Back to GetFilings.com
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED COMMISSION FILE NUMBER
June 30, 2004 0-49677
WEST BANCORPORATION, INC.
-------------------------
(Exact Name of Registrant as Specified in its Charter)
IOWA 42-1230603
---- ----------
(State of Incorporation) (I.R.S. Employer Identification No.)
1601 22nd Street, West Des Moines, Iowa 50266
Telephone Number (515) 222-2300
Indicate by check mark whether the registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [ ]
As of August 3, 2004, there were 16,701,843 shares of common stock, no par value
outstanding.
1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
West Bancorporation, Inc. and Subsidiaries
Consolidated Balance Sheets
(unaudited)
June 30, December 31,
2004 2003
---- ----
Assets
Cash and due from banks $ 26,589,762 $ 27,786,795
Federal funds sold and other short-term investments 34,001,241 54,287,004
--------------- ---------------
Cash and cash equivalents 60,591,003 82,073,799
--------------- ---------------
Securities available for sale 210,020,362 178,308,941
Securities held to maturity (approximate market value of $79,367,000
and $93,477,000 at June 30, 2004 and December 31, 2003, respectively) 78,757,599 91,406,205
Federal Home Loan Bank stock, at cost 7,134,000 5,197,600
--------------- ---------------
Total securities 295,911,961 274,912,746
--------------- ---------------
Loans 631,694,527 599,355,407
Allowance for loan losses (6,032,246) (5,975,587)
--------------- ---------------
Loans, net 625,662,281 593,379,820
--------------- ---------------
Premises and equipment, net 3,752,356 3,683,020
Accrued interest receivable 5,792,251 5,878,880
Goodwill and other intangible assets 16,754,318 16,900,487
Bank-owned life insurance 20,831,680 20,386,714
Other assets 3,545,634 3,396,145
--------------- ---------------
Total assets $ 1,032,841,484 $ 1,000,611,611
=============== ===============
Liabilities and Stockholders' Equity
Deposits:
Noninterest bearing demand $ 170,049,329 $ 172,070,832
Savings and interest bearing demand 407,882,433 403,060,980
Time, in excess of $100,000 113,124,743 63,463,030
Other time 64,580,934 66,479,171
--------------- ---------------
Total deposits 755,637,439 705,074,013
Federal funds purchased and securities sold under agreements to repurchase 46,120,167 85,442,675
Other short-term borrowings 33,313,854 9,141,973
Accrued expenses and other liabilities 2,940,057 2,032,291
Trust preferred securities - 20,000,000
Subordinated notes 20,619,000 -
Federal Home Loan Bank advances 81,971,317 86,024,315
--------------- ---------------
Total liabilities 940,601,834 907,715,267
--------------- ---------------
Stockholders' Equity
Common stock, no par value; authorized 50,000,000 shares; 15,906,641 and
16,060,271 shares issued and outstanding at June 30, 2004 and
December 31,2003, respectively 3,000,000 3,000,000
Additional paid-in capital 32,000,000 32,000,000
Retained earnings 58,112,317 56,796,771
Accumulated other comprehensive income (loss) (872,667) 1,099,573
--------------- ---------------
Total stockholders' equity 92,239,650 92,896,344
--------------- ---------------
Total liabilities and stockholders' equity $ 1,032,841,484 $ 1,000,611,611
=============== ===============
See accompanying notes to consolidated financial statements.
2
West Bancorporation, Inc. and Subsidiaries
Consolidated Statements of Income
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2004 2003 2004 2003
---- ---- ---- ----
Interest income:
Loans $ 8,832,357 $ 7,667,478 $17,579,507 $15,369,314
Securities:
U.S Treasury, government agencies and corporations 1,429,510 1,087,784 2,717,387 2,262,832
States and political subdivisions 506,722 444,095 968,119 859,337
Other 690,926 761,521 1,439,906 1,403,510
Federal funds sold and other short-term investments 179,399 379,187 367,146 818,680
----------- ----------- ----------- -----------
Total interest income 11,638,914 10,340,065 23,072,065 20,713,673
----------- ----------- ----------- -----------
Interest expense:
Demand deposits 20,182 24,014 39,804 49,275
Savings deposits 849,039 725,172 1,577,757 1,493,869
Time deposits 696,986 704,608 1,292,152 1,520,668
Federal funds purchased and securities sold under
agreements to repurchase 137,504 492,194 333,338 888,351
Other short-term borrowings 57,433 1,782 82,231 3,357
Subordinated notes 366,872 - 733,744 -
Long-term borrowings 927,585 715,907 1,856,873 1,423,947
----------- ----------- ----------- -----------
Total interest expense 3,055,601 2,663,677 5,915,899 5,379,467
----------- ----------- ----------- -----------
Net interest income 8,583,313 7,676,388 17,156,166 15,334,206
Provision for loan losses 225,000 175,000 450,000 375,000
----------- ----------- ----------- -----------
Net interest income after provision for loan losses 8,358,313 7,501,388 16,706,166 14,959,206
----------- ----------- ----------- -----------
Noninterest income:
Service charges on deposit accounts 1,273,472 1,261,022 2,420,569 2,358,217
Trust services 132,500 122,000 258,500 254,000
Investment advisory fees 622,196 - 1,189,021 -
Increase in cash value of bank-owned life insurance 221,739 126,701 444,965 191,347
Net realized gains from sales of securities available for sale 243,006 95,867 243,006 195,607
Other income 334,546 333,443 707,524 644,284
----------- ----------- ----------- -----------
Total noninterest income 2,827,459 1,939,033 5,263,585 3,643,455
----------- ----------- ----------- -----------
Noninterest expense:
Salaries and employee benefits 2,425,732 1,701,151 4,889,403 3,405,442
Occupancy expenses 494,110 352,874 1,005,173 723,123
Data processing expenses 352,148 248,889 689,159 492,174
Other expenses 978,884 575,255 1,962,666 1,163,535
----------- ----------- ----------- -----------
Total noninterest expense 4,250,874 2,878,169 8,546,401 5,784,274
----------- ----------- ----------- -----------
Income before income taxes 6,934,898 6,562,252 13,423,350 12,818,387
Income taxes 2,381,798 2,311,391 4,608,283 4,516,961
----------- ----------- ----------- -----------
Net income $ 4,553,100 $ 4,250,861 $ 8,815,067 $ 8.301.426
=========== =========== =========== ===========
Basic earnings per share $ 0.28 $ 0.26 $ 0.55 $ 0.52
=========== =========== =========== ===========
Cash dividends per share $ 0.16 $ 0.16 $ 0.32 $ 0.32
=========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
3
West Bancorporation, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
(unaudited)
Six Months Ended June 30,
2004 2003
---- ----
Common Stock
Beginning of year balance $ 3,000,000 $ 3,000,000
----------- -----------
End of period balance 3,000,000 3,000,000
----------- -----------
Additional Paid-in Capital
Beginning of year balance 32,000,000 32,000,000
----------- -----------
End of period balance 32,000,000 32,000,000
----------- -----------
Retained Earnings
Beginning of year balance 56,796,771 49,792,716
Net income 8,815,067 8,301,426
Dividends on common stock (5,139,286) (5,139,286)
Shares reacquired under the common stock
repurchase plan (2,360,235) -
----------- -----------
End of period balance 58,112,317 52,954,856
----------- -----------
Accumulated Other Comprehensive Income (Loss)
Beginning of year balance 1,099,573 1,031,446
Unrealized gain on securities, net of tax (1,972,240) 648,604
----------- -----------
End of period balance (872,667) 1,680,050
----------- -----------
Total Stockholders' Equity $92,239,650 $89,634,906
=========== ===========
West Bancorporation, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
Six Months Ended June 30,
2004 2003
---- ----
Net Income $ 8,815,067 $ 8,301,426
Other comprehensive income (loss), unrealized
gains (losses) on securities, net of
reclassification adjustment, net of tax (1,972,240) 648,604
----------- -----------
Comprehensive income $ 6,842,827 $ 8,950,030
=========== ===========
See accompanying notes to consolidated financial statements.
