reports filed by the Company with the Securities and Exchange Commission. The Company undertakes no obligation to revise or update such forward-looking statements to reflect current or future events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

The market areas served by West Bank are highly competitive with respect to both loans and deposits. West Bank competes with other commercial banks, credit unions, mortgage companies and other financial service providers, including financial technology (FinTech) companies. According to the Federal Deposit Insurance Corporation’s (FDIC) Summary of Deposits as of June 30, 2023, West Bank ranked eighth in the state of Iowa in terms of deposit share. Some of West Bank’s competitors are locally controlled, while others are regional, national or international companies. The larger, international, national or regional banks have certain competitive advantages due to their ability to undertake substantial advertising campaigns and allocate their investment assets to out-of-market geographic regions with potentially higher returns. Such banks also offer certain services, such as international and conduit financing transactions, which are not offered directly by West Bank. These larger banking organizations also have much higher legal lending limits than West Bank, and therefore, may be better able to service large regional, national and global commercial customers. The financial services industry has become even more competitive as a result of recent Federal Reserve rate increases and legislative, regulatory and technological changes and continued consolidation. Technology has lowered barriers to entry and made it possible for non-banks, such as FinTech companies, to offer deposit and loan products and services traditionally provided by banks.

In order to compete to the fullest extent possible with the other financial institutions in its primary market areas, West Bank uses the flexibility and knowledge of its local management, Board of Directors and community advisors. West Bank has a group of community advisors in each of its markets who provide insight to management on current business activity levels and trends. West Bank seeks to capitalize on customers who desire to do business with a local institution. This includes emphasizing specialized services, local promotional activities, and personal contacts by West Bank’s officers, directors and employees. In particular, West Bank competes for loans primarily by offering competitive interest rates, experienced lending personnel with local decision-making authority, flexible loan arrangements, quality products and services, and proactive relationship management. West Bank competes for deposits principally by offering depositors a variety of straight-forward deposit products along with electronic access and other personalized services.

As part of our compensation philosophy, we believe that we must offer and maintain market competitive compensation and benefit programs for our employees in order to attract and retain talent. The goal of our compensation program is to create superior long-term value for our stockholders by attracting, motivating and retaining outstanding employees who serve our customers while generating financial performance that is consistently better than our peers. Our business model allows us to operate with fewer employees than the typical commercial bank of our size because we emphasize teamwork, sound practices and a focus on business banking. Because we have fewer people, we need to have the right people and ensure that we offer what we consider to be above average pay in exchange for above average performance. Our employees are provided a formal performance evaluation annually that includes discussion of the opportunity for advancement and career development.

FDIC-insured institutions, their holding companies and their affiliates are extensively regulated under federal and state law. As a result, our growth and earnings performance may be affected not only by management decisions and general economic conditions, but also by the requirements of federal and state statutes and by the regulations and policies of various bank regulatory agencies, including the Iowa Division of Banking, the Board of Governors of the Federal Reserve System (Federal Reserve), the FDIC and the Consumer Financial Protection Bureau (CFPB). Furthermore, taxation laws administered by the Internal Revenue Service and state taxing authorities, accounting rules developed by the Financial Accounting Standards Board (FASB), securities laws administered by the SEC and state securities authorities, and anti-money laundering laws enforced by the U.S. Department of the Treasury (Treasury) have an impact on our business. The effect of these statutes, regulations, regulatory policies and accounting rules are significant to our operations and results.

Federal and state banking laws impose a comprehensive system of supervision, regulation and enforcement on the operations of FDIC-insured institutions, their holding companies and affiliates that is intended primarily for the protection of the FDIC-insured deposits and depositors of banks, rather than stockholders. These federal and state laws, and the regulations of the bank regulatory agencies issued under them, affect, among other things, the scope of our business; the kinds and amounts of investments we may make; required capital levels relative to our assets; the nature and amount of collateral for loans; the establishment of branches; our ability to merge, consolidate and acquire; dealings with our insiders and affiliates; and our payment of dividends. In reaction to the global financial crisis and particularly following passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), we experienced heightened regulatory requirements and scrutiny. Although the reforms primarily targeted systemically important financial service providers, their influence filtered down in varying degrees to community banks over time and caused our compliance and risk management processes, and the costs thereof, to increase. The Economic Growth, Regulatory Relief and Consumer Protection Act of 2018 (Regulatory Relief Act) eliminated questions about the applicability of certain Dodd-Frank Act reforms to community bank systems, including relieving us of any requirement to engage in mandatory stress tests, maintain a risk committee or comply with the Volcker Rule’s complicated prohibitions on proprietary trading and ownership of private funds. We believe these reforms have been favorable to our operations.

Acquisitions and Activities/Financial Holding Company Election. The primary purpose of a bank holding company is to control and manage banks. The BHCA generally requires the prior approval of the Federal Reserve for any merger involving a bank holding company or any acquisition by a bank holding company of another bank or bank holding company. Subject to certain conditions (including deposit concentration limits established by the BHCA), the Federal Reserve may allow a bank holding company to acquire banks located in any state of the United States. In approving interstate acquisitions, the Federal Reserve is required to give effect to applicable state law limitations on the aggregate amount of deposits that may be held by the acquiring bank holding company and its FDIC-insured institution affiliates in the state in which the target bank is located (provided that those limits do not discriminate against out-of-state institutions or their holding companies) and state laws that require that the target bank have been in existence for a minimum period of time (not to exceed five years) before being acquired by an out-of-state bank holding company. Furthermore, in accordance with the Dodd-Frank Act, bank holding companies must be well-capitalized and well-managed in order to effect interstate mergers or acquisitions.

The BHCA generally prohibits the Company from acquiring direct or indirect ownership or control of more than five percent of the voting shares of any company that is not a bank and from engaging in any business other than that of banking, managing and controlling banks or furnishing services to banks and their subsidiaries. This general prohibition is subject to a number of exceptions. The principal exception allows bank holding companies to engage in, and to own shares of companies engaged in, certain businesses found by the Federal Reserve prior to November 11, 1999 to be “so closely related to banking ... as to be a proper incident thereto.” This authority would permit us to engage in a variety of banking-related businesses, including the ownership and operation of a savings association, or any entity engaged in consumer finance, equipment leasing, the operation of a computer service bureau (including software development) and mortgage banking and brokerage services. The BHCA does not place territorial restrictions on the domestic activities of nonbank subsidiaries of bank holding companies.

Additionally, bank holding companies that meet certain eligibility requirements prescribed by the BHCA and elect to operate as financial holding companies may engage in, or own shares in companies engaged in, a wider range of nonbanking activities, including securities and insurance underwriting and sales, merchant banking and any other activity that the Federal Reserve, in consultation with the Secretary of the Treasury, determines by regulation or order is financial in nature or incidental to any such financial activity or that the Federal Reserve determines by order to be complementary to any such financial activity, as long as the activity does not pose a substantial risk to the safety or soundness of FDIC-insured institutions or the financial system generally. In the third quarter of 2016, we elected to operate as a financial holding company. In order to maintain our status as a financial holding company, both the Company and West Bank must be well-capitalized, well-managed, and have at least a satisfactory CRA rating. If the Federal Reserve determines that either the Company or West Bank is not well-capitalized or well-managed, the Federal Reserve will provide a period of time in which to achieve compliance, but during the period of noncompliance, the Federal Reserve may place any limitations on us that it deems appropriate. Furthermore, if non-compliance is based on the failure of West Bank to achieve a satisfactory CRA rating, we would not be able to commence any new financial activities or acquire a company that engages in such activities. As of December 31, 2023, we retained our election as a financial holding company, but we have not engaged in any activity and do not own any assets for which a financial holding company designation was required. The election affords the ability to respond more quickly to market developments and opportunities.

As a general matter, the Federal Reserve has indicated that the board of directors of a bank holding company should eliminate, defer or significantly reduce dividends to stockholders if: (i) the company’s net income available to stockholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends; (ii) the prospective rate of earnings retention is inconsistent with the company’s capital needs and overall current and prospective financial condition; or (iii) the company will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios. The Federal Reserve also possesses enforcement powers over bank holding companies and their nonbank subsidiaries to prevent or remedy actions that represent unsafe or unsound practices or violations of applicable statutes and regulations. Among these powers is the ability to proscribe the payment of dividends by banks and bank holding companies.

At least semi-annually, the FDIC updates its loss and income projections for the DIF and, if needed, increases or decreases the assessment rates, following notice and comment on proposed rulemaking. For this purpose, the reserve ratio is the DIF balance divided by estimated insured deposits. In response to the global financial crisis, the Dodd-Frank Act increased the minimum reserve ratio from 1.15% to 1.35% of estimated amount of total insured deposits. In the semiannual update in June 2022, the FDIC projected that the reserve ratio was at risk of not reaching the statutory minimum of 1.35% by September 30, 2028, the statutory deadline. Based on this update, the FDIC approved an increase in initial base deposit insurance assessment rate schedules by two basis points, applicable to all insured depository institutions. The increase was effective on January 1, 2023, applicable to the first quarterly assessment period of the 2023 assessment (January 1 through March 31, 2023).

In July 2023, federal banking agencies proposed a revision to capital rules that would apply to all banking organizations with $100 billion or more in total assets. The rules are intended to improve consistency of risk measurement in the capital rules for large banking organizations; apply the capital standards for large banking organizations to a broader set of large banking organizations to ensure regulatory capital is calculated in a consistent manner; require all large banking organizations to meet the supplementary leverage ratio requirements. Smaller banking organizations could be subject to the newly revised market risk capital rule if its trading assets and trading liabilities are at least $5 billion or at least 10 percent of its total assets, to satisfy minimum capital requirements. If finalized, the proposal would provide transition provisions to allow banking organizations sufficient time to adjust to the proposed requirements. Specifically, the proposal would phase in the requirements over three years, such that the new provisions would be fully implemented starting in the fourth year after the effective date of the rule.

Capital Levels. Banks have been required to hold minimum levels of capital based on guidelines established by the bank regulatory agencies since 1983. The minimums have been expressed in terms of ratios of “capital” divided by “total assets”. The capital guidelines for U.S. banks beginning in 1989 have been based upon international capital accords (known as “Basel” rules) adopted by the Basel Committee on Banking Supervision, a committee of central banks and bank supervisors that acts as the primary global standard-setter for prudential regulation, as implemented by the U.S. bank regulatory agencies on an interagency basis. The accords recognized that bank assets for the purpose of the capital ratio calculations needed to be risk weighted (the theory being that riskier assets should require more capital) and that off-balance sheet exposures needed to be factored in the calculations. Following the global financial crisis, the Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, announced agreement on a strengthened set of capital requirements for banking organizations around the world, known as Basel III, to address deficiencies recognized in connection with the global financial crisis.

Not only did the Basel III Rule increase most of the required minimum capital ratios in effect prior to January 1, 2015, but, in requiring that forms of capital be of higher quality to absorb loss, it introduced the concept of Common Equity Tier 1 Capital, which consists primarily of common stock, related surplus (net of Treasury stock), retained earnings, and Common Equity Tier 1 minority interests subject to certain regulatory adjustments. The Basel III Rule also changed the definition of capital by establishing more stringent criteria that instruments must meet to be considered Additional Tier 1 Capital (primarily non-cumulative perpetual preferred stock that meets certain requirements) and Tier 2 Capital (primarily other types of preferred stock and subordinated debt, subject to limitations). The Basel III Rule also constrained the inclusion of minority interests, mortgage-servicing assets, and deferred tax assets in capital and required deductions from Common Equity Tier 1 Capital if such assets exceeded a percentage of a banking institution’s Common Equity Tier 1 Capital.

Well-Capitalized Requirements. The ratios described above are minimum standards in order for banking organizations to be considered “adequately capitalized.” Bank regulatory agencies uniformly encourage banks to hold more capital and be “well-capitalized” and, to that end, federal law and regulations provide various incentives for banking organizations to maintain regulatory capital at levels in excess of minimum regulatory requirements. For example, a banking organization that is well-capitalized may: (i) qualify for exemptions from prior notice or application requirements otherwise applicable to certain types of activities; (ii) qualify for expedited processing of other required notices or applications; and (iii) accept, roll-over or renew brokered deposits. Higher capital levels could also be required if warranted by the particular circumstances or risk profiles of individual banking organizations. For example, the Federal Reserve’s capital guidelines contemplate that additional capital may be required to take adequate account of, among other things, interest rate risk, or the risks posed by concentrations of credit, nontraditional activities or securities trading activities. Further, any banking organization experiencing or anticipating significant growth would be expected to maintain capital ratios, including tangible capital positions (i.e., Tier 1 Capital less all intangible assets), well above the minimum levels.

Prompt Corrective Action. The concept of an institution being “well-capitalized” is part of a regulatory enforcement regime that provides the federal banking regulators with broad power to take “prompt corrective action” to resolve the problems of depository institutions based on the capital level of each particular institution. The extent of the regulators’ powers depends on whether the institution in question is “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized,” in each case as defined by regulation. Depending upon the capital category to which an institution is assigned, the regulators’ corrective powers include: (i) requiring the institution to submit a capital restoration plan; (ii) limiting the institution’s asset growth and restricting its activities; (iii) requiring the institution to issue additional capital stock (including additional voting stock) or to sell itself; (iv) restricting transactions between the institution and its affiliates; (v) restricting the interest rate that the institution may pay on deposits; (vi) ordering a new election of directors of the institution; (vii) requiring that senior executive officers or directors be dismissed; (viii) prohibiting the institution from accepting deposits from correspondent banks; (ix) requiring the institution to divest certain subsidiaries; (x) prohibiting the payment of principal or interest on subordinated debt; and (xi) ultimately, appointing a receiver for the institution.

