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EX-31.1 - EXHIBIT 31.1 - WEST BANCORPORATION INCwtba-20150331xex311.htm
EX-32.1 - EXHIBIT 32.1 - WEST BANCORPORATION INCwtba-20150331xex321.htm
EX-31.2 - EXHIBIT 31.2 - WEST BANCORPORATION INCwtba-20150331xex312.htm
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EX-32.2 - EXHIBIT 32.2 - WEST BANCORPORATION INCwtba-20150331xex322.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2015
 
 
 
or
 
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from __________ to __________

Commission File Number:  0-49677

WEST BANCORPORATION, INC.
(Exact Name of Registrant as Specified in its Charter)

IOWA
42-1230603
(State of Incorporation)
(I.R.S. Employer Identification No.)

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

Registrant's telephone number, including area code:  (515) 222-2300

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  x                      No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  x                      No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
o
 
Accelerated filer
x
 
Non-accelerated filer
o
 
Smaller reporting company
o
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  o                      No  x

As of April 22, 2015, there were 16,039,269 shares of common stock, no par value, outstanding.



WEST BANCORPORATION, INC.

INDEX
 
 
Page
PART I.
 
 
 
 
Item 1.
 
 
 
 
Consolidated Balance Sheets at March 31, 2015 and December 31, 2014
 
 
 
 
Consolidated Statements of Income for the three months ended March 31, 2015 and 2014
 
 
 
 
 
 
 
 
Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2015 and 2014
 
 
 
 
Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014
 
 
 
 
 
 
 
Item 2.
 
 
 
 
"Safe Harbor" Concerning Forward-Looking Statements
 
 
 
 
Critical Accounting Policies
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
PART II.
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.
 
 
 
 
 
 
 
 
Exhibit Index

2


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
West Bancorporation, Inc. and Subsidiary
 
 
 
 
Consolidated Balance Sheets
 
 
 
 
(unaudited)
 
 
 
 
 
 
 
 
 
(in thousands, except share data)
 
March 31, 2015
 
December 31, 2014
ASSETS
 
 
 
 
Cash and due from banks
 
$
40,514

 
$
27,936

Federal funds sold
 
48,445

 
11,845

Cash and cash equivalents
 
88,959

 
39,781

Investment securities available for sale, at fair value
 
264,213

 
272,790

Investment securities held to maturity, at amortized cost (fair value of $51,784
 
 
 
 
and $51,501 at March 31, 2015 and December 31, 2014, respectively)
 
51,322

 
51,343

Federal Home Loan Bank stock, at cost
 
12,515

 
15,075

Loans
 
1,184,447

 
1,184,045

Allowance for loan losses
 
(13,878
)
 
(13,607
)
Loans, net
 
1,170,569

 
1,170,438

Premises and equipment, net
 
10,798

 
9,988

Accrued interest receivable
 
5,114

 
4,425

Bank-owned life insurance
 
32,296

 
32,107

Deferred tax assets, net
 
5,799

 
6,333

Other assets
 
7,342

 
13,553

Total assets
 
$
1,648,927

 
$
1,615,833

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
LIABILITIES
 
 
 
 
Deposits:
 
 
 
 
Noninterest-bearing demand
 
$
367,422

 
$
362,827

Interest-bearing demand
 
257,696

 
241,722

Savings
 
597,181

 
527,277

Time of $250,000 or more
 
14,416

 
18,985

Other time
 
128,705

 
119,651

Total deposits
 
1,365,420

 
1,270,462

Federal funds purchased
 
4,100

 
2,975

Short-term borrowings
 

 
66,000

Subordinated notes
 
20,619

 
20,619

Federal Home Loan Bank advances, net of discount
 
97,257

 
96,888

Long-term debt
 
11,861

 
12,676

Accrued expenses and other liabilities
 
5,949

 
6,038

Total liabilities
 
1,505,206

 
1,475,658

COMMITMENTS AND CONTINGENCIES (NOTE 8)
 