4
West Bancorporation, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)
Six Months Ended June 30,
2004 2003
---- ----
Cash Flows from Operating Activities
Net income $ 8,815,067 $ 8,301,426
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 450,000 375,000
Net amortization 1,117,916 677,677
Net gains from sales of securities available for sale
and loans held for sale (321,783) (319,344)
Proceeds from sales of loans held for sale 6,838,887 4,991,669
Originations of loans held for sale (6,690,110) (4,989,182)
Depreciation 168,141 106,775
Deferred income taxes 415,048 (394,254)
Change in assets and liabilities:
Decrease (increase) in accrued interest receivable 86,629 (129,181)
Increase (decrease) in accrued expenses and other liabilities 907,766 (525,556)
------------- -------------
Net cash provided by operating activities 11,787,561 8,095,030
------------- -------------
Cash Flows from Investing Activities
Proceeds from sales, calls, and maturities of securities available for sale 50,764,241 17,746,751
Purchases of securities available for sale (75,347,371) (95,463,237)
Proceeds from calls and maturities of securities held to maturity 26,598,000 49,857,843
Purchases of securities held to maturity (25,082,002) (14,414,620)
Acquisition of Federal Home Loan Bank stock (5,238,700) -
Proceeds from redemption of Federal Home Loan Bank stock 3,302,300 -
Net increase in loans (32,802,461) (11,566,783)
Purchases of premises and equipment (237,477) (73,188)
Purchase of bank-owned life insurance - (10,000,000)
Change in other assets 140,835 (275,090)
------------- -------------
Net cash (used) in investing activities (57,902,635) (64,188,324)
------------- -------------
Cash Flows from Financing Activities
Net increase (decrease) in deposits 50,563,426 (54,670,885)
Net increase (decrease) in federal funds purchased and securities sold
under agreements to repurchase (39,322,508) 32,320,402
Net increase (decrease) in other short-term borrowings 24,171,881 (3,150,149)
Proceeds from long-term borrowings 10,619,000 -
Principal payments on long-term borrowings (13,900,000) -
Payment for shares reaquired under common stock
repurchase plan (2,360,235) -
Cash dividends (5,139,286) (5,139,286)
------------- -------------
Net cash provided by (used) in financing activities 24,632,278 (30,639,918)
------------- -------------
Net decrease in cash and cash equivalents (21,482,796) (86,733,212)
Cash and Cash Equivalents
Beginning 82,073,799 181,214,068
------------- -------------
End $ 60,591,003 $ 94,480,856
============= =============
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest $ 5,729,400 $ 5,901,782
Income taxes 3,637,000 4,868,603
See accompanying notes to consolidated financial statements.
5
West Bancorporation, Inc.
Notes to Consolidated Financial Statements
(unaudited)
1. Basis of Presentation
The accompanying consolidated statements of income, stockholders' equity,
comprehensive income, and cash flows for the three and six months ended June 30,
2004 and 2003, and the consolidated balance sheets as of June 30, 2004 and
December 31, 2003 include the accounts and transactions of the Company and its
wholly-owned subsidiaries, West Bank and WB Capital Management Inc. d/b/a VMF
Capital. All material intercompany balances and transactions have been
eliminated in consolidation.
The accompanying consolidated financial statements have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. Although management believes that the disclosures are adequate to
make the information presented not misleading, it is suggested that these
interim consolidated financial statements be read in conjunction with the
company's most recent audited financial statements and notes thereto. In the
opinion of management, the accompanying consolidated financial statements
contain all adjustments (consisting of only normal recurring accruals) necessary
to present fairly the financial position as of June 30, 2004, and the results of
operations and cash flows for the three and six months ended June 30, 2004 and
2003.
The results for these interim periods may not be indicative of results for the
entire year or for any other period.
2. Earnings Per Common Share
Earnings per share represent income available to common shareholders divided by
the weighted average number of shares outstanding during the period. The Company
has no common equivalent shares that could cause dilution. The average number of
shares outstanding for the three months ended June 30, 2004 and 2003 was
15,980,383 and 16,060,271, respectively, and the average number of shares
outstanding for the six months ended June 30, 2004 and 2003 was 16,020,327 and
16,060,271, respectively.
3. Commitments
In the normal course of business, the Company enters into commitments to extend
credit such as loan commitments and standby letters of credit to meet the
financing needs of its customers. These commitments expose the Company to
varying degrees of credit and market risk and are subject to the same credit
reviews as those recorded on the balance sheet. For additional information on
credit extension commitments see Note 13 of the Company's 2003 consolidated
financial statements. The Company's commitments as of June 30, 2004 and December
31, 2003 are approximately as follows:
June 30, 2004 December 31, 2003
------------- -----------------
Commitments to extend credit $ 149,747,000 $ 166,945,000
Standby letters of credit 22,836,000 19,974,000
------------- -------------
$ 172,583,000 $ 186,919,000
============= =============
6
4. Impact of New Financial Accounting Standards
The Accounting Standards Executive Committee has issued Statement of Position
03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer.