The primary role of liquidity risk management is to: (i) prospectively assess the need for funds to meet financial obligations; and (ii) ensure the availability of cash or collateral to fulfill those needs at the appropriate time by coordinating the various sources of funds available to the institution under normal and stressed conditions. Basel III includes a liquidity framework that requires the largest insured institutions to measure their liquidity against specific liquidity tests. One test, referred to as the Liquidity Coverage Ratio, or LCR, is designed to ensure that the banking entity has an adequate stock of unencumbered high-quality liquid assets that can be converted easily and immediately in private markets into cash to meet liquidity needs for a 30-calendar day liquidity stress scenario. The other test, known as the Net Stable Funding Ratio, or NSFR, is designed to promote more medium- and long-term funding of the assets and activities of FDIC-insured institutions over a one-year horizon. These tests provide an incentive for banks and holding companies to increase their holdings in Treasury securities and other sovereign debt as a component of assets, increase the use of long-term debt as a funding source and rely on stable funding like core deposits (in lieu of brokered deposits).

Dividend Payments. The primary source of funds for the Company is dividends from West Bank. Under the Iowa Banking Act, Iowa-chartered banks generally may pay dividends only out of undivided profits. The Iowa Division of Banking may restrict the declaration or payment of a dividend by an Iowa-chartered bank, such as West Bank. The payment of dividends by any FDIC-insured institution is affected by the requirement to maintain adequate capital pursuant to applicable capital adequacy guidelines and regulations, and an FDIC-insured institution generally is prohibited from paying any dividends if, following payment thereof, the institution would be undercapitalized. As described above, West Bank exceeded its capital requirements under applicable guidelines as of December 31, 2023. Notwithstanding the availability of funds for dividends, however, the FDIC and the Iowa Division of Banking may prohibit the payment of dividends by West Bank if either or both determine such payment would constitute an unsafe or unsound practice. In addition, under the Basel III Rule, institutions that want to pay dividends will have to maintain 2.5 percent in Common Equity Tier 1 Capital attributable to the capital conservation buffer. See “—Bank Capital Requirements” above.

In general, the safety and soundness standards prescribe the goals to be achieved in each area, and each institution is responsible for establishing its own procedures to achieve those goals. If an institution fails to operate in a safe and sound manner, the FDIC-insured institution’s primary federal regulator may require the institution to submit a plan for achieving and maintaining compliance. If an FDIC-insured institution fails to submit an acceptable compliance plan, or fails in any material respect to implement a compliance plan that has been accepted by its primary federal regulator, the regulator is required to issue an order directing the institution to cure the deficiency. Until the deficiency cited in the regulator’s order is cured, the regulator may restrict the FDIC-insured institution’s rate of growth, require the FDIC-insured institution to increase its capital, restrict the rates that the institution pays on deposits or require the institution to take any action that the regulator deems appropriate under the circumstances. Operating in an unsafe or unsound manner will also constitute grounds for other enforcement action by the federal bank regulatory agencies, including cease and desist orders and civil money penalty assessments.

During the past decade, the bank regulatory agencies have increasingly emphasized the importance of sound risk management processes and strong internal controls when evaluating the activities of the FDIC-insured institutions that they supervise. Properly managing risks has been identified as critical to the conduct of safe and sound banking activities and has become even more important as new technologies, product innovation, and the size and speed of financial transactions have changed the nature of banking markets. The agencies have identified a spectrum of risks facing a banking institution including, but not limited to, credit, market, liquidity, operational, legal and reputational risk. The key risk themes identified for 2023 are discussed under Risk Factors. West Bank is expected to have active board and senior management oversight; adequate policies, procedures and limits; adequate risk measurement, monitoring and management information systems; and comprehensive internal controls.

Privacy and Cybersecurity. West Bank is subject to many U.S. federal and state laws and regulations governing requirements for maintaining policies and procedures to protect non-public confidential information of their customers. These laws require West Bank to periodically disclose its privacy policies and practices relating to sharing such information and permit consumers to opt out of their ability to share information with unaffiliated third parties under certain circumstances. They also impact West Bank’s ability to share certain information with affiliates and non-affiliates for marketing and/or non-marketing purposes, or to contact customers with marketing offers. In addition, as a part of its operational risk mitigation, West Bank is required to implement a comprehensive information security program that includes administrative, technical, and physical safeguards to ensure the security and confidentiality of customer records and information and to require the same of its service providers. These security and privacy policies and procedures are in effect across all business lines and geographic locations.

On October 24, 2023, the bank regulatory agencies issued a final rule to strengthen and modernize the CRA regulations (the CRA Rule), some of which is effective on April 1, 2024. The CRA Rule is designed to update how CRA activities qualify for consideration, where CRA activities are considered, and how CRA activities are evaluated. More specifically, the bank regulatory agencies described the goals of the CRA Rule as follows: (i) to expand access to credit, investment, and basic banking services in low and moderate income communities; (ii) to adapt to changes in the banking industry, including mobile and internet banking by modernizing assessment areas while maintaining a focus on branch based areas; (iii) to provide greater clarity, consistency, and transparency in the application of the regulations through the use of standardized metrics as part of CRA evaluation and clarifying eligible CRA activities focused on low and moderate income communities and underserved rural communities; (iv) to tailor CRA rules and data collection to bank size and business model; and (v) to maintain a unified approach among the regulators. Management of West Bank is assessing the impact of the CRA Rule on its CRA lending and investment activities in its markets.

Concentrations in Commercial Real Estate. Concentration risk exists when FDIC-insured institutions deploy too many assets to any one industry or segment. A concentration in commercial real estate (CRE) is one example of regulatory concern. The interagency Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices guidance (CRE Guidance) provides supervisory criteria, including the following numerical indicators, to assist bank examiners in identifying banks with potentially significant commercial real estate loan concentrations that may warrant greater supervisory scrutiny: (i) CRE loans exceeding 300 percent of capital and increasing 50 percent or more in the preceding three years; or (ii) construction and land development loans exceeding 100 percent of capital. The CRE Guidance does not limit banks’ levels of CRE lending activities, but rather guides institutions in developing risk management practices and levels of capital that are commensurate with the level and nature of their commercial real estate concentrations. On December 18, 2015, the federal banking agencies issued a statement to reinforce prudent risk-management practices related to CRE lending, having observed substantial growth in many CRE asset and lending markets, increased competitive pressures, rising CRE concentrations in banks, and an easing of CRE underwriting standards. The federal bank agencies reminded FDIC-insured institutions to maintain underwriting discipline and exercise prudent risk-management practices to identify, measure, monitor and manage the risks arising from CRE lending. In addition, FDIC-insured institutions must maintain capital commensurate with the level and nature of their CRE concentration risk.

Because abuses in connection with residential mortgages were a significant factor contributing to the global financial crisis, many new rules issued by the CFPB, as required by the Dodd-Frank Act, addressed mortgage and mortgage-related products, their underwriting, origination, servicing and sales. The Dodd-Frank Act significantly expanded underwriting requirements applicable to loans secured by 1-4 family residential real property and augmented federal law combating predatory lending practices. In addition to numerous disclosure requirements, the Dodd-Frank Act and the CFPB’s enabling rules imposed new standards for mortgage loan originations on all lenders, including banks and savings associations, in an effort to strongly encourage lenders to verify a borrower’s ability to repay, while also establishing a presumption of compliance for certain “qualified mortgages.” The CFPB has from time to time released additional rules as to qualified mortgages and the borrower’s ability to repay. The CFPB’s rules have not had a significant impact on West Bank’s operations, except for higher compliance costs.

In deciding whether to extend credit or enter into other transactions with clients and counterparties, we may rely on information furnished by or on behalf of clients and counterparties, including financial statements and other financial information. We also may rely on representations of clients and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. Although we regularly review our credit exposure to specific clients and counterparties and to specific industries that we believe may present credit concerns, default risk may arise from events or circumstances that are difficult to detect, such as fraud, or such as catastrophic events affecting certain industries. Moreover, such circumstances, including fraud, may become more likely to occur or be detected in periods of general economic uncertainty. We may also fail to receive full information with respect to the risks of a counterparty. In addition, in cases where we have extended credit against collateral, we may find that we are under-secured, for example, as a result of sudden declines in market values that reduce the value of collateral or due to fraud with respect to such collateral. If such events or circumstances were to occur, it could result in potential loss of revenue and have an adverse effect on our business, results of operations and financial condition.

West Bank’s loan portfolio includes a significant amount of commercial real estate loans, construction and land development loans, commercial lines of credit and commercial term loans. West Bank’s typical commercial borrower is a small- or medium-sized, privately owned Iowa or Minnesota business entity. Commercial loans often have large balances, and repayment usually depends on the borrowers’ successful business operations. Commercial loans also are generally not fully repaid over the loan period and thus may require refinancing or a large payoff at maturity. If the general economy turns downward, commercial borrowers may not be able to repay their loans, and the value of their assets, which are usually pledged as collateral, may decrease rapidly and significantly. Also, when credit markets tighten due to adverse developments in specific markets or the general economy, opportunities for refinancing may become more expensive or unavailable, resulting in loan defaults.

Commercial real estate loans were a significant portion of our total loan portfolio as of December 31, 2023. The market value of real estate can fluctuate significantly in a short period of time as a result of market conditions in the geographic area in which the real estate is located. Adverse developments affecting real estate values in one or more of our markets could increase the credit risk associated with our loan portfolio. Additionally, commercial real estate lending typically involves higher loan principal amounts, and repayment of the loans is generally dependent, in large part, on sufficient income from the properties securing the loans to cover operating expenses and debt service. Economic events, including decreases in office occupancy following the COVID-19 pandemic, or governmental regulations outside of the control of the borrower or lender could negatively impact the future cash flows and market values of the affected properties.

The federal banking regulators have promulgated joint guidance on sound risk management practices for financial institutions with concentrations in commercial real estate lending. Under the CRE Guidance, a financial institution that, like West Bank, is actively involved in commercial real estate lending should perform a risk assessment to identify concentrations. A financial institution may have a concentration in commercial real estate lending if, among other factors (i) total reported loans for construction, land development, and other land represent 100 percent or more of total risk-based capital, or (ii) total reported loans secured by multifamily and non-farm non-residential properties, loans for construction, land development and other land, and loans otherwise sensitive to the general commercial real estate market, including loans to commercial real estate related entities, represent 300 percent or more of total risk-based capital. Based on these criteria, West Bank had concentrations of 90 percent and 417 percent, respectively, as of December 31, 2023. The purpose of the CRE Guidance is to assist banks in developing risk management practices and capital levels commensurate with the level and nature of commercial real estate concentrations. The CRE Guidance states that management should employ heightened risk management practices, including board and management oversight, strategic planning, development of underwriting standards, and risk assessment and monitoring through market analysis and stress testing. West Bank believes that its current risk management processes adequately address the regulatory guidance; however, there can be no guarantee of the effectiveness of the risk management processes on an ongoing basis.

A significant portion of our loan portfolio is secured by real property. Under certain circumstances, we may take title to the real property collateral through foreclosure or other means. As the titleholder of the property, we may be responsible for environmental risks, such as hazardous materials, which attach to the property. For these reasons, prior to extending credit, we have an environmental risk assessment program to identify any known environmental risks associated with the real property that will secure our loans. In addition, we routinely inspect properties following the taking of title. When environmental risks are found, environmental laws and regulations may prescribe our approach to remediation. As a result, while we have ownership of a property, we may incur substantial expense and bear potential liability for any damages caused. The environmental risks may also materially reduce the property’s value or limit our ability to use or sell the property. We also cannot guarantee that our environmental risk assessment will detect all environmental issues relating to a property, which could subject us to additional liability.

Determination of the allowance is inherently subjective as it requires significant estimates and management’s judgment of credit risks and future trends, all of which may undergo material changes. Deterioration in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require an increase in the allowance for credit losses. In addition, bank regulatory agencies periodically review our allowance and may require an increase in the provision for credit losses or the recognition of additional loan charge-offs, based on judgments different from those of management. Also, if charge-offs in future periods exceed the allowance for credit losses, we will need additional provisions to increase the allowance. Any increases in provisions will result in a decrease in net income and capital and may have a material adverse effect on our financial condition and results of operations.

There continues to be a rise in electronic fraudulent activity, security breaches and cyber attacks within the financial services industry, especially in the commercial banking sector due to cyber-criminals targeting commercial bank accounts, and as a result of increasingly sophisticated methods of conducting cyber attacks, including those employing artificial intelligence. Moreover, in recent periods, several large corporations, including financial institutions, third party partners specializing in providing services to financial institutions, and retail companies, have suffered major data breaches, in some cases exposing not only confidential and proprietary corporate information, but also sensitive financial and other personal information of their customers and employees and subjecting them to potential fraudulent activity. Some of our customers may have been affected by these breaches, which could increase their risks of identity theft and other fraudulent activity that could involve their accounts with us.