 
 
 
STOCKHOLDERS' EQUITY
 
 
 
 
Preferred stock, $0.01 par value; authorized 50,000,000 shares; no shares issued
 
 
 
 
and outstanding at March 31, 2015 and December 31, 2014
 

 

Common stock, no par value; authorized 50,000,000 shares; 16,039,269 and
 
 
 
 
16,018,734 shares issued and outstanding at March 31, 2015 and
 
 
 
 
December 31, 2014, respectively
 
3,000

 
3,000

Additional paid-in capital
 
19,054

 
18,971

Retained earnings
 
120,811

 
117,950

Accumulated other comprehensive income
 
856

 
254

Total stockholders' equity
 
143,721

 
140,175

Total liabilities and stockholders' equity
 
$
1,648,927

 
$
1,615,833

See Notes to Consolidated Financial Statements.

3


West Bancorporation, Inc. and Subsidiary
 
 
 
 
Consolidated Statements of Income
 
 
 
 
(unaudited)
 
 
 
 
 
 
Three Months Ended March 31,
(in thousands, except per share data)
 
2015
 
2014
Interest income:
 
 
 
 
Loans, including fees
 
$
12,622

 
$
11,330

Investment securities:
 
 
 
 
Taxable
 
1,125

 
1,330

Tax-exempt
 
764

 
676

Federal funds sold
 
10

 
10

Total interest income
 
14,521

 
13,346

Interest expense:
 
 

 
 

Deposits
 
571

 
622

Federal funds purchased
 
2

 
4

Short-term borrowings
 
26

 
9

Subordinated notes
 
171

 
173

Federal Home Loan Bank advances
 
724

 
647

Long-term debt
 
64

 
83

Total interest expense
 
1,558

 
1,538

Net interest income
 
12,963

 
11,808

Provision for loan losses
 

 

Net interest income after provision for loan losses
 
12,963

 
11,808

Noninterest income:
 
 

 
 

Service charges on deposit accounts
 
620

 
679

Debit card usage fees
 
435

 
410

Trust services
 
325

 
318

Revenue from residential mortgage banking
 
35

 
226

Increase in cash value of bank-owned life insurance
 
189

 
154

Realized investment securities gains, net
 
11

 
506

Other income
 
245

 
260

Total noninterest income
 
1,860

 
2,553

Noninterest expense:
 
 

 
 

Salaries and employee benefits
 
3,990

 
4,111

Occupancy
 
1,049

 
1,011

Data processing
 
574

 
522

FDIC insurance
 
202

 
181

Other real estate owned
 

 
286

Professional fees
 
204

 
264

Director fees
 
188

 
153

Miscellaneous losses
 
(13
)
 
269

Other expenses
 
1,252

 
1,205

Total noninterest expense
 
7,446

 
8,002

Income before income taxes
 
7,377

 
6,359

Income taxes
 
2,274

 
1,959

Net income
 
$
5,103

 
$
4,400

 
 
 
 
 
Basic earnings per common share
 
$
0.32

 
$
0.28

Diluted earnings per common share
 
$
0.32

 
$
0.27

Cash dividends declared per common share
 
$
0.14

 
$
0.11

See Notes to Consolidated Financial Statements.

4



West Bancorporation, Inc. and Subsidiary
 
 
 
 
Consolidated Statements of Comprehensive Income
 
 
 
 
(unaudited)
 
 
 
 
 
 
Three Months Ended March 31,
(in thousands)
 
2015
 
2014
Net income
 
$
5,103

 
$
4,400

Other comprehensive income:
 
 

 
 

Unrealized gains on securities for which a portion
 
 
 
 
of an other than temporary impairment has
 
 
 
 
been recorded in earnings:
 
 
 
 
Unrealized holding gains arising during the
 
 
 
 
period
 

 
318

Less: reclassification adjustment for impairment
 
 
 
 
losses realized in net income
 

 