This Statement applies to all loans acquired in a transfer, including those
acquired in the acquisition of a bank or a branch, and provides that such loans
be accounted for at fair value with no allowance for loan losses, or other
valuation allowance, permitted at the time of acquisition. The difference
between cash flows expected at the acquisition date and the investment in the
loan should be recognized as interest income over the life of the loan. If
contractually required payments for principal and interest are less than
expected cash flows, this amount should not be recognized as a yield adjustment,
a loss accrual, or a valuation allowance. For the Company, this Statement is
effective for calendar year 2005 and, early adoption, although permitted, is not
planned. No significant impact is expected on the consolidated financial
statements at the time of adoption.
5. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates. A significant estimate that is
particularly sensitive to change is the allowance for loan losses.
6. Critical Accounting Policies
Management has identified its most critical accounting policy to be that related
to the allowance for loan losses. The allowance for loan losses is established
through a provision for loan losses charged to expense. Loans are charged
against the allowance for loan losses when management believes that
collectibility of the principal is unlikely. The Company has policies and
procedures for evaluating the overall credit quality of its loan portfolio
including timely identification of potential problem credits. On a quarterly
basis, management reviews the appropriate level for the allowance for loan
losses incorporating a variety of risk considerations, both quantitative and
qualitative. Quantitative factors include the Company's historical loss
experience, delinquency and charge-off trends, collateral values, known
information about individual loans and other factors. Qualitative factors
include the general economic environment in the Company's market area and the
expected trend of those economic conditions. To the extent actual results differ
from forecasts and management's judgment, the allowance for loan losses may be
greater or less than future charge-offs.
7. Reclassifications
In July, 2003, the Company formed West Bancorporation Capital Trust I (the
"Trust") for the purpose of issuing trust preferred securities. Following
generally accepted accounting principles in effect as of December 31, 2003, the
financial statements of the Trust were consolidated with the Company and any
intercompany transactions were eliminated. As of June 30, 2004, generally
accepted accounting principles have been modified to state that the financial
statements of the Trust should not be consolidated with the Company's and
intercompany transactions should not be eliminated. The result of this change is
that the balance of subordinated debt has increased by $619,000 which represents
debt issued by the Company to the Trust. In addition, other assets increased by
$619,000 which represents the Company's investment in the common stock of the
Trust. The results of the Trust are recorded on the books of the Company using
the equity method of accounting. There was no impact to net income as a result
of this change.
Other minor reclassifications were made to certain prior year's income and
expense categories to conform to the current year's presentation.
7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
The information contained in this report may contain forward-looking statements
about the Company's growth and acquisition strategies, new products and
services, and future financial performance, including earnings and dividends per
share, return on average assets, return on average equity, efficiency ratio and
capital ratio. Certain statements in this report constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking information is based upon certain underlying
assumptions, risks and uncertainties. Because of the possibility of change in
the underlying assumptions, actual results could differ materially from these
forward-looking statements. Risks and uncertainties that may affect future
results include: competitive pressures, pricing pressures on loans and deposits,
actions of bank and non-bank competitors, changes in local and national
economic conditions, changes in regulatory requirements, actions of the
Securities and Exchange Commission and/or the Federal Reserve Board, and
customer acceptance of the Company's products and services. The Company
undertakes no obligation to revise or update such forward-looking statements to
reflect current events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
THREE AND SIX MONTHS ENDED JUNE 30, 2004
OVERVIEW
The following discussion is provided for the consolidated operations of the
Company, which includes its wholly-owned banking subsidiary, West Bank ("Bank")
and its wholly-owned investment advisory subsidiary, WB Capital Management Inc.
d/b/a VMF Capital ("VMF Capital"). It focuses on the consolidated results of
operations for the three and six months ended June 30, 2004, compared to the
same periods in 2003 and on the consolidated financial condition of the
Companies and its subsidiaries at June 30, 2004, compared to December 31,2003.
Net income for the three months ended June 30, 2004 increased 7.1 percent to
$4,553,000 compared to $4,251,000 for the same period in 2003. The increase was
primarily due to an 11.8 percent increase in net interest income and higher
gains from sales of securities.
For the first six months of 2004, net income was $8,815,000, or $.55 per share,
which is a 6.2 percent increase over last year. Net income for the first six
months of 2004 is higher than the previous year primarily because of the $90
million increase in average earning assets. A significant portion of that
increase is attributable to the acquisition of the Iowa City offices which
occurred in July of 2003.
The year-to-date net interest margin has increased 4 basis points from a year
ago. While loan and deposit rate are both lower than a year ago, changes in the
mix of earning assets and interest bearing liabilities allowed the Company to
maintain the net interest margin. On June 30, 2004, the Federal Reserve
increased the fed funds rate by 25 basis points. This was the first increase in
interest rates since June of 2003. Prime rate on loans has also increased 25
basis points to 4.25 percent. The increase in market rates during the second
quarter of 2004 prior to the Federal Reserve's action on June 30th has caused an
increase in the rates offered on longer term certificates of deposit and could
put pressure on banks to increase other deposit rates.
Year-to-date noninterest income was higher than last year due to investment
advisory fees earned by VMF Capital. Those fees totaled $1,189,000 year-to-date.
VMF Capital was acquired in October of 2003 so there were no such fees for the
comparable periods last year.
Noninterest expense was 48% higher than a year ago, both for the current quarter
and year-to-date. The increase is due to approximately 40 more employees than a
year ago, two additional banking office locations and two VMF Capital locations
that were not a part of the Company last year at this time.
For the first six months of 2004, VMF Capital had a net loss of $87,000, which
was in line with internal projections. It is expected that VMF Capital will be
near breakeven for the entire year of 2004, however that is dependent upon
continued growth in assets under management, which is difficult to project with
any degree of certainty. During the first six months of 2004, assets under
management at VMF Capital increased approximately $237 million to $699 million.
8
RESULTS OF OPERATIONS
The following table shows selected financial results and measures for the three
and six months ended June 30, 2004 compared with the same periods in 2003.
Three months ended June 30, Six months ended June 30,
2004 2003 Change Change-% 2004 2003 Change Change-%
---- ---- ------ -------- ---- ---- ------ --------
Net income $ 4,553,100 $ 4,250,861 $ 302,239 7.1% $ 8,815,067 $ 8,301,426 $ 513,641 6.2%
Average assets 1,019,175,042 88,654,683 130,520,359 14.7% 1,002,528,764 878,079,008 124,449,756 14.2%
Average
stockholders'
equity 93,296,891 88,095,649 5,201,242 5.9% 93,614,745 87,250,509 6,364,236 7.3%
Return on assets 1.80% 1.92% -0.12% -6.4% 1 .77% 1.91% -0.14% -7.3%
Return on equity 19.63% 19.35% 0.27% 1.4% 18.94% 19.19% -0.25% -1.3%
Efficiency ratio 37.11% 29.54% 7.57% 25.6% 37.62% 30.05% 7.57% 25.2%
Dividend payout ratio 57.14% 61.54% -4.40% -7.1% 58.18% 61.54% -3.36% -5.5%
Equity to assets ratio 9.15% 9.91% -0.76% -7.7% 9.34% 9.94% -0.60% -6.0%
Definitions of ratios:
Return on assets - annualized net income divided by average assets.