Information pertaining to us and our customers is maintained, and transactions are executed, on networks and systems maintained by us and certain third-party partners, such as our online banking, mobile banking and core deposit and loan recordkeeping systems. The secure maintenance and transmission of confidential information, as well as execution of transactions over these systems, are essential to protect us and our customers against fraud and security breaches and to maintain the confidence of our customers. Breaches of information security also may occur through intentional or unintentional acts by those having access to our systems or the confidential information of our customers, including employees. In addition, increases in criminal activity levels and sophistication, advances in computer capabilities, new discoveries, vulnerabilities in third-party technologies (including browsers and operating systems), or other developments could result in a compromise or breach of the technology, processes and controls that we use to prevent fraudulent transactions and to protect data about us, our customers and underlying transactions, as well as the technology used by our customers to access our systems. Our third-party partners’ inability to anticipate, or failure to adequately mitigate, breaches of security could result in a number of negative events, including losses to us or our customers, loss of business or customers, damage to our reputation, the incurrence of additional expenses, disruption to our business, additional regulatory scrutiny or penalties, or our exposure to civil litigation and possible financial liability, any of which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Artificial intelligence, including generative artificial intelligence, is or may be enabled by or integrated into our products or those developed by our third-party partners. As with many developing technologies, artificial intelligence presents risks and challenges that could affect its further development, adoption, and use, and therefore our business. Artificial intelligence algorithms may be flawed, for example datasets may contain biased information or otherwise be insufficient; and inappropriate or controversial data practices could impair the acceptance of artificial intelligence solutions and result in burdensome new regulations. If the analyses that products incorporating artificial intelligence assist in producing for us or our third-party partners are deficient, biased or inaccurate, we could be subject to competitive harm, potential legal liability and brand or reputational harm. The use of artificial intelligence may also present ethical issues. If we or our third-party partners offer artificial intelligence enabled products that are controversial because of their purported or real impact on human rights, privacy, or other issues, we may experience competitive harm, potential legal liability and brand or reputational harm. In addition, we expect that governments will continue to assess and implement new laws and regulations concerning the use of artificial intelligence, which may affect or impair the usability or efficiency of our products and services and those developed by our third-party partners.

Our business is highly dependent on the successful and uninterrupted functioning of our information technology and telecommunications systems, third-party servicers, accounting systems, mobile and online banking platforms and financial intermediaries. We outsource to third parties many of our major systems, such as data processing and mobile and online banking. The failure of these systems, or the termination of a third-party software license or service agreement on which any of these systems is based, could interrupt our operations. Because our information technology and telecommunications systems interface with and depend on third-party systems, we could experience service denials if demand for such services exceeds capacity or such third-party systems fail or experience interruptions. A system failure or service denial could result in a deterioration of our ability to process loans or gather deposits and provide customer service, compromise our ability to operate effectively, result in potential noncompliance with applicable laws or regulations, damage our reputation, result in a loss of customer business or subject us to additional regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on business, financial condition, results of operations and growth prospects. In addition, failures of third parties to comply with applicable laws and regulations, or fraud or misconduct on the part of employees of any of these third parties, could disrupt our operations or adversely affect our reputation.

If economic influences change so that we do not have access to short-term credit, or our depositors withdraw a substantial amount of their funds for other uses, West Bank might experience liquidity issues. Our efforts to monitor and manage liquidity risk may not be successful or sufficient to deal with dramatic or unanticipated reductions in our liquidity. If this were to occur and additional short-term borrowings or debt is needed for liquidity purposes in the future, there can be no assurance that such borrowings or debt would be available or, if available, would be on favorable terms. If we increase our short-term borrowings or debt, our cost of funds will increase, thereby reducing our net interest income, or we may need to sell a portion of our investment portfolio, which, depending upon market conditions, could result in the Company or West Bank realizing losses. At December 31, 2023, our borrowed funds increased to $592.6 million, compared to $485.9 million at December 31, 2022. The increase included $140.0 million in FHLB advances associated with long-term interest rate swaps and $20.0 million in FHLB advances with a fixed interest rate, partially offset by a decrease of $49.7 million in federal funds purchased and other short-term borrowings. As a result, our cost of funds has increased and caused a decline in our net interest income and net interest margin in 2023, as compared to 2022. Although we believe West Bank’s current sources of funds are adequate for its liquidity needs, there can be no assurance in this regard for the future.

Our business depends upon earning and maintaining the trust and confidence of our customers, stockholders and employees. Damage to our reputation could cause significant harm to our business. Harm to our reputation can arise from numerous sources, including employee misconduct, vendor nonperformance, cybersecurity breaches, compliance failures, litigation or governmental investigations, among other things. In addition, a failure to deliver appropriate standards of service, or a failure or perceived failure to treat customers and clients fairly, can result in customer dissatisfaction, litigation, and heightened regulatory scrutiny, all of which can lead to lost revenue, higher operating costs and harm to our reputation. Adverse publicity about West Bank, whether or not true, may also result in harm to our business. Should any events or circumstances that could undermine our reputation occur, there can be no assurance that any lost revenue from customers opting to move their business to another institution and the additional costs and expenses that we may incur in addressing such issues would not adversely affect our financial condition and results of operations.

Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships. We have exposure to many different industries and counterparties, and we routinely execute transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks and other institutional clients. Many of these transactions expose us to credit risk in the event of default by our counterparty or client. In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due us. There is no assurance that any such losses would not materially and adversely affect our results of operations or earnings. Additionally, we may be negatively affected by brand or reputational harm to other community banks or to the community banking industry.

In the future, we may decide to expand into additional communities or attempt to strengthen our position in our current markets through opportunistic acquisitions of all or part of other financial institutions or related businesses or through the hiring of teams of bankers from other financial institutions that we believe provide a strategic fit with our business, or by opening new locations. To the extent that we undertake acquisitions or new office openings, we are likely to experience the effects of higher operating expense relative to operating income from the new operations, which may have an adverse effect on our overall levels of reported net income, return on average equity and return on average assets. To the extent we hire teams of bankers from other financial institutions, our salaries and employee benefits expense will likely increase, which may have an adverse effect on our net income, without any guarantee that the new banking team will be successful in generating new business. Other effects of engaging in such growth strategies may include potential diversion of our management’s time and attention and general disruption to our business.

Earnings in the banking industry, particularly the community bank segment, are substantially dependent on net interest income, which is the difference between interest earned on interest-earning assets (securities and loans) and interest paid on interest-bearing liabilities (deposits and borrowings). Interest rates are sensitive to many factors, including government monetary and fiscal policies, domestic and international economic and political conditions and competition. If interest rates continue to increase, banks will experience competitive pressures to further increase rates paid on deposits. If the Federal Reserve Federal Open Markets Committee (FOMC) further increases the targeted federal funds rates, overall interest rates likely will rise, which may negatively impact the entire national economy. In addition, our net interest income could be adversely affected if the rates we pay on deposits and borrowings increase more rapidly than the rates we earn on loans and other assets. Rising interest rates also may reduce the demand for loans and the value of fixed-rate securities. These effects from interest rate changes or from other sustained economic stress or a recession, among other matters, could have a material adverse effect on our business, financial condition, liquidity, and results of operations.

A large percentage of our securities have fixed interest rates and are classified as available for sale. As is the case with many financial institutions, our emphasis on increasing the development of core deposits, those with no stated maturity date, has resulted in our interest-bearing liabilities having a shorter duration than our interest-earning assets. This imbalance can create significant earnings volatility because interest rates change over time. As interest rates have increased, our cost of funds has increased more rapidly than the yields on a substantial portion of our interest-earning assets. In addition, the market value of our securities portfolio has declined in recent periods. At December 31, 2023, we had $121,787 of net unrealized losses in the securities portfolio. In line with the foregoing, we have experienced and may continue to experience an increase in the cost of interest-bearing liabilities, primarily due to raising the rates we pay on some of our deposit products to stay competitive within our market, and an increase in borrowing costs from increases in the federal funds rate. Community banks, such as West Bank, rely more heavily than larger institutions on net interest income as a revenue source. Larger institutions generally have more diversified sources of noninterest income.

Our financial performance generally, and in particular the ability of customers to pay interest on and repay principal on outstanding loans and the value of collateral securing those loans, as well as demand for loans and other products and services we offer, is highly dependent upon the business environment, not only in the markets where we operate, but also in the states of Iowa and Minnesota, generally, in the United States as a whole, and internationally. A favorable business environment is generally characterized by, among other factors, economic growth, efficient capital markets, low inflation, low unemployment, high business and investor confidence, and strong business earnings. Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity, or investor or business confidence; limitations on the availability or increases in the cost of credit and capital; increases in inflation or interest rates; high unemployment; uncertainty in U.S. trade policies, legislation, treaties and tariffs; natural disasters; acts of war or terrorism; widespread disease or pandemics; or a combination of these or other factors. Such unfavorable conditions could materially and adversely affect us.

The financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict, including the current conflicts between Russia and Ukraine and between Israel and Palestine, which are increasing volatility in commodity and energy prices, creating supply chain issues and causing instability in financial markets and political systems. Sanctions imposed by the United States and other countries in response to such conflicts could further adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic instability. The specific consequences of the conflicts on our business are difficult to predict at this time, but in addition to inflationary pressures affecting our operations and those of our customers and borrowers, we may also experience an increase in cyberattacks against us, our customers and borrowers, service providers and other third parties.

The United States has recently experienced elevated levels of inflation, with the consumer price index climbing significantly in 2022. Inflationary pressures reduced in 2023 but remained elevated. Future inflation metrics are uncertain for 2024 and onward. Continued levels of inflation could have complex effects on our business, results of operations and financial condition, some of which could be materially adverse. For example, while we generally expect any inflation-related increases in our interest expense to be offset by increases in our interest revenue, inflation-driven increases in our levels of noninterest expense could negatively impact our results of operations. Continued elevated levels of inflation could also cause increased volatility and uncertainty in the business environment, which could adversely affect loan demand and our clients’ ability to repay indebtedness. It is also possible that governmental responses to the current inflation environment could adversely affect our business, such as changes to monetary and fiscal policy that are too strict, or the imposition or threatened imposition of price controls. The duration and severity of the current inflationary period cannot be estimated with precision.

The Company and West Bank are required by federal and state regulatory authorities to maintain adequate levels of capital to support their operations. The ability to raise additional capital, when and if needed, will depend on conditions in the capital markets, economic conditions, and a number of other factors, including investor perceptions regarding the banking industry and market conditions, and governmental activities, many of which are outside of our control, as well as on our financial condition and performance. Accordingly, we cannot provide assurance that we will be able to raise additional capital, if needed, or on terms acceptable to us. Failure to meet these capital and other regulatory requirements could affect customer confidence, our ability to grow, the costs of funds, FDIC insurance costs, the ability to pay dividends on common stock and to make distributions on the junior subordinated debentures, the ability to make acquisitions, the ability to make certain discretionary bonus payments to executive officers, and the results of operations and financial condition.

The banking industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. Effective use of technology increases efficiency and enables banks to better serve customers. Our future success depends, in part, on our ability and the ability of our third-party partners to effectively implement new technology. The widespread adoption of new technologies, including mobile banking services, artificial intelligence, cryptocurrencies and payment systems, could require us in the future to make substantial expenditures to modify or adapt our existing products and services as we grow and develop new products to satisfy our customers’ expectations and comply with regulatory guidance. Many of our larger competitors have substantially greater resources than we do to invest in technological improvements. As a result, they may be able to offer, or more quickly offer, additional or superior products that could put West Bank at a competitive disadvantage.

Concerns over the long-term impacts of climate change have led and will continue to lead to governmental efforts around the world to mitigate those impacts. Consumers and businesses also may change their behavior on their own as a result of these concerns. New governmental regulations or guidance relating to climate change, as well as changes in consumers’ and businesses’ behaviors and business preferences, may affect whether and on what terms and conditions we will engage in certain activities or offer certain products or services. The governmental and supervisory focus on climate change could also result in our becoming subject to new or heightened regulatory requirements, such as requirements relating to operational resiliency or stress testing for various climate stress scenarios. Any such new or heightened requirements could result in increased regulatory, compliance or other costs or higher capital requirements. In connection with the transition to a low carbon economy, legislative or public policy changes and changes in consumer sentiment could negatively impact the businesses and financial condition of our clients, which may decrease revenues from those clients and increase the credit risk associated with loans and other credit exposures to those clients. Our business, reputation and ability to attract and retain employees may also be harmed if our response to climate change is perceived to be ineffective or insufficient.

The stock market has experienced, and may continue to experience, fluctuations that significantly impact the market prices of securities issued by many companies. Market fluctuations could adversely affect our stock price. These fluctuations have often been unrelated or disproportionate to the operating performance of particular companies. These broad market fluctuations, as well as general economic, systemic, political and market conditions, such as recessions, loss of investor confidence, interest rate changes, government shutdowns, presidential elections, international trade wars or international currency fluctuations may negatively affect the market price of our common stock. Moreover, our operating results may fluctuate and vary from period to period due to the risk factors set forth herein. As a result, period-to-period comparisons should not be relied upon as an indication of future performance. Our stock price could fluctuate significantly in response to the impact of these risk factors.

The Company may issue additional shares of common or preferred stock in order to raise capital at some date in the future to support continued growth, either internally generated or through acquisitions. Common shares have been and will be issued through the Company’s 2017 Equity Incentive Plan and the Company’s 2021 Equity Incentive Plan as grants of restricted stock units vest. As additional shares of common or preferred stock are issued, the ownership interests of our existing stockholders may be diluted. The market price of our common stock might decline or fail to increase in response to issuing additional common or preferred stock. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside of our control. Accordingly, we cannot provide any assurance that we will be able to raise additional capital, if needed, on acceptable terms. If we cannot raise additional capital when needed, our ability to further expand our operations could be materially impaired and our financial condition and liquidity could be materially and adversely affected.