Income tax (expense)
 

 
(121
)
Other comprehensive income on available
 
 
 
 
for sale securities with other than temporary
 
 
 
 
impairment
 

 
197

Unrealized gains on securities without
 
 

 
 

other than temporary impairment:
 
 
 
 
Unrealized holding gains arising during
 
 
 
 
the period
 
2,029

 
3,342

Less: reclassification adjustment for net (gains)
 
 
 
 
realized in net income
 
(11
)
 
(506
)
Less: reclassification adjustment for amortization
 
 
 
 
of net unrealized gains on securities transferred
 
 
 
 
from available for sale to held to maturity,
 
 
 
 
realized in interest income
 
(10
)
 

Income tax (expense)
 
(763
)
 
(1,077
)
Other comprehensive income on
 
 
 
 
available for sale securities without other
 
 
 
 
than temporary impairment
 
1,245

 
1,759

Unrealized (losses) on derivatives arising
 
 
 
 
during the period
 
(1,113
)
 
(1,179
)
Less: reclassification adjustment for net loss on
 
 
 
 
derivatives realized in net income
 
74

 

Less: reclassification adjustment for amortization of
 
 
 
 
derivative termination costs
 
2

 

Income tax benefit
 
394

 
447

Other comprehensive (loss) on derivatives
 
(643
)
 
(732
)
Total other comprehensive income
 
602

 
1,224

Comprehensive income
 
$
5,705

 
$
5,624


See Notes to Consolidated Financial Statements.
 

5


West Bancorporation, Inc. and Subsidiary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Statements of Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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, 2013
 
$

 
15,976,204

 
$
3,000

 
$
18,411

 
$
105,752

 
$
(3,538
)
 
$
123,625

Net income
 

 

 

 

 
4,400

 

 
4,400

Other comprehensive income, net of tax
 

 

 

 

 

 
1,224

 
1,224

Cash dividends declared, $0.11 per common share
 

 

 

 

 
(1,758
)
 

 
(1,758
)
Stock-based compensation costs
 

 

 

 
107

 

 

 
107

Issuance of common stock upon vesting of restricted
 
 
 
 
 
 
 
 
 
 
 
 
 
 
stock units, net of shares withheld for payroll taxes
 

 
9,420

 

 
(54
)
 

 

 
(54
)
Excess tax benefits from vesting of restricted stock units
 

 

 

 
28

 

 

 
28

Balance, March 31, 2014
 
$

 
15,985,624

 
$
3,000

 
$
18,492

 
$
108,394

 
$
(2,314
)
 
$
127,572

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2014
 
$

 
16,018,734

 
$
3,000

 
$
18,971

 
$
117,950

 
$
254

 
$
140,175

Net income
 

 

 

 

 
5,103

 

 
5,103

Other comprehensive income, net of tax
 

 

 

 

 

 
602

 
602

Cash dividends declared, $0.14 per common share
 

 

 

 

 
(2,242
)
 

 
(2,242
)
Stock-based compensation costs
 

 

 

 
178

 

 

 
178

Issuance of common stock upon vesting of restricted
 
 
 
 
 
 
 
 
 
 
 
 
 
 
stock units, net of shares withheld for payroll taxes
 

 
20,535

 

 
(179
)
 

 

 
(179
)
Excess tax benefits from vesting of restricted stock units
 

 

 

 
84

 

 

 
84

Balance, March 31, 2015
 
$

 
16,039,269

 
$
3,000

 
$
19,054

 
$
120,811

 
$
856

 
$
143,721


See Notes to Consolidated Financial Statements.