Return on equity - annualized net income divided by average stockholders'
equity.
Efficiency ratio - noninterest expense divided by noninterest income (excluding
securities gains) plus taxable equivalent net interest income.
Dividend payout ratio - dividends per share divided by net income per share.
Equity to assets ratio - average equity divided by average assets.
Net Interest Income
The following tables show average balances and related interest income or
interest expense, with the resulting average yield or rate by category of
average earning assets or interest bearing liabilities. Interest income and the
resulting net interest income are shown on a fully taxable basis.
9
Data for the three months ended June 30 (dollars in thousands):
Average Balance Interest Income/Expense Yield/Rate
--------------------------------------- ---------------------------------- ----------------------
2004 2003 Change Change-% 2004 2003 Change Change-% 2004 2003 Change
Interest-earning assets:
Loans:
Commercial $ 272,913 $ 257,719 $ 15,194 5.90% $ 3,536 $ 3,614 $ (78) -2.16% 5.21% 5.62% -0.41%
Real estate 318,228 207,366 110,862 53.46% 4,847 3,597 1,250 34.75% 6.13% 6.96% -0.83%
Consumer 13,153 17,088 (3,935) -23.03% 234 328 (94) -28.66% 7.16% 7.70% -0.54%
Other 20,580 9,702 10,878 112.12% 313 188 125 66.49% 6.12% 7.77% -1.65%
--------- --------- -------- ------ ------- ------- ------ ------ ---- ---- -----
Total loans 624,874 491,875 132,999 27.04% 8,930 7,727 1,203 15.57% 5.75% 6.30% -0.55%
--------- --------- -------- ------ ------- ------- ------ ------ ---- ---- -----
Investment securities:
Taxable 233,358 193,743 39,615 20.45% 2,215 1,933 282 14.59% 3.80% 4.00% -0.20%
Tax-exempt 51,366 41,789 9,577 22.92% 601 524 77 14.69% 4.68% 5.03% -0.35%
--------- --------- -------- ------ ------- ------- ------ ------ ---- ---- -----
Total investment securities 284,724 235,532 49,192 20.89% 2,816 2,457 359 14.61% 3.96% 4.18% -0.22%
--------- --------- -------- ------ ------- ------- ------ ------ ---- ---- -----
Federal funds sold and
short-term investments 38,538 122,737 (84,199) -68.60% 179 379 (200) -52.77% 1.87% 1.24% 0.63%
--------- --------- -------- ------ ------- ------- ------ ------ ---- ---- -----
Total interest-earning assets $ 948,136 $ 850,144 $ 97,992 11.53% 11,925 10,563 1,362 12.89% 5.06% 4.98% 0.08%
========= ========= ======== ====== ======= ======= ====== ====== ==== ==== =====
Interest-bearing liabilities:
Deposits:
Checking with interest,
savings and money markets $ 404,721 $ 322,853 $ 81,868 25.36% 869 749 120 16.02% 0.86% 0.93% -0.07%
Time deposits 159,786 103,346 56,440 54.61% 697 705 (8) -1.13% 1.75% 2.73% -0.98%
--------- --------- -------- ------ ------- ------- ------ ------ ---- ---- -----
Total deposits 564,507 426,199 138,308 32.45% 1,566 1,454 112 7.70% 1.12% 1.37% -0.25%
--------- --------- -------- ------ ------- ------- ------ ------ ---- ---- -----
Other borrowed funds 186,839 231,540 (44,701) -19.31% 1,489 1,210 279 23.06% 3.21% 2.10% 1.11%
--------- --------- -------- ------ ------- ------- ------ ------ ---- ---- -----
Total interest-bearing
liabilities $ 751,346 $ 657,739 $ 93,607 14.23% 3,055 2,664 391 14.68% 1.64% 1.62% 0.02%
========= ========= ======== ====== ------- ------- ------ ------ ---- ---- -----
Tax-equivalent net interest
income $ 8,870 $ 7,899 $ 971 12.29%
======= ======= ====== =====
Net interest spread 3.42% 3.36% 0.06%
==== ==== =====
Net interest margin 3.76% 3.73% 0.03%
==== ==== =====
Data for the six months ended June 30 (dollars in thousands):
Average Balance Interest Income/Expense Yield/Rate
--------------------------------------- ---------------------------------- ----------------------
2004 2003 Change Change-% 2004 2003 Change Change-% 2004 2003 Change
Interest-earning assets:
Loans:
Commercial $ 293,849 $ 254,389 $ 39,460 15.51% $ 7,771 $ 7,165 $ 606 8.46% 5.32% 5.68% -0.36%
Real estate 285,121 202,482 82,639 40.81% 8.850 7,192 1,658 23.05% 6.24% 7.16% -0.92%
Consumer 16,012 18,324 (2,312) -12.62% 562 689 (127) -18.43% 7.06% 7.58% -0.52%
Other 18.619 12,054 6,565 54.46% 576 472 104 22.03% 6.22% 7.90% -1.68%
--------- --------- -------- ------ -------- ------- ------ ------ ---- ---- -----
Total loans 613.601 487,249 126,352 25.93% 17,759 15,518 2,241 14.44% 5.82% 6.42% -0.60%
--------- --------- -------- ------ -------- ------- ------ ------ ---- ---- -----
Investment securities:
Taxable 226,733 185,348 41,385 22.33% 4,337 3,834 503 13.12% 3.83% 4.17% -0.34%
Tax-exempt 49,501 37,253 12,248 32.88% 1,152 1,009 143 14.17% 4.65% 5.46% -0.81%
--------- --------- -------- ------ -------- ------- ------ ------ ---- ---- -----
Total investment securities 276,234 222,601 53,633 24.09% 5,489 4,843 646 13.34% 3.98% 4.39% -0.41%
--------- --------- -------- ------ -------- ------- ------ ------ ---- ---- -----
Federal funds sold and
short-term investments 42,710 132,675 (89,965) -67.81% 367 819 (452) -55.19% 1.73% 1.24% 0.49%
--------- --------- -------- ------ -------- ------- ------ ------ ---- ---- -----
Total interest-earning assets $ 932,545 $ 842,525 $ 90,020 10.68% 23,615 21,180 2,435 11.50% 5.09% 5.07% 0.02%
========= ========= ======== ====== ======== ======= ====== ====== ==== ==== ====
Interest-bearing
liabilities:
Deposits:
Checking with interest,
savings and money markets $ 391,599 $ 325,670 $ 65,929 20.24% $ 1,618 $ 1,543 75 4.86% 0.83% 0.96% -0.13%
Time deposits 147,985 109,743 38,242 34.85% 1,292 1,521 (229) -15.06% 1.76% 2.79% -1.03%
--------- --------- -------- ------ ------- ------- ------ ----- ---- ---- -----
Total deposits 539,584 435,413 104,171 23.92% 2,910 3,064 (154) -5.03% 1.08% 1.42% -0.34%
--------- --------- -------- ------ ------- ------- ------ ----- ---- ---- -----
Other borrowed funds 196,106 215,532 (19,426) -9.01% 3,006 2,316 690 29.79% 3.08% 2.17% 0.91%
--------- --------- -------- ------ ------- ------- ------ ----- ---- ---- -----
Total interest-bearing
liabilities $ 735,690 $ 650,945 $ 84,745 13.02% 5,916 5,380 536 9.96% 1.62% 1.67% -0.05%
========= ========= ======== ====== ------- ------- ------ ----- ---- ---- -----