As of December 31, 2023, the Company had $20.6 million in junior subordinated debentures outstanding that were issued to the Company’s subsidiary trust, West Bancorporation Capital Trust I, and $60.0 million aggregate principal amount outstanding of the Company’s 5.25% Fixed-to-Floating Rate Subordinated Notes due 2032 (the “Notes”). The junior subordinated debentures and the Notes are senior to the Company’s shares of common stock. As a result, the Company must make payments on the junior subordinated debentures (and the related trust preferred securities (TPS)) and the Notes before any dividends can be paid on its common stock, and in the event of the Company’s bankruptcy, dissolution or liquidation, the holders of the debentures and the Notes must be satisfied before any distributions can be made to the holders of the common stock. The Company has the right to defer distributions on the junior subordinated debentures (and the related TPS) for up to five years during which time no dividends may be paid to holders of the Company’s common stock. The Company’s ability to pay future distributions depends upon the earnings of West Bank and the issuance of dividends from West Bank to the Company, which may be inadequate to service the obligations. Interest payments on the junior subordinated debentures underlying the TPS are classified as a “dividend” by the Federal Reserve supervisory policies and therefore are subject to applicable restrictions and approvals imposed by the Federal Reserve Board.

In addition, the Company’s Board, both as a whole and through its Risk and Information Technology Committee (Risk Committee) is responsible for the oversight of risk management, including cybersecurity risks. In that role, the Company’s Board and the Risk Committee, with support from the Company’s management and third party cybersecurity advisors, are responsible for ensuring that the risk management processes designed and implemented by management are adequate and functioning as designed. The Board reviews and approves an information security program, vendor management policy (including third-party service providers), acceptable use policy, incident response policy and business continuity planning policy on an annual basis. All the aforementioned policies are developed and implemented by management of the Company. To carry out their duties, the Board receives updates from the Risk Committee regarding cybersecurity risks and the Company’s efforts to prevent, detect, mitigate and remediate any cybersecurity incidents on at least a quarterly basis.

Total cash dividends paid to common stockholders in both 2023 and 2022 were $1.00 per common share. Dividend declarations are evaluated and determined by the Board on a quarterly basis, and the dividends are paid quarterly. The Company intends to continue its policy of paying quarterly dividends; however, the ability of the Company to pay dividends in the future will depend primarily upon the earnings of West Bank and its ability to pay dividends to the Company, as well as regulatory requirements of the Federal Reserve relating to the payment of dividends by bank holding companies. The ability of West Bank to pay dividends is governed by various statutes. These statutes provide that a bank may pay dividends only out of undivided profits. In addition, applicable bank regulatory authorities have the power to require any bank to suspend the payment of dividends until the bank complies with all requirements that may be imposed by such authorities.


	As of and for the Years Ended December 31,
	2023			2022			2021
Performance Ratios
Return on average assets	0.66		%	1.32		%	1.52		%
Return on average equity	11.42		%	20.71		%	20.33		%
Efficiency ratio (1)(2)	60.73		%	43.70		%	40.91		%
Nonperforming assets/total assets (1)	0.01		%	0.01		%	0.26		%
Net interest margin(2)	2.01		%	2.76		%	3.05		%

Dividends and Per Share Data
Basic earnings per common share	$	1.44		$	2.79		$	3.00
Diluted earnings per common share	1.44			2.76			2.95
Cash dividends per common share	1.00			1.00			0.94
Dividend payout ratio	69.21		%	35.82		%	31.33		%
Dividend yield	4.72		%	3.91		%	3.03		%

Operating Results and Year-End Balances
Net income	$	24,137		$	46,399		$	49,607
Total assets	3,825,758			3,613,218			3,500,201
Securities available for sale	623,919			664,115			758,822
Loans	2,927,535			2,742,836			2,456,196
Deposits	2,973,779			2,880,408			3,016,005
Borrowings	592,637			485,855			199,866
Stockholders’ equity	225,043			211,112			260,328
Average equity to average assets ratio	5.77		%	6.39		%	7.46		%

The Company compares three key performance metrics to those of an identified peer group for evaluating its results. The peer group for 2023 consists of 22 Midwestern, publicly traded financial institutions including Bank First Corporation, Bridgewater Bancshares, Inc., ChoiceOne Financial Services, Inc., Civista Bancshares, Inc., CrossFirst Bankshares, Inc., Equity Bancshares, Inc., Farmers National Banc Corp., Farmers & Merchants Bancorp., First Business Financial Services, Inc., First Financial Corp., First Mid Bancshares, Inc., German American Bancorp, Inc., HBT Financial, Inc., Hills Bancorporation, Isabella Bank Corporation, LCNB Corp., Macatawa Bank Corporation, Mercantile Bank Corporation, MidWestOne 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.

The fair value of a financial instrument is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts business. A framework has been established for measuring the fair value of financial instruments that considers the attributes specific to particular assets or liabilities and includes a three-level hierarchy for determining fair value based on the transparency of inputs to each valuation as of the measurement date. The Company estimates the fair value of financial instruments using a variety of valuation methods. When financial instruments are actively traded and have quoted market prices, quoted market prices are used for fair value and are classified as Level 1. When financial instruments, such as securities and derivatives, are not actively traded, the Company determines fair value based on various sources and may apply matrix pricing with observable prices for similar instruments where a price for the identical instrument is not observable. The fair values of these financial instruments, which are classified as Level 2, are determined by pricing models that consider observable market data such as interest rate volatilities, yield curves, credit spreads, prices from external market data providers and/or nonbinding broker-dealer quotations. When observable inputs do not exist, the Company estimates fair value based on available market data, and these values are classified as Level 3. Imprecision in estimating fair values can impact the carrying value of assets and the amount of revenue or loss recorded.

The Company measures expected credit losses of loans on a collective (pool) basis when the loans share similar risk characteristics and uses a cash flow based method to estimate expected credit losses for each of these pools. The Company’s methodology for estimating the ACL considers available relevant information about the collectability of cash flows, including information about past events, current conditions, and reasonable and supportable forecasts. The methodologies apply historical loss information, adjusted for asset-specific characteristics, economic conditions at the measurement date, and forecasts about economic conditions expected to exist through the contractual lives of the financial assets that are reasonable and supportable, to the identified pools of financial assets with similar risk characteristics for which the historical experience was observed. Loans that do not share risk characteristics are evaluated on an individual basis.

The Company uses a cash flow based model to estimate expected credit losses for all loan segments. For each of the loan segments, the Company calculates a cash flow projection using contractual terms, estimated prepayment speeds, estimated curtailment rates, and other relevant data. The Company uses regression analysis that links historical losses of the Company and a peer group to two economic metrics: national unemployment rate and 10-year treasury rate over 2-year treasury rate spread to establish the loss rates applied to the projected cash flows. For all loan segments, the Company uses a forecast period of four quarters and reverts to a historical rate after four quarters. When estimating prepayment speed and curtailment rates, the modeling is based on historical internal data. In addition to the historical loss information, the Company utilizes qualitative factors to adjust the ACL as appropriate. Qualitative factors are based on management’s judgment of the changes in underlying loan composition of specific portfolios, trends relating to credit quality and collateral values, company-specific data, or effects of other factors such as market competition or legal and regulatory requirements.

This report contains references to financial measures that are not defined in GAAP. Such non-GAAP financial measures include the Company’s presentation of net interest income and net interest margin on a fully taxable equivalent (FTE) basis, and the presentation of the efficiency ratio on an adjusted and FTE basis, excluding certain income and expenses. Management believes these non-GAAP financial measures provide useful information to both management and investors to analyze and evaluate the Company’s financial performance. These measures are considered standard measures of comparison within the banking industry. Additionally, management believes providing measures on an FTE basis enhances the comparability of income arising from taxable and nontaxable sources. Limitations associated with non-GAAP financial measures include the risks that persons might disagree as to the appropriateness of items included in these measures and that different companies might calculate these measures differently. These non-GAAP disclosures should not be considered an alternative to the Company’s GAAP results. The following table reconciles the non-GAAP financial measures of net interest income and net interest margin on a fully taxable equivalent basis and efficiency ratio on an adjusted and FTE basis, to their most directly comparable measures under GAAP.

The allowance for credit losses, which totaled $28,342 as of December 31, 2023, represented 0.97 percent of total loans, compared to 0.93 percent as of December 31, 2022. The allowance for credit losses for 2023 was measured under the current expected credit losses, or CECL, model, while the allowance for credit losses for 2022 was measured under the previous incurred loss model. A credit loss expense of $700 was recorded in 2023, compared to a credit loss expense of negative $2,500 in 2022. 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. This credit loss expense was primarily due to growth in loans and unfunded loan commitments. The negative credit loss expense recorded in 2022 was due to the reversal of a specific reserve on an impaired loan and the reduction of certain qualitative factors resulting from the sustained performance of loans after the expiration of COVID-19 modifications and continued improvement in classified loans. Management believed the allowance for credit losses at December 31, 2023 was adequate to absorb expected losses in the loan portfolio as of that date.

Salaries and employee benefits increased in 2023 compared to 2022 primarily due to wage increases in response to market conditions and competition in retaining and recruiting talent. Additionally, the number of full-time equivalent employees has increased with growth in our commercial banking team and information technology department. Occupancy and equipment expense increased in 2023 compared to 2022 primarily due to an increase in depreciation expense related to the new bank buildings in St. Cloud and Mankato, Minnesota, along with scheduled increases in rent expense on existing leases. FDIC insurance expense increased in 2023 when compared to 2022 primarily due to the FDIC’s increase in the minimum assessment rate, which was announced in 2022 and effective as of the first quarter of 2023. Business development expenses increased in 2023 due to an increase in the size of our commercial banking team and a general increase in sponsorships and business development activity.

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 2023 and 2022 was $3,711 and $9,165, respectively, while state income tax expense was $1,938 and $3,833, respectively. The effective rate of income tax expense as a percent of income before income taxes was 18.9 percent and 21.9 percent, respectively, for 2023 and 2022. In 2022, income tax expense included a one-time increase in state income tax expense related to the June 2022 enactment of changes in the Iowa bank franchise tax rates. This legislation reduced the Iowa bank franchise tax rate applied to apportioned income for 2023 and future years. The future reduction in the state tax rate required the Company to reduce net deferred tax assets by $671 and in turn caused the one-time increase in 2022 tax expense.


	2023						2022						2021
	Average Balance		Revenue/ Expense		Yield/ Rate		Average Balance		Revenue/ Expense		Yield/ Rate		Average Balance		Revenue/ Expense		Yield/ Rate
Assets
Interest-earning assets:
Loans: (1) (2)
Commercial	$	520,116	$	32,067	6.17	%	$	487,151	$	22,742	4.67	%	$	525,228	$	23,365	4.45	%
Real estate (3)	2,270,662		110,431		4.86	%	2,061,777		84,523		4.10	%	1,796,118		72,579		4.04	%
Consumer and other	9,478		665		7.02	%	5,748		282		4.91	%	4,193		182		4.34	%
Total loans	2,800,256		143,163		5.11	%	2,554,676		107,547		4.21	%	2,325,539		96,126		4.13	%
Securities:
Taxable	516,118		13,696		2.65	%	592,186		12,524		2.11	%	450,910		8,542		1.89	%
Tax-exempt (3)	146,734		3,768		2.57	%	155,803		4,197		2.69	%	141,816		3,522		2.48	%
Total securities	662,852		17,464		2.63	%	747,989		16,721		2.24	%	592,726		12,064		2.04	%
Interest-bearing deposits	2,856		169		5.94	%	58,426		203		0.35	%	233,873		292		0.12	%
Total interest-earning assets (3)	3,465,964		160,796		4.64	%	3,361,091		124,471		3.70	%	3,152,138		108,482		3.44	%
Noninterest-earning assets:
Cash and due from banks	23,139						23,842						41,141
Premises and equipment, net	67,281						43,299						31,291
Other, less allowance for
credit losses	106,194						80,553						46,612
Total noninterest-earning assets	196,614						147,694						119,044
Total assets	$	3,662,578					$	3,508,785					$	3,271,182

Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	467,174	6,984		1.49	%	$	505,889	2,458		0.49	%	$	477,988	769		0.16	%
Savings and money market	1,357,675		43,569		3.21	%	1,452,034		15,814		1.09	%	1,413,878		5,641		0.40	%
Time	424,320		16,243		3.83	%	291,732		4,357		1.49	%	208,164		1,538		0.74	%
Total deposits	2,249,169		66,796		2.97	%	2,249,655		22,629		1.01	%	2,100,030		7,948		0.38	%
Borrowed funds:
Federal funds purchased and
other short-term borrowings	194,802		9,532		4.89	%	62,901		1,764		2.80	%	4,620		5		0.11	%
Subordinated notes, net	79,501		4,442		5.59	%	52,873		2,867		5.42	%	20,458		1,008		4.93	%
Federal Home Loan Bank
advances	265,644		7,694		2.90	%	128,863		2,669		2.07	%	140,274		2,944		2.10	%
Long-term debt	49,938		2,810		5.63	%	51,489		1,680		3.26	%	20,995		316		1.51	%
Total borrowed funds	589,885		24,478		4.15	%	296,126		8,980		3.03	%	186,347		4,273		2.29	%
Total interest-bearing liabilities	2,839,054		91,274		3.21	%	2,545,781		31,609		1.24	%	2,286,377		12,221		0.53	%
Noninterest-bearing liabilities:
Demand deposits	586,903						708,667						709,009
Other liabilities	25,218						30,284						31,783
Stockholders’ equity	211,403						224,053						244,013
Total liabilities and
stockholders’ equity	$	3,662,578					$	3,508,785					$	3,271,182

Net interest income (4)/net interest spread (3)			$	69,522	1.43	%			$	92,862	2.46	%			$	96,261	2.91	%
Net interest margin (3) (4)					2.01	%					2.76	%					3.05	%

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. The potential for additional target federal funds interest rate changes in 2024 is unknown at this time. The increases that occurred throughout 2022 and 2023 have had a significant impact on the comparability of net interest income between 2023, 2022 and 2021.