Tax-equivalent net interest
income $ 17,699 15,800 $1,899 12.02%
======== ======= ====== =====
Net interest spread 3.47% 3.40% 0.07%
==== ==== ====
Net interest margin 3.82% 3.78% 0.04%
==== ==== ====
10
Fluctuations in net interest income can result from the changes in the volumes
of assets and liabilities as well as changes in interest rates. Net interest
margin is a measure of the net return on interest-earning assets and is computed
by dividing annualized net interest income by the average of total
interest-earning assets for the period. The net interest margin for the second
quarter was 3.76 percent, which is 3 basis points higher than the same quarter
last year and 11 basis points less than the first quarter of 2004. The slight
decline from the prior quarter was due to an increase in interest rates on time
deposits as a result of increases in market rates during the second quarter of
2004. The Company's tax-equivalent net interest income for the six months ended
June 30, 2004 increased $1,899,000 compared to the six months ended June 30,
2003. The increase is primarily attributable to a higher level of earning
assets.
Taxable-equivalent interest income and fees on loans increased $2,241,000 in the
first six months of 2004 compared to the same period in 2003, due to a higher
volume of outstanding loans. Average loans were $126 million higher than the
first six months of last year. Loans acquired in the July 2003 Hawkeye State
Bank transaction account for approximately $60 million of that increase. The
average yield on loans declined to 5.82 percent for the first six months of
2004, compared to 6.42 percent for the same period in 2003. The yield on the
Company's loan portfolio is affected by the amount of nonaccrual loans, the mix
of the portfolio, the effects of competition and the interest rate environment.
The interest rate environment can influence the volume of new loan originations
and the mix of variable rate versus fixed rate loans. Competition for loans in
the market areas served by the Company remains strong.
The average balance of investment securities was $53.6 million higher than last
year while the yield has declined 41 basis points. Most purchases of investment
securities during the first six months of 2004 have been agency bonds and
tax-exempt municipal bonds with a maturity of five years or less.
The average rate paid on deposits for the first six months of 2004 declined to
1.08 percent from 1.42 percent for the same period last year. This decline is
primarily the result of a decrease in market interest rates. Compared to the
first six months of last year, the average balance of higher rate certificates
of deposit was up $38.2 million, while the average balance of money market and
savings accounts, which typically have lower rates, were $39.0 million and $21.4
million higher, respectively.
The average balance of borrowings for the first six months of 2004 was $19.4
million lower than a year ago. However, the mix of borrowings has changed
significantly since last year. Overnight borrowings in the form of Federal funds
purchased from downstream correspondent banks averaged $82 million less than the
first six months of last year. Long-term fixed borrowings averaged $51 million
more, consisting of $20.6 million in subordinated notes and $30.8 million in
fixed-rate Federal Home Loan Bank (FHLB) advances. The FHLB advances were
assumed in the Hawkeye State Bank transaction. This change in mix caused the
overall cost of borrowings to increase by 90 basis points, but should provide
favorable results when market interest rates rise.
Provision for Loan Losses and the Related Allowance for Loan Losses
The following table sets forth the activity in the Allowance for Loan Losses for
the three and six months ended June 30, 2004 and the same respective periods for
2003 as well as common ratios related to the allowance for loan losses.
Three months ended June 30, Six months ended June 30,
2004 2003 Change 2004 2003 Change
------------- ------------- ------------- ------------- ------------ -----------
Balance at beginning of period $ 5,955,308 $ 4,615,248 $ 1,340,060 $ 5,975,587 $ 4,493,583 $ 1,482,004
Charge-offs (204,833) (37,728) (167,105) (467,452) (160,681) (306,771)
Recoveries 56,771 43,809 12,962 74,111 88,427 (14,316)
------------- ------------- ------------- ------------- ------------ -----------
Net charge-offs (148,062) 6,081 (154,143) (393,341) (72,254) (321,087)
Provision charged to operations 225,000 175,000 50,000 450,000 375,000 75,000
------------- ------------- ------------- ------------- ------------ -----------
Balance at end of period $ 6,032,246 $ 4,796,329 $ 1,235,917 $ 6,032,246 $ 4,796,329 $ 1,235,917
============= ============= ============= ============= ============ ===========
Average loans outstanding $ 624,873,885 $ 491,875,695 $ 613,601,478 $487,248,274
Ratio of net charge-offs during the
period to average loans outstanding 0.02% 0.00% 0.06% 0.01%
Ratio of allowance for loan losses
to average loans outstanding 0.97% 0.98% 0.98% 0.98%
11
Management determines an appropriate provision based on its evaluation of the
adequacy of the allowance for loan losses in relationship to a continuing review
of problem loans, the current economic conditions, actual loss experience and
industry trends. The allowance for loan losses is management's best estimate of
probable losses inherent in the loan portfolio as of the balance sheet date;
however, changes in the loan portfolio and the uncertainty of the general
economy require that management continue to evaluate the adequacy of the
allowance for loan losses and make additional provisions in future periods as
deemed necessary. See also the discussion of nonperforming assets later in this
report.
Noninterest Income
The following table shows the variance from the prior year in the noninterest
income categories shown in the Consolidated Statements of Income. In addition,
accounts within the Other Income category that represent significant variances
are shown.
Three months ended June 30,
Noninterest income 2004 2003 Change Change-%
---------- ---------- --------- --------
Service charges on deposit accounts $1,273,472 $1,261,022 $ 12,450 0.99%
Trust services 132,500 122,000 10,500 8.61%
Investment advisory fees 622,196 - 622,196 -
Increase in cash value of bank-owned
life insurance 221,739 126,701 95,038 75.01%
Other:
Letter of credit fees 45,731 19,536 26,195 134.09%
VISA/Mastercard income 38,832 36,197 2,635 7.28%
Gain on sale of real estate loans 35,233 80,847 (45,614) -56.42%
Safe deposit box rent 31,989 29,490 2,499 8.47%
All other 182,761 167,373 15,388 9.19%
---------- ---------- --------- ------
Total other 334,546 333,443 1,103 0.33%
---------- ---------- --------- ------
Gain on sale of securities 243,006 95,867 147,139 153.48%
---------- ---------- --------- ------
Total noninterest income $2,827,459 $1,939,033 $ 888,426 45.82%
========== ========== ========= ======
Six months ended June 30,
Noninterest income 2004 2003 Change Change-%
---------- ---------- ----------- --------
Service charges on deposit accounts $2,420,569 $2,358,217 $ 62,352 2.64%
Trust services 258,500 254,000 4,500 1.77%
Investment advisory fees 1,189,021 - 1,189,021 -
Increase in cash value of bank-owned
life insurance 444,965 191,347 253,618 132.54%
Other:
Letter of credit fees 82,354 34,115 48,239 141.40%
VISA/Mastercard income 87,967 74,445 13,522 18.16%
Gain on sale of real estate loans 78,777 123,737 (44,960) -36.34%
Safe deposit box rent 88,252 64,095 24,157 37.69%
All other 370,174 347,892 22,282 6.40%
---------- ---------- ----------- ------
Total other 707,524 644,284 63,240 9.82%
---------- ---------- ----------- ------
Gain on sale of securities 243,006 195,607 47,399 24.23%
---------- ---------- ----------- ------
Total noninterest income $5,263,585 $3,643,455 $ 1,620,130 44.47%
========== ========== =========== ======
12
Noninterest income results from the charges and fees collected by the Company
from its customers for various services performed and miscellaneous other income
and gains (or losses) from the sale of investment securities held in the
available for sale category. Investment advisory fees are fees earned by VMF
Capital, which commenced operations on October 1, 2003. Bank-owned life
insurance was purchased during the first and third quarters of 2003. Letter of
credit fees are higher due to volume. The increase in VISA/Mastercard income is
due to an increase in the number of merchant customers. The gain on the sale of
real estate loans is lower this year because of a decline in the volume of sold
loans due to rising mortgage rates. The increase in safe deposit box rent is
primarily attributable to the Iowa City offices.
Noninterest Expense
The following table shows the variance from the prior year in the noninterest
expense categories shown in the Consolidated Statements of Income. In addition,
accounts within the Other Expense category that represent significant variances
are shown.
Three months ended June 30,
Noninterest expense: 2004 2003 Change Change-%
----------- ---------- ----------- ---------
Salaries and employee benefits $ 2,425,732 $1,701,151 $ 724,581 42.59%
Occupancy expenses 494,110 352,874 141,236 40.02%
Data processing expenses 352,148 248,889 103,259 41.49%
Other:
Intangible amortization 94,350 7,955 86,395 1086.05%
Supplies 59,157 26,043 33,114 127.15%
Marketing 149,898 49,962 99,936 200.02%
Business development 113,321 15,430 97,891 634.42%
Charitable contributions 25,316 25,610 (294) -1.15%
Professional fees 141,237 68,448 72,789 106.34%
OREO expense (107,865) 2,599 (110,464) -4250.25%
All other 503,470 379,208 124,262 32.77%
----------- ---------- ----------- --------
Total other 978,884 575,255 403,629 70.17%
----------- ---------- ----------- --------
Total noninterest expense $ 4,250,874 $2,878,169 $ 1,372,705 47.69%
=========== ========== =========== ========
Six months ended June 30,
Noninterest expense: 2004 2003 Change Change-%
----------- ---------- ----------- ---------
Salaries and employee benefits $ 4,889,403 $3,405,442 $ 1,483,961 43.58%
Occupancy expenses 1,005,173 723,123 282,050 39.00%
Data processing expenses 689,159 492,174 196,985 40.02%
Other:
Intangible amortization 188,701 15,910 172,791 1086.05%
Supplies 131,323 66,123 65,200 98.60%
Marketing 192,883 97,804 95,079 97.21%
Business development 202,199 28,159 174,040 618.06%
Charitable contributions 88,123 66,123 22,000 33.27%
Professional fees 273,561 158,724 114,837 72.35%
OREO expense (90,039) 3,287 (93,326) -2839.25%
All other 975,915 727,405 248,510 34.16%
----------- ---------- ----------- --------
Total other 1,962,666 1,163,535 799,131 68.68%
----------- ---------- ----------- --------
Total noninterest expense $ 8,546,401 $5,784,274 $ 2,762,127 47.75%
=========== ========== =========== ========
13
The increase in salaries and benefits includes compensation related expenses for
approximately 40 more employees than a year ago due to the acquisitions in the
last half of 2003. Occupancy expenses likewise were higher this year due to four
additional locations: two banking locations in Iowa City and two VMF Capital
offices. The increase in intangible asset amortization relates to the 2003
acquisitions. Supplies are higher because of the acquisitions and the
implementation of a new corporate logo. Marketing expenses increased as the
result of an increased focus on direct mail campaigns, market research and
implementation of the new corporate logo. The increase in business development
costs is mostly attributable to VMF Capital. Charitable contributions are higher
because of the timing of certain payments. The increase in professional fees
were the result of additional legal and accounting services associated with
complying with the Sarbanes-Oxley Act of 2002 and the decision to outsource the
Company's internal audit services. OREO (other real estate owned) expense has
declined as a result of selling several other real estate properties at gains.
Income Tax Expense
The Company incurred income tax expense of $4,608,000 for the six months ended
June 30, 2004 compared to $4,518,000 for the six months ended June 30, 2003. The
effective income tax rate as a percent of income before taxes for the three and
six months ended June 30, 2004 was 34.3 percent, compared to 35.2 percent for
the same periods last year. The effective income tax rate is slightly lower in
2004 because of a higher level of income that is exempt from Federal income
taxes.
FINANCIAL CONDITION
Total assets as of June 30, 2004 were $1,032,841,000, a slight increase from
$1,000,612,000 at December 31, 2003. The increase is primarily due to increased
loan volume.
Investment Securities
Investment securities available for sale increased $31,711,000 from December 31,
2003 to $210,020,000. Since December 31, 2003, investment securities classified
as held to maturity declined $12,649,000 to $78,758,000 as of June 30, 2004 due
to maturities and calls. The increase in the available for sale category was
accomplished to allow for increased liquidity and flexibility.
Loans and Nonperforming Assets
Loans outstanding increased $32,339,000 from December 31, 2003 to June 30, 2004.
The increase was primarily attributable to growth in commercial and real estate
loans.