	2023 Compared to 2022						2022 Compared to 2021
	Volume		Rate		Total		Volume		Rate		Total
Interest Income
Loans: (1)
Commercial	$	1,625	$	7,700	$	9,325	$	(1,744)	$	1,121	$	(623)
Real estate (2)	9,125		16,783		25,908		10,877		1,067		11,944
Consumer and other	230		153		383		74		26		100
Total loans (including fees)	10,980		24,636		35,616		9,207		2,214		11,421
Securities:
Taxable	(1,746)		2,918		1,172		2,903		1,079		3,982
Tax-exempt (2)	(238)		(191)		(429)		363		312		675
Total securities	(1,984)		2,727		743		3,266		1,391		4,657
Interest-bearing deposits	(366)		332		(34)		(335)		246		(89)
Total interest income (2)	8,630		27,695		36,325		12,138		3,851		15,989
Interest Expense
Deposits:
Interest-bearing demand	(202)		4,728		4,526		47		1,642		1,689
Savings and money market	(1,092)		28,847		27,755		156		10,017		10,173
Time	2,677		9,209		11,886		795		2,024		2,819
Total deposits	1,383		42,784		44,167		998		13,683		14,681
Borrowed funds:
Federal funds purchased and
other short-term borrowings	5,732		2,036		7,768		591		1,168		1,759
Subordinated debt, net	1,485		90		1,575		1,748		111		1,859
Federal Home Loan Bank advances	3,654		1,371		5,025		(237)		(38)		(275)
Long-term debt	(52)		1,182		1,130		756		608		1,364
Total borrowed funds	10,819		4,679		15,498		2,858		1,849		4,707
Total interest expense	12,202		47,463		59,665		3,856		15,532		19,388
Net interest income (2) (3)	$	(3,572)	$	(19,768)	$	(23,340)	$	8,282	$	(11,681)	$	(3,399)

Interest expense on borrowed funds increased $15,498 for the year ended December 31, 2023, compared to 2022. The average balance of borrowed funds increased $293,759 in 2023 compared to 2022. The Company issued $60,000 of subordinated debt in June 2022. Additionally, average balances of federal funds purchased and other short-term borrowings increased $131,901 in 2023 compared to 2022. The average rate paid on federal funds purchased and other short-term borrowings increased 209 basis points in 2023 compared to 2022. This increase in average rates paid on federal funds purchased and other short-term borrowings was driven by the increases in the target federal funds rate by the Federal Reserve. The average balances of FHLB advances increased by $136,781 in 2023 compared to 2022. This increase in average balances was primarily due to increases in our rolling funding program whereby rolling one-month FHLB advances are hedged with long-term interest rate swap agreements to provide long-term fixed cost wholesale funding. The average rate paid on FHLB advances increased 83 basis points in 2023 compared to 2022.

Although repayment risk exists on all loans, different factors influence repayment risk for each type of loan. The primary risks associated with commercial real estate loans are the quality of the borrower’s management and the health of the national and regional economies. Underwriting on commercial properties is primarily based on the economic viability of the project with heavy consideration given to the creditworthiness and experience of the borrower. Recognizing that debt is paid via cash flow, the projected cash flows of the project are critical in underwriting because these determine the ultimate value of the property and the ability to service debt. Therefore, in most commercial real estate projects, we generally require a minimum stabilized debt service coverage ratio of 1.20 to 1.35, depending on the real estate type. Exceptions to this policy can be made for certain borrowers that exhibit other credit quality strengths. Exceptions to the policy are monitored by management. Our strategy with respect to the management of these types of risks is to consistently follow prudent loan policies and underwriting practices.


	As of December 31, 2023
	Within one year		After one but within five years		After five but within 15 years		After 15 years		Total
Commercial	$	166,171	$	270,955	$	94,468	$	—	$	531,594
Real estate:
Construction, land and land development	195,018		187,346		31,113		—		413,477
1-4 family residential first mortgages	7,309		98,127		1,252		—		106,688
Home equity	5,310		9,308		—		—		14,618
Commercial	118,043		1,128,177		571,850		36,440		1,854,510
Consumer and other	6,314		4,616		—		—		10,930
	$	498,165	$	1,698,529	$	698,683	$	36,440	$	2,931,817

			After one but within five years		After five but within 15 years		After 15 years
Loan maturities after one year with:
Fixed rates
Commercial			$	185,004	$	39,956	$	—
Real estate:
Construction, land and land development			110,911		11,964		—
1-4 family residential first mortgages			80,432		1,198		—
Home equity			3,365		—		—
Commercial			1,095,562		342,677		11,803
Consumer and other			1,537		—		—
Total fixed-rate loans			1,476,811		395,795		11,803

Variable rates
Commercial			85,951		54,512		—
Real estate:
Construction, land and land development			76,435		19,149		—
1-4 family residential first mortgages			17,695		54		—
Home equity			5,943		—		—
Commercial			32,615		229,173		24,637
Consumer and other			3,079		—		—
Total variable-rate loans			221,718		302,888		24,637
			$	1,698,529	$	698,683	$	36,440

Factors considered by management in establishing an appropriate allowance include: the borrower’s financial condition; the value and adequacy of loan collateral; the condition of the local economy and the borrower’s specific industry; the levels and trends of loans by segment; and a review of delinquent and classified loans. The quarterly evaluation focuses on factors such as specific loan reviews, changes in the components of the loan portfolio given economic conditions, and historical loss experience. Any one of the following conditions may result in the review of a specific loan: concern about whether the borrower’s cash flow or net worth is sufficient to repay the loan; delinquency status; criticism of the loan in a regulatory examination; the suspension of interest accrual; or other factors, including whether the loan has other special or unusual characteristics that suggest special monitoring is warranted. The Company’s concentration risks include geographic concentration in central and eastern Iowa and southern Minnesota. The local economies are composed primarily of major financial services companies, healthcare providers, educational institutions, technology and agribusiness companies, and state and local governments.

As of December 31, 2023 there was no allowance for credit losses related to loans individually evaluated for credit losses. As of December 31, 2022, there were no specific reserves related to loans individually evaluated for impairment. The portion of the allowance for credit losses related to loans collectively evaluated for credit losses increased to $28,342, or 0.97 percent of outstanding loans as of December 31, 2023, compared to $25,473, or 0.93 percent of outstanding loans as of December 31, 2022. The increase was primarily due to the $2,458 adjustment to the allowance on January 1, 2023 related to the adoption of ASU No. 2016-13, also known as the current expected credit loss, or CECL, standard. Additionally, there was a credit loss expense of $500 related to loans for the year ended December 31, 2023, which was due primarily to loan growth. The provision for loan losses recorded in 2022 was negative $2,500. This negative provision in 2022 was due to the reversal of a specific reserve on an impaired loan and the reduction of certain qualitative factors resulting from the sustained performance of loans after the expiration of COVID-19 modifications and continued improvement in classified loans. Management believed the allowance for credit losses as of December 31, 2023 was adequate to absorb the expected losses in the portfolio as of that date.

As of December 31, 2023, West Bank had additional borrowing capacity available from the FHLB of approximately $528,000, as well as approximately $2,282 through the Federal Reserve discount window, $35,000 through unsecured federal funds lines of credit with correspondent banks and $89,000 through the BTFP. The BTFP was established by the Federal Reserve in March 2023 to provide an additional source of liquidity against high-quality securities. As of December 31, 2023, West Bank had pledged approximately $89,000 in eligible securities to facilitate participation in the program. No funds were borrowed from the Federal Reserve discount window or BTFP as of December 31, 2023. The Federal Reserve has announced that it is ending the BTFP and will cease making new loans under this program on March 11, 2024. Net cash from continuing operating activities contributed $25,249, $59,439 and $57,878 to liquidity for the years ended December 31, 2023, 2022 and 2021, respectively. Management believed that the combination of high levels of potentially liquid assets, unencumbered securities, cash flows from operations and additional borrowing capacity provided the Company with sufficient liquidity as of December 31, 2023.

The Company has an Asset Liability Committee which meets quarterly, or more often when deemed necessary, to review the interest rate sensitivity position and to review and develop various strategies for managing interest rate risk. Measuring and maintaining interest rate risk is a dynamic process that management performs with the objective of maximizing net interest margin while maintaining interest rate risk within acceptable tolerances. This process relies primarily on the simulation of net interest income over multiple interest rate scenarios. The Company engages a third party that utilizes a modeling program to measure the Company’s exposure to potential interest rate changes. For various assumed hypothetical changes in market interest rates, this analysis measures the estimated change in net interest income. The simulations allow for ongoing assessment of interest rate sensitivity and can include the impact of potential new business strategies. The modeled scenarios begin with a base case in which rates are unchanged and can include parallel and nonparallel rate shocks. The results of these shocks are measured in two forms: first, the impact on the net interest margin and earnings over one and two year time frames; and second, the impact on the market value of equity. The results of the simulation are compared against approved policy limits.

As described in Note 1 and Note 4 to the consolidated financial statements, the Company’s allowance for credit losses for loans (allowance) totaled $28.3 million at December 31, 2023. On January 1, 2023 the Company adopted Accounting Standards Update 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The allowance is a valuation account that is deducted from the amortized cost basis of loans to present the net amount of loans expected to be collected. The Company’s allowance reflects losses expected over the remaining contractual life of the loans. The Company’s allowance is measured on a collective (pool) basis when similar risk characteristics exist. Loans that do not share similar risk characteristics are evaluated on an individual basis at the balance sheet date. At December 31, 2023 the reserve on loans collectively evaluated totaled $28.3 million and there was no reserve on loans individually evaluated.

The measurement of the reserve is based on relevant information about the collectability of cash flows, including information about past events, current conditions and reasonable and supportable forecasts. The methodologies apply historical loss information, adjusted for asset-specific characteristics, economic conditions at the measurement date, and forecasts about the future economic conditions expected to exist through the contractual lives of the financial assets that are reasonable and supportable, to the identified pools of financial assets with similar risk characteristics for which the historical experience was observed. The Company uses a cash flow-based model to estimate expected credit losses for all loan segments. For each of the loan segments, the Company calculates a cash flow projection using contractual terms, estimated prepayment speeds, estimated curtailment rates and other relevant data. The Company uses a regression analysis that links historical losses of the Company and its peer group to two economic metrics: national unemployment rate and 10-year treasury rate over 2-year treasury rate spread to establish the loss rates applied to the projected cash flows. For all loan segments, the Company uses a forecast period of four quarters and reverts to a historical rate after four quarters. Qualitative factors are based on management’s judgment of the changes in underlying loan composition of specific portfolio, trends relating to credit quality and collateral values, company-specific data, or effects of other factors such as market competition or legal and regulatory requirements. The evaluation of these qualitative factors and forecasts requires that management make significant judgments and includes significant estimation uncertainty.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.


(dollars in thousands, except per share data)	2023		2022
ASSETS
Cash and due from banks	$	33,245	$	24,896
Interest-bearing deposits	32,112		1,643
Cash and cash equivalents	65,357		26,539
Securities available for sale, at fair value	623,919		664,115
Federal Home Loan Bank stock, at cost	22,957		19,336
Loans	2,927,535		2,742,836
Allowance for credit losses	(28,342)		(25,473)
Loans, net	2,899,193		2,717,363
Premises and equipment, net	86,399		53,124
Accrued interest receivable	13,581		11,988
Bank-owned life insurance	43,864		44,573
Deferred tax assets, net	34,303		36,609
Other assets	36,185		39,571
Total assets	$	3,825,758	$	3,613,218

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits:
Noninterest-bearing demand	$	548,726	$	693,563
Interest-bearing demand	481,207		536,226
Savings and money market	1,440,076		1,237,954
Time	503,770		412,665
Total deposits	2,973,779		2,880,408
Federal funds purchased and other short-term borrowings	150,270		200,000
Subordinated notes, net	79,631		79,369
Federal Home Loan Bank advances	315,000		155,000
Long-term debt	47,736		51,486
Accrued expenses and other liabilities	34,299		35,843
Total liabilities	3,600,715		3,402,106
COMMITMENTS AND CONTINGENCIES (Note 17)
STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value; authorized 50,000,000 shares; no shares issued and outstanding at December 31, 2023 and 2022	—		—
Common stock, no par value; authorized 50,000,000 shares; 16,725,094 and 16,640,413 shares issued and outstanding at December 31, 2023 and 2022, respectively	3,000		3,000
Additional paid-in capital	34,197		32,021
Retained earnings	271,369		267,562
Accumulated other comprehensive loss	(83,523)		(91,471)
Total stockholders’ equity	225,043		211,112
Total liabilities and stockholders’ equity	$	3,825,758	$	3,613,218