The following table sets forth the amount of non-performing loans and assets
carried by the Company and common ratio measurements of those items (dollars in
thousands).
June 30, 2004 December 31, 2003 Change
------------- ----------------- ------
Nonaccrual loans $2,316 $1,668 $ 648
Loans past due 90 days and still
accruing interest 415 125 290
------ ------ -----
Total non-performing loans 2,731 1,793 938
Other real estate owned 120 441 (321)
------ ------ -----
Total non-performing assets $2,851 $2,234 $ 617
====== ====== =====
Non-performing assets to total loans 0.45% 0.37% 0.08%
Non-performing assets to total assets 0.28% 0.22% 0.06%
The increase in nonaccrual loans is due to a few smaller balance loans. It is
expected that a commercial real estate loan with a balance of approximately
$900,000 will be paid off in the third quarter of 2004. In the opinion of
management, loans past due 90 days and still accruing interest are adequately
collateralized to cover any unpaid interest.
14
Reference is also made to the information and discussion earlier in this report
under the heading of "Provision for Loan Losses and the Related Allowance for
Loan Losses".
Deposits
Total deposits as of June 30, 2004 were $755,637,000 compared with $705,074,000
as of December 31, 2003. Most of the increase was in certificates of deposit,
which were $177,706,000 at June 30, 2004, up $47,763,000 from December 31, 2003.
The increase is primarily in public fund certificates of deposit, $100,000 and
over.
Borrowings
The balance of federal funds purchased and securities sold under agreement to
repurchase was $46,120,000 at June 30, 2004, down from $85,443,000 at December
31, 2003. Most of this decrease relates to federal funds purchased, which are
federal funds sold to West Bank by approximately 40 banks throughout Iowa. This
is a correspondent bank service provided by West Bank. Federal funds sold to
West Bank by these downstream correspondent banks are invested in federal funds
sold to upstream correspondent banks or other short-term investments. The
balance of other short-term borrowings consisted of Treasury, Tax and Loan
option notes and short-term FHLB borrowings at June 30, 2004 and December 31,
2003.
Liquidity and Capital Resources
The objective of liquidity management is to ensure the availability of
sufficient cash flows to meet the requirements of depositors and borrowers, all
corporate financial commitments and to capitalize on opportunities for
profitable business expansion. The Company's principal source of funds is
deposits including demand, money market, savings and certificates of deposit.
Other sources include principal repayments on loans, proceeds from the maturity
and sale of investment securities, federal funds purchased, repurchase
agreements, advances from the Federal Home Loan Bank and funds provided by
operations. Liquidity management is conducted on both a daily and a long-term
basis. Investments in liquid assets are adjusted based on expected loan demand,
projected loan maturities and payments, expected deposit flows, and the
objectives set by the Company's funds management policy. The Company had liquid
assets (cash and cash equivalents) of $60,591,000 as of June 30, 2004, compared
with $82,074,000 as of December 31, 2003. Securities available for sale may be
sold prior to maturity to meet liquidity needs, to respond to market changes or
to adjust the Company's interest rate risk position. In addition, the Bank
maintains lines of credit with correspondent banks totaling $80 million that
would allow it to borrow Federal funds on a short-term basis, if necessary, and
has additional borrowing capacity of approximately $39 million at the Federal
Home Loan Bank. The Company also has a $5 million unsecured line of credit
through a large regional correspondent bank. The interest rate is variable and
tied to LIBOR. To date, the line has not been used. Management believes the
combination of high levels of potentially liquid assets, cash flows from
operations and additional borrowing capacity provided strong liquidity for the
Company at June 30, 2004 to meet the needs of borrowers and depositors.
The Company's total stockholders' equity declined slightly to $92,240,000 at
June 30, 2004, from $92,896,000 at December 31, 2003. Total stockholders' equity
was 8.9 percent of total assets as of June 30, 2004 and 9.3 percent on December
31, 2003. Total equity declined due to purchases of common stock in the Company
buy-back plan described below and depreciation in West Bank's available for sale
investment portfolio. No material capital expenditures or material changes in
the capital resource mix are anticipated at this time.
In April 2004, the Company's Board of Directors authorized the buy-back of the
Company's common stock for a period of twelve months, in an amount not to exceed
$5 million. Share repurchases in the three months ended June 30, 2004 totaled
153,630 shares at a cost of $2,360,235.
15
The table below shows the various measures of regulatory capital and related
ratios.
Regulatory capital:
June 30, 2004 December 31, 2003
------------- -----------------
Total shareholders' equity $ 92,239,650 $ 92,896,344
Less: net unrealized (gains) losses on
available for sale securities 872,667 (1,099,573)
Less: net unrealized loss on
available for sale equity securities (38,604) (3,500)
Less: intangible assets (16,754,318) (16,900,487)
Plus: subordinated notes/trust preferred securities 20,000,000 20,000,000
------------- -------------
Tier 1 capital 96,319,395 94,892,784
Plus: allowance for loan losses 6,032,246 5,975,587
------------- -------------
Total risk-based capital $ 102,351,641 $ 100,868,371
============= =============
Regulatory
requirements to be: Actual Regulatory
Adequately Well- Capital Ratios as of:
Capitalized Capitalized June 30, 2004 December 31, 2003
------------------- ----------- ------------- -----------------
Total risk-based capital
as % of risk-weighted assets 8.0% 10.0% 12.7% 13.1%
Tier 1 capital as % of risk-weighted assets 4.0% 6.0% 11.9% 12.3%
Tier 1 capital as % average assets 4.0% 5.0% 9.6% 9.6%
Risk-based capital guidelines require the classification of assets and some
off-balance items in terms of credit-risk exposure and the measuring of capital
as a percentage of the risk adjusted asset totals. Management believes, and data
in the above table show that, as of June 30, 2004 and December 31, 2003, the
Company met all capital adequacy requirements to which it is subject. As of
those dates, West Bank was "well capitalized" under regulatory prompt corrective
action provisions.
Market Risk Management
Market risk is the risk of earnings volatility that results from adverse changes
in interest rates and market prices. The Company's market risk is primarily
interest rate risk arising from its core banking activities of lending and
deposit taking. Interest rate risk is the risk that changes in market interest
rates may adversely affect the Company's net interest income. Management
continually develops and implements strategies to mitigate this risk. The
analysis of the Company's interest rate risk was presented in the Form 10-K
filed with the Securities and Exchange Commission on March 4, 2004 and is
incorporated herein by reference. The Company has not experienced any material
changes to its market risk position since December 31, 2003. Management does not
believe the Company's primary market risk exposures and how those exposures were
managed in the first six months of 2004 changed when compared to 2003.
Subsequent Event
On July 14, 2004, the Board of Directors of the Company declared a 5 percent
common stock dividend to be paid on August 2, 2004 to shareholders of record on
July 26, 2004. Any fractional shares resulting from the stock dividend were paid
in cash. The Board of Directors also declared a quarterly cash dividend of $0.16
per common share which is payable on the higher number of shares outstanding
after distribution of the stock dividend. The cash dividend is payable on August
16, 2004 to shareholders of record on August 3, 2004. The number of outstanding
common shares shown on the cover of this report reflects the stock dividend,
however, the number of outstanding common shares and earnings per common share
in the accompanying financial statements and footnotes do not reflect the 5
percent common stock dividend.
16
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
The information appearing above under the heading "Market Risk Management" is
incorporated herein by reference.
Item 4. Controls and Procedures
a. Evaluation of disclosure controls and procedures. As of the end of the period
covered by this report, an evaluation was performed under the supervision and
with the participation of the Company's Chief Executive Officer and Chief
Financial Officer of the effectiveness of the Company's disclosure controls and
procedures (as defined in Exchange Act Rule 240.13a-15(e)) as of the end of the
period covered by this report. Based on that evaluation, the Chief Executive
Officer and the Chief Financial Officer have concluded that the Company's
current disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in the reports that it files
or submits under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms.
b. Changes in internal controls over financial reporting. There were no changes
in the Company's internal control over financial reporting that occurred during
the period covered by this report that has materially affected, or is reasonably
likely to materially affect, the Company's internal control over financial
reporting.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company and its subsidiaries from time to time are party to various legal
actions arising in the normal course of business. Management believes, as of the
date of this Form 10-Q, that there is no threatened or pending proceeding
against the Company, West Bank or VMF Capital, which, if determined adversely,
would have a material adverse effect on the business or financial position of
the Company, West Bank or VMF Capital.
Item 2. Change in Securities and Use of Proceeds
The following table provides information regarding the Company's purchases of
its common shares during the fiscal quarter ended June 30, 2004:
(c) Total
Number of Shares (d) Maximum
Purchased as Dollar Amount of
(a) Total Number (b) Average Part of Publicly Shares that May
Quarter ended of Shares Price Paid Announced Yet be Purchased
June 30, 2004 Purchased per Share (1)(2) Plan Under the Plan
- --------------- ---------------- ---------------- ----------------- ----------------
April 1 through
April 30, 2004 - $ - - $5,000,000
May 1 through
May 31, 2004 153,630 15.36 153,630 2,639,765
June 1 through
June 30, 2004 - - - 2,639,765
------- ------ ------- ----------
Total 153,630 $15.36 153,630 $2,639,765
======= ====== ======= ==========
(1) All shares were purchased via open market transactions.
(2) The stock buy-back plan was approved by the Board of Directors on
April 15, 2004. The Company is authorized to purchase up to
$5,000,000 of common stock within a twelve month period ending April
14, 2005.
17
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting of shareholders was held on April 15, 2004. The
record date for determination of shareholders entitled to vote at the meeting
was February 6, 2004. There were 16,060,271 shares outstanding as of that date,
each such share being entitled to one vote. At the shareholders' meeting the
holders of 13,056,833 or 81.3 percent of the outstanding shares were represented
in person or by proxy, which constituted a quorum. The following proposal was
voted on at the meeting:
Proposal I - Election of Directors
Nine directors were elected to serve for a one year term or until their
successors shall have been elected and qualified. At the shareholders' meeting,
the individuals received the number of votes set opposite their names:
Vote
For Withheld
--- --------
Frank W . Berlin 13,053,048 3,785
Steven G. Chapman 13,052,229 4,604
Michael A. Coppola 12,862,138 194,695
Orville E. Crowley 13,041,968 14,865
David R. Milligan 13,055,086 1,747
Robert G. Pulver 13,055,246 1,587
Thomas E. Stanberry 13,030,464 26,369
Jack G. Wahlig 13,019,152 37,681
Connie Wimer 13,009,312 47,521
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed as part of this report:
Exhibits
3.1 Restated Articles of Incorporation of the Company *
3.2 By-laws of the Company *
10.1 Lease for Main Bank Facility *
10.2 Supplemental Agreement to Lease for Main Bank Facility *
10.3 Short-term Lease related to Main Bank Facility *
10.4 Assignment *
10.5 Lease Modification Agreement No. 1 for Main bank Facility *
10.6 Memorandum of Real estate contract *
10.7 Affidavit *
10.8 Addendum to Lease for Main Bank Facility *
10.9 Data Processing Contract *
10.10 Employment Contract *
10.11 Consulting Contract *
10.12 Data Processing Contract Amendment **
10.13 Purchase and Assumption Agreement between West Des Moines State Bank
and Hawkeye State Bank ***
10.14 Employment Agreement effective March 1, 2003, which was consummated
in the first quarter of 2004****
31.1 Certification of Chief Executive Officer under Section 302 of the
Sarbanes Oxley Act of 2002
31.2 Certification of Chief Financial Officer under Section 302 of the
Sarbanes Oxley Act of 2002
32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350 as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350 as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
18
* Incorporated herein by reference to the related exhibit filed with
the Form 10 on March 11, 2002.
** Incorporated herein by reference to the related exhibit filed with
the Form 10-K on March 26, 2003.
*** Incorporated herein by reference to the related exhibit filed with
the Form 10-Q on May 15, 2003.
**** Incorporated herein by reference to the related exhibit filed with
the Form 10-K on March 4, 2004.
(b) Reports on Form 8-K: During the three months ended June 30, 2004, the
Company filed a form 8-K on April 16, 2004 which contained the annual meeting
presentation, a Form 8-K on April 16, 2004 which contained a press release
announcing the quarterly dividend, a Form 8-K on April 19, 2004 which contained
a press release announcing earnings for the three months ended March 31, 2004,
and a Form 8-K on June 1, 2004 which contained a presentation given at the Howe
Barnes Investments, Inc. Community Bank Conference.
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
West Bancorporation, Inc.
(Registrant)
August 5, 2004 By: /s/ Thomas E. Stanberry
------------------------------------------------
Dated Thomas E. Stanberry
Chairman, President and Chief Executive Officer
August 5, 2004 By: /s/ Douglas R. Gulling
------------------------------------------------
Dated Douglas R. Gulling
Chief Financial Officer
(Principal Accounting Officer)
20
EXHIBIT INDEX
The following exhibits are filed herewith:
Exhibit No. Description
31.1 Certification of Chief Executive Officer under Section 302 of
the Sarbanes Oxley Act of 2002
31.2 Certification of Chief Financial Officer under Section 302 of
the Sarbanes Oxley Act of 2002
32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350 as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350 as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
21