(dollars in thousands, except per share data)	2023		2022		2021
Interest income:
Loans, including fees	$	142,923	$	107,095	$	95,585
Securities:
Taxable	13,696		12,524		8,542
Tax-exempt	3,517		3,527		2,861
Interest-bearing deposits	169		203		292
Total interest income	160,305		123,349		107,280
Interest expense:
Deposits	66,796		22,629		7,948
Federal funds purchased and other short-term borrowings	9,532		1,764		5
Subordinated notes	4,442		2,867		1,008
Federal Home Loan Bank advances	7,694		2,669		2,944
Long-term debt	2,810		1,680		316
Total interest expense	91,274		31,609		12,221
Net interest income	69,031		91,740		95,059
Credit loss expense (benefit)	700		(2,500)		(1,500)
Net interest income after credit loss expense (benefit)	68,331		94,240		96,559
Noninterest income:
Service charges on deposit accounts	1,859		2,194		2,352
Debit card usage fees	1,980		1,969		1,948
Trust services	3,068		2,709		2,671
Increase in cash value of bank-owned life insurance	1,044		964		923
Gain from bank-owned life insurance	691		—		—
Loan swap fees	431		835		66
Realized securities gains (losses), net	(431)		—		51
Other income	1,424		1,537		1,718
Total noninterest income	10,066		10,208		9,729
Noninterest expense:
Salaries and employee benefits	27,060		25,838		23,226
Occupancy and equipment	5,507		4,913		5,162
Data processing	2,790		2,597		2,465
Technology and software	2,341		2,137		1,777
FDIC insurance	1,750		996		1,818
Professional fees	1,026		874		946
Director fees	892		814		765
Other expenses	7,245		6,882		7,221
Total noninterest expense	48,611		45,051		43,380
Income before income taxes	29,786		59,397		62,908
Income taxes	5,649		12,998		13,301
Net income	$	24,137	$	46,399	$	49,607

Basic earnings per common share	$	1.44	$	2.79	$	3.00
Diluted earnings per common share	$	1.44	$	2.76	$	2.95


										Accumulated
						Additional				Other
	Preferred		Common Stock			Paid-in		Retained		Comprehensive
(in thousands, except share and per share data)	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	—		—	—		—		49,607		—		49,607
Other comprehensive income, net of tax	—		—	—		—		—		1,209		1,209
Cash dividends declared, $0.94 per common share	—		—	—		—		(15,543)		—		(15,543)
Stock-based compensation costs	—		—	—		2,573		—		—		2,573
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes	—		85,574	—		(1,213)		—		—		(1,213)
Balance, December 31, 2021	—		16,554,846	3,000		30,183		237,782		(10,637)		260,328
Net income	—		—	—		—		46,399		—		46,399
Other comprehensive loss, net of tax	—		—	—		—		—		(80,834)		(80,834)
Cash dividends declared, $1.00 per common share	—		—	—		—		(16,619)		—		(16,619)
Stock-based compensation costs	—		—	—		3,357		—		—		3,357
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes	—		85,567	—		(1,519)		—		—		(1,519)
Balance, December 31, 2022	—		16,640,413	3,000		32,021		267,562		(91,471)		211,112
Cumulative effect of change in accounting principle(1)	—		—	—		—		(3,626)		—		(3,626)
Net income	—		—	—		—		24,137		—		24,137
Other comprehensive income, net of tax	—		—	—		—		—		7,948		7,948
Cash dividends declared, $1.00 per common share	—		—	—		—		(16,704)		—		(16,704)
Stock-based compensation costs	—		—	—		3,111		—		—		3,111
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes	—		84,681	—		(935)		—		—		(935)
Balance, December 31, 2023	$	—	16,725,094	$	3,000	$	34,197	$	271,369	$	(83,523)	$	225,043


(dollars in thousands)	2023		2022		2021
Cash Flows from Operating Activities:
Net income	$	24,137	$	46,399	$	49,607
Adjustments to reconcile net income to net cash provided by operating activities:
Credit loss expense (benefit)	700		(2,500)		(1,500)
Net amortization and accretion	3,293		2,965		2,111
Securities (gains) losses, net	431		—		(51)
Stock-based compensation	3,111		3,357		2,573
Increase in cash value of bank-owned life insurance	(1,044)		(964)		(923)

Gain from bank-owned life insurance	(691)		—		—
Depreciation	1,856		1,498		1,504

Provision for deferred income taxes	447		1,583		82
Change in assets and liabilities:
(Increase) decrease in accrued interest receivable	(1,593)		(3,098)		2,341
(Increase) decrease in other assets	(2,794)		1,005		2,118
Increase (decrease) in accrued expenses and other liabilities	(2,604)		9,194		16
Net cash provided by operating activities	25,249		59,439		57,878
Cash Flows from Investing Activities:
Proceeds from sales of securities available for sale	11,285		—		30,374
Proceeds from principal paydowns, maturities and calls of securities available for sale	42,370		79,959		95,733
Purchases of securities available for sale	—		(120,077)		(481,140)
Purchases of Federal Home Loan Bank stock	(115,480)		(75,092)		(2,329)
Proceeds from redemption of Federal Home Loan Bank stock	111,859		65,721		4,087
Net increase in loans	(184,788)		(287,031)		(175,193)

Proceeds of principal and earnings from bank-owned life insurance	2,458		—		—
Purchases of premises and equipment	(36,387)		(21,311)		(8,743)

Net cash used in investing activities	(168,683)		(357,831)		(537,211)
Cash Flows from Financing Activities:
Net increase (decrease) in deposits	93,371		(135,597)		315,011
Net increase (decrease) in federal funds purchased and other short-term borrowings	(49,730)		197,120		(2,495)
Net increase (decrease) in Federal Home Loan Bank advances	160,000		30,000		(50,000)
Proceeds from issuance of subordinated debt, net of issuance costs	—		58,756		—
Proceeds from long-term debt	—		—		34,500
Principal payments on long-term debt	(3,750)		(35)		(4,537)
Common stock dividends paid	(16,704)		(16,619)		(15,543)
Restricted stock units withheld for payroll taxes	(935)		(1,519)		(1,213)
Net cash provided by financing activities	182,252		132,106		275,723
Net increase (decrease) in cash and cash equivalents	38,818		(166,286)		(203,610)
Cash and Cash Equivalents:
Beginning	26,539		192,825		396,435
Ending	$	65,357	$	26,539	$	192,825

Supplemental Disclosure of Cash Flow Information:
Cash payments for:
Interest	$	87,846	$	28,868	$	12,641
Income taxes	5,720		10,630		13,380

The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life using the same models for the Company’s other loan portfolio segments described above. The Company's allowance for credit losses for unfunded commitments was $2,544 as of December 31, 2023. The allowance for credit losses for off-balance-sheet credit exposures is presented in the “Accrued expenses and other liabilities” line of the Consolidated Balance Sheets. Changes in the allowance for credit losses for off-balance-sheet credit exposures is reflected in the “Credit loss expense” line of the Consolidated Statements of Income. During the year ended December 31, 2023, the Company recorded a credit loss expense of $200 associated with off-balance sheet credit exposures.

The Company is exposed to credit risk in the event of nonperformance by interest rate swap counterparties, which is minimized by collateral-pledging provisions in the agreements. Derivative contracts with swap counterparties are executed with a Credit Support Annex, which is a bilateral ratings-sensitive agreement that requires collateral postings at established credit threshold levels. These agreements protect the interests of the Company and its counterparties should either party suffer a credit rating deterioration. As of both December 31, 2023 and 2022, the Company pledged $0 of collateral to the counterparties in the form of cash on deposit. As of December 31, 2023 and 2022, the Company’s counterparties pledged $22,340 and $31,560, respectively, of collateral to the Company in the form of cash on deposit. The interest rate swap product with the borrowers is cross-collateralized with the underlying loan and therefore there is no pledged cash collateral under swap contracts with customers.

Effective as of the 2021 annual meeting of stockholders, the West Bancorporation, Inc. 2021 Equity Incentive Plan (2021 Plan) was adopted by the Board of Directors and approved by our stockholders. The prior 2017 Equity Incentive Plan (2017 Plan) was frozen with respect to future grants upon approval of the 2021 Plan. At the time the 2017 Plan was frozen, 196,535 shares had not been issued under the original authorization for that plan. Awards outstanding under the 2017 Plan will remain subject to the 2017 Plan as long as they remain outstanding. Under the terms of the 2021 Plan, the Company may grant a total of 625,000 shares of the Company’s common stock as nonqualified and incentive stock options, stock appreciation rights and stock awards. All employees and directors of the Company and its subsidiary are eligible to become participants in the 2021 Plan. Additional information regarding our equity incentive plans is presented in “Note 13. Stock Compensation Plans” in the notes to the consolidated financial statements pursuant to Item 8. The following table sets forth information regarding outstanding restricted stock units and shares available for future issuance under these plans as of December 31, 2023.


3.1			Restatement of the Restated Articles of Incorporation of West Bancorporation, Inc. (incorporated herein by reference to Exhibit 3.1 filed with the Form 10-K on March 1, 2017)
3.2			Amended and Restated Bylaws of West Bancorporation, Inc. as of January 23, 2019 (incorporated herein by reference to Exhibit 3.1 filed with the Form 8-K on January 24, 2019)
4.1			Description of Capital Stock (incorporated herein by reference to Exhibit 4 filed with the Form 10-K on February 27, 2020)
4.2			Indenture, dated June 14, 2022, between West Bancorporation, Inc. and Wilmington Trust, National Association, as trustee (incorporated herein by reference to Exhibit 4.1 filed with the Form 8-K on June 14, 2022)
4.3			First Supplemental Indenture, dated June 14, 2022, between West Bancorporation, Inc. and Wilmington Trust, National Association, as trustee (incorporated herein by reference to Exhibit 4.2 filed with the Form 8-K on June 14, 2022)
4.4			Form of 5.25% Fixed-to-Floating Rate Subordinated Notes due 2032 (incorporated herein by reference to Exhibit 4.3 filed with the Form 8-K on June 14, 2022)
10.1*			Employment Agreement dated July 23, 2012, between West Bancorporation, Inc. and David D. Nelson (incorporated herein by reference to Exhibit 10.1 filed with the Form 8-K on July 25, 2012)
10.2*			Employment Agreement dated July 23, 2012, between West Bancorporation, Inc. and Brad L. Winterbottom (incorporated herein by reference to Exhibit 10.2 filed with the Form 8-K on July 25, 2012)
10.3*			Employment Agreement dated July 23, 2012, between West Bancorporation, Inc. and Harlee N. Olafson (incorporated herein by reference to Exhibit 10.3 filed with the Form 8-K on July 25, 2012)
10.4*			Transitional Employment Agreement dated May 27, 2021, between West Bancorporation, Inc. and Douglas R. Gulling (incorporated herein by reference to Exhibit 10.1 filed with the Form 8-K on May 27, 2021)
10.5*			Employment Agreement dated April 29, 2021 between West Bancorporation, Inc. and Bradley P. Peters (incorporated herein by reference to Exhibit 10.2 filed with the Form 8-K on April 30, 2021)
10.6*			Employment Agreement dated May 27, 2021 between West Bancorporation, Inc. and Jane M. Funk (incorporated herein by reference to Exhibit 10.2 filed with the Form 8-K on May 27, 2021)


10.7*			West Bancorporation, Inc. Deferred Compensation Plan (incorporated herein by reference to Exhibit 10.1 filed with the Form 8-K on October 29, 2012)
10.8*			West Bancorporation, Inc. Employee Savings and Stock Ownership Plan, as amended (incorporated herein by reference to Exhibit 10.20 filed with the Form 10-K on March 6, 2014)
10.9*			Amendment No. 1 to West Bancorporation, Inc. Employee Savings and Stock Ownership Plan, Effective January 1, 2015 (incorporated herein by reference to Exhibit 10.1 filed with the Form 10-Q/A on August 11, 2020)
10.10*			Amendment No. 2 to West Bancorporation, Inc. Employee Savings and Stock Ownership Plan, Effective January 1, 2016 (incorporated herein by reference to Exhibit 10.2 filed with the Form 10-Q/A on August 11, 2020)
10.11*			Amendment No. 3 to West Bancorporation, Inc. Employee Savings and Stock Ownership Plan, Effective January 1, 2018 (incorporated herein by reference to Exhibit 10.3 filed with the Form 10-Q/A on August 11, 2020)
10.12*			Interim Amendment to West Bancorporation, Inc. Employee Savings and Stock Ownership Plan, Effective April 1, 2018 (incorporated herein by reference to Exhibit 10.4 filed with the Form 10-Q/A on August 11, 2020)
10.13*			West Bancorporation, Inc. 2017 Equity Incentive Plan (incorporated herein by reference to Exhibit A of the definitive proxy statement on Schedule 14A filed on March 1, 2017)
10.14*			Form of Restricted Stock Unit Award Agreement under the West Bancorporation, Inc. 2017 Equity Incentive Plan (incorporated herein by reference to Exhibit 4.2 filed with the Form S-8 on April 28, 2017)
10.15*			Form of Restricted Stock Award Agreement under the West Bancorporation, Inc. 2017 Equity Incentive Plan (incorporated herein by reference to Exhibit 4.3 filed with the Form S-8 on April 28, 2017)
10.16*			Form of Nonqualified Stock Option Award Agreement under the West Bancorporation, Inc. 2017 Equity Incentive Plan (incorporated herein by reference to Exhibit 4.4 filed with the Form S-8 on April 28, 2017)
10.17*			Form of Incentive Stock Option Award Agreement under the West Bancorporation, Inc. 2017 Equity Incentive Plan (incorporated herein by reference to Exhibit 4.5 filed with the Form S-8 on April 28, 2017)
10.18*			Form of Stock Appreciation Right Award Agreement under the West Bancorporation, Inc. 2017 Equity Incentive Plan (incorporated herein by reference to Exhibit 4.6 filed with the Form S-8 on April 28, 2017)
10.19*			Form of Restricted Stock Unit Award Agreement under the West Bancorporation, Inc. 2017 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.19 filed with the Form 10-K on March 1, 2021)
10.20*			Form of Performance Based Restricted Stock Unit Award Agreement under the West Bancorporation, Inc. 2017 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.20 filed with the Form 10-K on March 1, 2021)
10.21			Amended and Restated Lease Agreement Dated February 20, 2018 (incorporated herein by reference to Exhibit 10.16 filed with the Form 10-K on March 1, 2018)
10.22*			West Bancorporation Inc. 2021 Equity Incentive Plan (incorporated herein by reference to Exhibit A to the Company’s definitive proxy statement filed with the Securities and Exchange Commission on March 1, 2021)
10.23*			Form of West Bancorporation, Inc. 2021 Equity Incentive Plan Restricted Stock Unit Award Agreement (with holding period) (incorporated herein by reference to Exhibit 4.4 filed with the Form S-8 on April 30, 2021)
10.24*			Form of West Bancorporation, Inc. 2021 Equity Incentive Plan Restricted Stock Unit Award Agreement (without holding period) (incorporated herein by reference to Exhibit 4.5 filed with the Form S-8 on April 30, 2021)
10.25*			Form of West Bancorporation, Inc. 2021 Equity Incentive Plan Performance-Based Restricted Stock Unit Award Agreement (incorporated herein by reference to Exhibit 4.6 filed with the Form S-8 on April 30, 2021)
10.26*			Form of West Bancorporation, Inc. 2021 Equity Incentive Plan Cash-Settled Restricted Stock Unit Award Agreement (incorporated herein by reference to Exhibit 4.7 filed with the Form S-8 on April 30, 2021)
10.27*			Form of West Bancorporation, Inc. 2021 Equity Incentive Plan Director Restricted Stock Unit Award Agreement (incorporated herein by reference to Exhibit 4.8 filed with the Form S-8 on April 30, 2021)
10.28			Credit Agreement, dated as of December 15, 2021, by and between West Bancorporation, Inc. and National Exchange Bank & Trust (incorporated herein by reference to Exhibit 10.1 filed with the Form 8-K on June 6, 2022)
10.29			Promissory Note, dated as of December 15, 2021, made by West Bancorporation, Inc., to and in favor of National Exchange Bank & Trust (incorporated herein by reference to Exhibit 10.2 filed with the Form 8-K on June 6, 2022)


(Mark One)
☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the fiscal year ended December 31, 2023

			or

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from __________ to __________


WEST BANCORPORATION, INC.
(Exact name of registrant as specified in its charter)

Iowa			42-1230603
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

1601 22nd Street, West Des Moines, Iowa			50266
(Address of principal executive offices)			(Zip Code)


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


Large accelerated filer			o
Accelerated filer			☒
Non-accelerated filer			o
Smaller reporting company			o
Emerging growth company			☐


FORM 10-K
TABLE OF CONTENTS


"SAFE HARBOR" CONCERNING FORWARD-LOOKING STATEMENTS		5

PART I

ITEM 1.	BUSINESS	5

ITEM 1A.	RISK FACTORS	17

ITEM 1B.	UNRESOLVED STAFF COMMENTS	28

ITEM 1C.	CYBERSECURITY	29

ITEM 2.	PROPERTIES	30

ITEM 3.	LEGAL PROCEEDINGS	30

ITEM 4.	MINE SAFETY DISCLOSURES	30

PART II

ITEM 5.	MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES	31

ITEM 6.	RESERVED	33

ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	33

ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	52

ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	53

ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	100

ITEM 9A.	CONTROLS AND PROCEDURES	100

ITEM 9B.	OTHER INFORMATION	100

ITEM 9C.	DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTION	101

PART III

ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE	102

ITEM 11.	EXECUTIVE COMPENSATION	102

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	102

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	103

ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	104

PART IV

ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	104

ITEM 16.	FORM 10-K SUMMARY	107


	Period Ending
Index	12/31/2018	12/31/2019	12/31/2020	12/31/2021	12/31/2022	12/31/2023
West Bancorporation, Inc.	100.00	139.47	109.93	183.00	156.60	137.21
Nasdaq Composite Index	100.00	136.69	198.10	242.03	163.28	236.17
S&P U.S. BMI Banks - Midwest Region Index	100.00	130.10	111.85	147.78	127.53	130.20


	West Bancorporation, Inc.	Peer Group Range
	As of and for the year ended December 31, 2023	As of and for the year ended December 31, 2023
Return on average equity	11.42%	1.85%-17.24%
Efficiency ratio(1)	60.73%	45.85%-70.02%
Nonperforming assets to total assets	0.01%	0.00%-0.73%


	As and for the Years Ended December 31
	2023			2022			2021
Reconciliation of net interest income and net interest margin on an FTE basis to GAAP:
Net interest income (GAAP)	$	69,031		$	91,740		$	95,059
Tax-equivalent adjustment(1)	491			1,122			1,202
Net interest income on an FTE basis (non-GAAP)	69,522			92,862			96,261
Average interest-earning assets	3,465,964			3,361,091			3,152,138
Net interest margin on an FTE basis (non-GAAP)	2.01		%	2.76		%	3.05		%

Reconciliation of efficiency ratio on an FTE basis to GAAP:
Net interest income on an FTE basis (non-GAAP)	$	69,522		$	92,862		$	96,261
Noninterest income	10,066			10,208			9,729
Adjustment for realized securities (gains) losses, net	431			—			(51)
Adjustment for losses on disposal of premises and equipment, net	29			29			84

Adjusted income	80,048			103,099			106,023
Noninterest expense	48,611			45,051			43,380



Efficiency ratio on an adjusted and FTE basis (non-GAAP)(2)	60.73		%	43.70		%	40.91		%


	Years ended December 31
Noninterest income:	2023		2022		Change		Change %
Service charges on deposit accounts	$	1,859	$	2,194	$	(335)	(15.3)	%
Debit card usage fees	1,980		1,969		11		0.6	%
Trust services	3,068		2,709		359		13.3	%
Increase in cash value of bank-owned life insurance	1,044		964		80		8.3	%
Gain from bank-owned life insurance	691		—		691		N/A
Loan swap fees	431		835		(404)		(48.4)	%
Realized securities losses, net	(431)		—		(431)		N/A
Other income	1,424		1,537		(113)		(7.4)	%
Total noninterest income	$	10,066	$	10,208	$	(142)	(1.4)	%


	Within one year		After one year but within five years		After five years but within ten years		After ten years		Total
Securities available for sale:
State and political subdivisions (1)	—	%	—	%	1.93	%	2.15	%	2.13	%
Collateralized mortgage obligations	—		—		2.38		1.56		1.56
Mortgage-backed securities	—		1.45		1.61		1.65		1.63
Collateralized loan obligations	—		—		7.35		—		7.35
Corporate notes	—		—		3.26		—		3.26
	—	%	1.45	%	4.07	%	1.77	%	2.07	%


	As of December 31
	2023						2022
	Balance		% of Non-owner Occupied CRE		Weighted Average LTV		Balance		% of Non-owner Occupied CRE		Weighted Average LTV
Non-owner occupied:
Multifamily	$	453,958	24.2	%	69	%	$	371,224	21.0	%	69	%
Medical & senior care facilities	225,314		12.0		63		249,127		14.1		65
Warehouse & trucking	167,030		8.9		63		169,462		9.6		67
Hotels	251,497		13.4		66		216,539		12.3		68
Mixed use	96,488		5.2		67		100,985		5.7		67
Offices	137,468		7.4		70		139,163		7.9		71
Land for development	110,874		5.9		64		114,428		6.5		62
All other	430,515		23.0		not available		405,261		22.9		not available
	$	1,873,144	100.0	%			$	1,766,189	100.0	%


	As of December 31, 2023
	Risk Rating
	Total		1-3		4		5		6		7		8
Non-owner occupied:
Multifamily	$	453,958	$	30,893	$	339,817	$	83,248	$	—	$	—	$	—
Medical & senior care facilities	225,314		70,896		123,680		30,738		—		—		—
Warehouse & trucking	167,030		55,593		95,616		15,821		—		—		—
Hotel	251,497		—		151,957		99,540		—		—		—
Mixed use	96,488		13,280		55,965		27,243		—		—		—
Offices	137,468		16,566		100,891		20,011		—		—		—
Land for development	110,874		2,025		105,746		3,103		—		—		—
All other	430,515		67,516		358,307		4,692		—		—		—
	$	1,873,144	$	256,769	$	1,331,979	$	284,396	$	—	$	—	$	—


	Analysis of the Allowance for Credit Losses for the Years Ended December 31
	2023		2022		2021
Ratio of net (charge-offs) recoveries during the
period to average loans outstanding by segment:
Commercial	—	%	—	%	0.02	%
Real estate:
Construction, land and land development	—		—		—
1-4 family residential first mortgages	—		—		—
Home equity	—		—		—
Commercial	—		(0.02)	%	—
Consumer and other	—		—		—
Total	0.00	%	(0.02)	%	0.02	%
Ratio of allowance for credit losses to total
loans at the end of period	0.97	%	0.93	%	1.15	%



Ratio of nonaccrual loans to total loans at
end of period	0.01	%	0.01	%	0.36	%
Ratio of allowance for credit losses to total
nonaccrual loans at the end of period	9,575.00	%	7,910.87	%	316.99	%
Ratio of net (charge-offs) recoveries to total
loans at end of period	0.00	%	(0.01)	%	0.02	%


3 months or less	$	231,110
Over 3 through 6 months	123,674
Over 6 through 12 months	91,151
Over 12 months	28,283
	$	474,218


3 months or less	$	148,585
Over 3 through 6 months	65,890
Over 6 through 12 months	27,038
Over 12 months	24,538
	$	266,051


	2023
	Amortized Cost		Fair Value
Due after five years through ten years	$	73,481	$	68,354
Due after ten years	209,314		173,794
	282,795		242,148
Collateralized mortgage obligations and mortgage-backed securities	462,911		381,771
	$	745,706	$	623,919


	2023
	Less than 12 months					12 months or longer					Total
	Fair Value		Gross Unrealized (Losses)		No. of Securities	Fair Value		Gross Unrealized Losses		No. of Securities	Fair Value		Gross Unrealized (Losses)
Securities available for sale:
State and political subdivisions	$	3,353	$	(89)	5	$	184,522	$	(38,338)	92	$	187,875	$	(38,427)
Collateralized mortgage obligations	—		—		—	249,933		(55,267)		72	249,933		(55,267)
Mortgage-backed securities	—		—		—	131,838		(25,873)		27	131,838		(25,873)
Collateralized loan obligations	—		—		—	37,536		(96)		6	37,536		(96)
Corporate notes	—		—		—	11,607		(2,143)		8	11,607		(2,143)
	$	3,353	$	(89)	5	$	615,436	$	(121,717)	205	$	618,789	$	(121,806)


	2022
	Less than 12 months					12 months or longer					Total
	Fair Value		Gross Unrealized (Losses)		No. of Securities	Fair Value		Gross Unrealized Losses		No. of Securities	Fair Value		Gross Unrealized (Losses)
Securities available for sale:
State and political subdivisions	$	74,676	$	(11,556)	74	$	118,487	$	(37,916)	43	$	193,163	$	(49,472)
Collateralized mortgage obligations	107,449		(14,484)		48	174,179		(42,763)		31	281,628		(57,247)
Mortgage-backed securities	31,350		(4,556)		8	108,930		(24,615)		19	140,280		(29,171)
Collateralized loan obligations	14,468		(480)		3	22,343		(657)		3	36,811		(1,137)
Corporate notes	9,185		(1,315)		5	2,856		(394)		3	12,041		(1,709)
	$	237,128	$	(32,391)	138	$	426,795	$	(106,345)	99	$	663,923	$	(138,736)


	2023		2022		2021
Balance, beginning of year	$	155,789	$	143,768	119,600
New loans	1,699		42,371		35,450
Repayments	(16,513)		(20,650)		(11,282)
Effect of change in director status	(30,682)		(9,700)		—
Balance, end of year	$	110,293	$	155,789	$	143,768


	Net Interest Income at
	December 31, 2023
Change in Interest Rates	$ Change		% Change
300 basis points rising	$	(11,456)	(14.73)	%
200 basis points rising	(7,187)		(9.24)
100 basis points rising	(3,559)		(4.58)
100 basis points falling	2,461		3.16
200 basis points falling	4,786		6.16


	January 1, 2023
	Pre-ASC 326 Adoption		Impact of ASC 326 Adoption		As Reported Under ASC 326
Assets:
Commercial	$	4,804	$	677	$	5,481
Real estate:
Construction, land and land development	3,548		(234)		3,314
1-4 family residential first mortgages	357		121		478
Home equity	101		(8)		93
Commercial	16,575		1,911		18,486
Consumer and other	88		(9)		79
Allowance for credit losses on loans	$	25,473	$	2,458	$	27,931

Liabilities:
Liability for off-balance sheet credit exposures	$	—	$	2,344	$	2,344


(in thousands, except per share data)	2023		2022		2021
Net income	$	24,137	$	46,399	$	49,607

Weighted average common shares outstanding	16,704		16,620		16,534
Weighted average effect of restricted stock units outstanding	46		178		255
Diluted weighted average common shares outstanding	16,750		16,798		16,789

Basic earnings per common share	$	1.44	$	2.79	$	3.00
Diluted earnings per common share	$	1.44	$	2.76	$	2.95
Number of anti-dilutive common stock equivalents excluded from diluted earnings per share computation	412		152		—


	2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available for sale:
State and political subdivisions	$	231,413	$	19	$	(38,427)	$	193,005
Collateralized mortgage obligations (1)	305,200		—		(55,267)		249,933
Mortgage-backed securities (1)	157,711		—		(25,873)		131,838
Collateralized loan obligations	37,632		—		(96)		37,536
Corporate notes	13,750		—		(2,143)		11,607
	$	745,706	$	19	$	(121,806)	$	623,919


	2023
			Real Estate
	Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Beginning balance	$	4,804	$	3,548	$	357	$	101	$	16,575	$	88	$	25,473
Adoption of CECL	677		(234)		121		(8)		1,911		(9)		2,458
Charge-offs	(55)		(39)		(40)		—		—		—		(134)
Recoveries	36		2		2		5		—		—		45
Provision for credit loss expense(1)	(171)		391		264		44		(66)		38		500
Ending balance	$	5,291	$	3,668	$	704	$	142	$	18,420	$	117	$	28,342


	December 31, 2022
			Real Estate
	Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Ending balance:
Individually evaluated for impairment	$	—	$	—	$	322	$	—	$	—	$	—	$	322
Collectively evaluated for impairment	519,196		363,014		74,889		10,322		1,771,940		7,292		2,746,653
Total	$	519,196	$	363,014	$	75,211	$	10,322	$	1,771,940	$	7,292	$	2,746,975


	Total Nonaccrual				Nonaccrual with no Allowance for Credit Losses				90 Days or More Past Due and Accruing
	December 31, 2023		December 31, 2022		December 31, 2023		December 31, 2022		December 31, 2023		December 31, 2022
Commercial	$	—	$	—	$	—	$	—	$	—	$	—
Real estate:
Construction, land and land
development	—		—		—		—		—		—
1-4 family residential first
mortgages	296		322		296		322		—		—
Home equity	—		—		—		—		—		—
Commercial	—		—		—		—		—		—
Consumer and other	—		—		—		—		—		—
Total	$	296	$	322	$	296	$	322	$	—	$	—


	December 31, 2023
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans
Commercial	$	—	$	—	$	—	$	—	$	531,594	$	531,594
Real estate:
Construction, land and
land development	—		—		—		—		413,477		413,477
1-4 family residential
first mortgages	—		—		—		—		106,688		106,688
Home equity	—		—		—		—		14,618		14,618
Commercial	—		—		—		—		1,854,510		1,854,510
Consumer and other	—		—		—		—		10,930		10,930
Total	$	—	$	—	$	—	$	—	$	2,931,817	$	2,931,817


	Term Loans by Origination Year
As of December 31, 2023	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total
Commercial
Pass	$	147,971	$	110,228	$	48,291	$	31,423	$	6,510	$	44,146	$	143,025	$	531,594
Watch	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	147,971	$	110,228	$	48,291	$	31,423	$	6,510	$	44,146	$	143,025	$	531,594
Current period gross writeoffs	$	37	$	—	$	—	$	—	$	18	$	—	$	—	$	55
Real estate:
Construction, land and land development
Pass	$	126,608	$	114,176	$	64,797	$	20,210	$	1,458	$	—	$	86,228	$	413,477
Watch	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	126,608	$	114,176	$	64,797	$	20,210	$	1,458	$	—	$	86,228	$	413,477
Current period gross writeoffs	$	—	$	39	$	—	$	—	$	—	$	—	$	—	$	39
1-4 family residential first mortgages
Pass	$	46,766	$	20,531	$	19,670	$	11,779	$	3,663	$	3,176	$	663	$	106,248
Watch	144		—		—		—		—		—		—		144
Substandard	—		—		—		—		296		—		—		296
Doubtful	—		—		—		—		—		—		—		—
Total	$	46,910	$	20,531	$	19,670	$	11,779	$	3,959	$	3,176	$	663	$	106,688
Current period gross writeoffs	$	—	$	40	$	—	$	—	$	—	$	—	$	—	$	40
Home equity
Pass	$	2,804	$	288	$	508	$	98	$	138	$	16	$	10,766	$	14,618
Watch	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	2,804	$	288	$	508	$	98	$	138	$	16	$	10,766	$	14,618
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial
Pass	$	212,772	$	519,783	$	463,750	$	359,032	$	84,995	$	195,967	$	18,211	$	1,854,510
Watch	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	212,772	$	519,783	$	463,750	$	359,032	$	84,995	$	195,967	$	18,211	$	1,854,510
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Consumer and other
Pass	$	1,740	$	211	$	392	$	51	$	17	$	126	$	8,393	$	10,930
Watch	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	1,740	$	211	$	392	$	51	$	17	$	126	$	8,393	$	10,930
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—


	Term Loans by Origination Year
As of December 31, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans		Total
Commercial
Pass	$	166,177	$	65,148	$	64,103	$	9,926	$	23,771	$	24,103	$	165,968	$	519,196
Watch	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	166,177	$	65,148	$	64,103	$	9,926	$	23,771	$	24,103	$	165,968	$	519,196
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Real estate:
Construction, land and land development
Pass	$	151,963	$	96,486	$	39,604	$	1,562	$	196	$	—	$	73,156	$	362,967
Watch	47		—		—		—		—		—		—		47
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	152,010	$	96,486	$	39,604	$	1,562	$	196	$	—	$	73,156	$	363,014
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
1-4 family residential first mortgages
Pass	$	24,777	$	24,042	$	14,879	$	4,229	$	1,283	$	4,267	$	1,176	$	74,653
Watch	—		148		—		—		—		—		—		148
Substandard	88		—		—		322		—		—		—		410
Doubtful	—		—		—		—		—		—		—		—
Total	$	24,865	$	24,190	$	14,879	$	4,551	$	1,283	$	4,267	$	1,176	$	75,211
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	31	$	—	$	31
Home equity
Pass	$	413	$	613	$	512	$	130	$	169	$	—	$	8,485	$	10,322
Watch	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	413	$	613	$	512	$	130	$	169	$	—	$	8,485	$	10,322
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial
Pass	$	543,138	$	440,150	$	405,935	$	92,304	$	54,723	$	169,055	$	12,599	$	1,717,904
Watch	22,553		30,573		—		910		—		—		—		54,036
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	565,691	$	470,723	$	405,935	$	93,214	$	54,723	$	169,055	$	12,599	$	1,771,940
Current period gross writeoffs	$	—	$	451	$	—	$	—	$	—	$	—	$	—	$	451
Consumer and other
Pass	$	1,176	$	1,082	$	136	$	86	$	272	$	72	$	4,468	$	7,292
Watch	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	1,176	$	1,082	$	136	$	86	$	272	$	72	$	4,468	$	7,292
Current period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—


	As of December 31, 2023
	Primary Type of Collateral
	Real Estate		Equipment		Other		Total		ACL Allocation



1-4 family residential first mortgages	$	296	$	—	$	—	$	296	$	—



Total	$	296	$	—	$	—	$	296	$	—


	December 31, 2022
	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Commercial	$	—	$	—	$	—
Real estate:
Construction, land and land development	—		—		—
1-4 family residential first mortgages	322		322		—
Home equity	—		—		—
Commercial	—		—		—
Consumer and other	—		—		—
	322		322		—
With an allowance recorded:
Commercial	—		—		—
Real estate:
Construction, land and land development	—		—		—
1-4 family residential first mortgages	—		—		—
Home equity	—		—		—
Commercial	—		—		—
Consumer and other	—		—		—
	—		—		—
Total:
Commercial	—		—		—
Real estate:
Construction, land and land development	—		—		—
1-4 family residential first mortgages	322		322		—
Home equity	—		—		—
Commercial	—		—		—
Consumer and other	—		—		—
Total impaired loans	$	322	$	322	$	—


	December 31, 2022				December 31, 2021
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial	$	—	$	—	$	—	$	—
Real estate:
Construction, land and land development	—		—		—		—
1-4 family residential first mortgages	336		—		363		—
Home equity	—		—		—		—
Commercial	—		—		—		—
Consumer and other	—		—		—		—
	336		—		363		—
With an allowance recorded:
Commercial	—		—		—		—
Real estate:
Construction, land and land development	—		—		—		—
1-4 family residential first mortgages	—		—		—		—
Home equity	—		—		—		—
Commercial	3,915		—		13,002		—
Consumer and other	—		—		—		—
	3,915		—		13,002		—
Total:
Commercial	—		—		—		—
Real estate:
Construction, land and land development	—		—		—		—
1-4 family residential first mortgages	336		—		363		—
Home equity	—		—		—		—
Commercial	3,915		—		13,002		—
Consumer and other	—		—		—		—
Total impaired loans	$	4,251	$	—	$	13,365	$	—


	2023		2022
Land	$	11,049	$	10,450
Buildings	69,693		37,173
Right-of-use assets under operating leases	3,231		4,487
Leasehold improvements	3,557		3,578
Furniture and equipment	11,880		9,441
	99,410		65,129
Accumulated depreciation	(13,011)		(12,005)
	$	86,399	$	53,124


2024	$	857
2025	588
2026	503
2027	347
2028	356
Thereafter	1,178
Total lease payments	3,829
Less: present value discount	(427)
Present value of lease liabilities	$	3,402


2024	$	5,000
2025	5,000
2026	5,446
2027	21,701
2028	455
Thereafter	10,134
	$	47,736


	December 31, 2023			December 31, 2022
Cash Flow Hedges:
Gross notional amount	$	445,000		$	310,000
Fair value in other assets	11,313			16,284
Fair value in other liabilities	(988)			—
Weighted-average floating rate received	5.64		%	4.53		%
Weighted-average fixed rate paid	3.04		%	2.25		%
Weighted-average maturity in years	2.6			3.3

Non-Hedging Derivatives:
Gross notional amount	$	293,400		$	254,369
Fair value in other assets	14,114			15,309
Fair value in other liabilities	(14,114)			(15,309)


	2023		2022
Deferred tax assets:
Allowance for credit losses	$	7,598	$	6,241
Net unrealized losses on securities available for sale	30,081		34,544

Lease liabilities	837		1,147
Accrued expenses	196		434
Restricted stock unit compensation	1,185		1,038
State net operating loss carryforward	1,763		1,476

Other	177		156
	41,837		45,036
Deferred tax liabilities:
Right-of-use assets	795		1,099
Deferred loan costs	258		249

Net unrealized gains on interest rate swaps	2,547		4,003
Premises and equipment	1,657		1,219
New markets tax credit loan	389		303
Other	125		78
	5,771		6,951
Net deferred tax assets before valuation allowance	36,066		38,085
Valuation allowance for deferred tax assets	(1,763)		(1,476)
Net deferred tax assets	$	34,303	$	36,609


			Unrealized		Accumulated
	Unrealized		Gains		Other
	Gains (Losses)		(Losses) on		Comprehensive
	on Securities		Derivatives		Income (Loss)
Balance, December 31, 2020	$	5,994	$	(17,840)	$	(11,846)
Other comprehensive income (loss) before reclassifications	(10,977)		6,032		(4,945)
Amounts reclassified from accumulated other
comprehensive income	(38)		6,192		6,154
Net current period other comprehensive income (loss)	(11,015)		12,224		1,209
Balance, December 31, 2021	(5,021)		(5,616)		(10,637)
Other comprehensive income (loss) before reclassifications	(98,637)		17,739		(80,898)
Amounts reclassified from accumulated other
comprehensive income	(22)		86		64
Net current period other comprehensive income (loss)	(98,659)		17,825		(80,834)
Balance, December 31, 2022	(103,680)		12,209		(91,471)
Other comprehensive income before reclassifications	12,158		3,221		15,379
Amounts reclassified from accumulated other
comprehensive income	289		(7,720)		(7,431)
Net current period other comprehensive income (loss)	12,447		(4,499)		7,948
Balance, December 31, 2023	$	(91,233)	$	7,710	$	(83,523)


	Actual				For Capital Adequacy Purposes				For Capital Adequacy Purposes With Capital Conservation Buffer				To Be Well-Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2023:
Total Capital (to Risk-Weighted Assets)
Consolidated	$	419,452	11.88	%	$	282,508	8.00	%	$	370,791	10.50	%	$	353,135	10.00	%
West Bank	450,444		12.76	%	282,307		8.00	%	370,527		10.50	%	352,883		10.00	%

Tier 1 Capital (to Risk-Weighted Assets)
Consolidated	328,566		9.30	%	211,881		6.00	%	300,164		8.50	%	282,508		8.00	%
West Bank	419,558		11.89	%	211,730		6.00	%	299,951		8.50	%	282,307		8.00	%

Common Equity Tier 1 Capital (to Risk-Weighted Assets)
Consolidated	308,566		8.74	%	158,911		4.50	%	247,194		7.00	%	229,537		6.50	%
West Bank	419,558		11.89	%	158,797		4.50	%	247,018		7.00	%	229,374		6.50	%

Tier 1 Capital (to Average Assets)
Consolidated	328,566		8.50	%	154,628		4.00	%	154,628		4.00	%	193,285		5.00	%
West Bank	419,558		10.86	%	154,571		4.00	%	154,571		4.00	%	193,213		5.00	%

As of December 31, 2022:
Total Capital (to Risk-Weighted Assets)
Consolidated	$	408,056	12.08	%	$	270,221	8.00	%	$	354,665	10.50	%	$	337,776	10.00	%
West Bank	441,628		13.08	%	270,053		8.00	%	354,445		10.50	%	337,566		10.00	%

Tier 1 Capital (to Risk-Weighted Assets)
Consolidated	322,583		9.55	%	202,666		6.00	%	287,110		8.50	%	270,221		8.00	%
West Bank	416,155		12.33	%	202,540		6.00	%	286,930		8.50	%	270,053		8.00	%

Common Equity Tier 1 Capital (to Risk-Weighted Assets)
Consolidated	302,583		8.96	%	151,999		4.50	%	236,443		7.00	%	219,555		6.50	%
West Bank	416,155		12.33	%	151,905		4.50	%	236,296		7.00	%	219,418		6.50	%

Tier 1 Capital (to Average Assets)
Consolidated	322,583		8.81	%	146,439		4.00	%	146,439		4.00	%	183,049		5.00	%
West Bank	416,155		11.37	%	146,367		4.00	%	146,367		4.00	%	182,958		5.00	%