6


West Bancorporation, Inc. and Subsidiary
Consolidated Statements of Cash Flows
(unaudited)
 
 
Three Months Ended March 31,
(in thousands)
 
2015
 
2014
Cash Flows from Operating Activities:
 
 
 
 
Net income
 
$
5,103

 
$
4,400

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Net amortization and accretion
 
898

 
885

(Gain) loss on disposition of premises and equipment
 
1

 
(10
)
Investment securities gains, net
 
(11
)
 
(506
)
Stock-based compensation
 
178

 
107

Gain on sale of loans
 
(14
)
 
(193
)
Proceeds from sales of loans held for sale
 
840

 
10,688

Originations of loans held for sale
 

 
(9,086
)
Gain on sales of other real estate owned
 

 
(25
)
Write-down of other real estate owned
 

 
296

Increase in cash value of bank-owned life insurance
 
(189
)
 
(154
)
Depreciation
 
230

 
200

Deferred income taxes
 
165

 
869

Excess tax benefits from vesting of restricted stock units
 
(84
)
 
(28
)
Change in assets and liabilities:
 
 
 
 
(Increase) in accrued interest receivable
 
(689
)
 
(498
)
Decrease in other assets
 
1,871

 
669

(Decrease) in accrued expenses and other liabilities
 
(971
)
 
(943
)
Net cash provided by operating activities
 
7,328

 
6,671

Cash Flows from Investing Activities:
 
 

 
 

Proceeds from sales of securities available for sale
 
10,057

 
29,238

Proceeds from maturities and calls of securities available for sale
 
10,146

 
20,209

Purchases of securities available for sale
 
(10,107
)
 
(41,575
)
Purchases of Federal Home Loan Bank stock
 
(8,187
)
 
(6,239
)
Proceeds from redemption of Federal Home Loan Bank stock
 
10,747

 
6,174

Net increase in loans
 
(131
)
 
(28,290
)
Proceeds from sales of other real estate owned
 

 
644

Proceeds from sales of premises and equipment
 

 
13

Purchases of premises and equipment
 
(1,041
)
 
(1,477
)
Proceeds from settlement of other assets
 
3,593

 

Net cash provided by (used in) investing activities
 
15,077

 
(21,303
)
Cash Flows from Financing Activities:
 
 

 
 

Net increase in deposits
 
94,958

 
72,178

Net increase (decrease) in federal funds purchased
 
1,125

 
(11,227
)
Net decrease in short-term borrowings
 
(66,000
)
 

Principal payments on long-term debt
 
(815
)
 
(814
)
Interest rate swap termination costs paid
 
(158
)
 

Common stock dividends paid
 
(2,242
)
 
(1,758
)
Restricted stock units withheld for payroll taxes
 
(179
)
 
(54
)
Excess tax benefits from vesting of restricted stock units
 
84

 
28

Net cash provided by financing activities
 
26,773

 
58,353

Net increase in cash and cash equivalents
 
49,178

 
43,721

Cash and Cash Equivalents:
 
 
 
 
Beginning
 
39,781

 
42,425

Ending
 
$
88,959

 
$
86,146

 
 
 
 
 
Supplemental Disclosures of Cash Flow Information:
 
 
 
 
Cash payments for:
 
 
 
 
Interest
 
$
1,569

 
$
1,516

Income taxes
 
40

 
35

Supplemental Disclosure of Noncash Investing and Financing Activities:
 
 
 
 
Transfer of loans to other real estate owned
 
$

 
$
143

See Notes to Consolidated Financial Statements.

7


West Bancorporation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except per share data)


1.  Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared by West Bancorporation, Inc. (the Company) pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to such rules and regulations. Although management believes that the disclosures are adequate to make the information presented understandable, it is suggested that these interim consolidated financial statements be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2014.  In the opinion of management, the accompanying consolidated financial statements contain all adjustments necessary to fairly present the financial position as of March 31, 2015 and December 31, 2014, and net income, comprehensive income and cash flows for the three months ended March 31, 2015 and 2014.  The results for these interim periods may not be indicative of results for the entire year or for any other period.

The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (GAAP) established by the Financial Accounting Standards Board (FASB).  References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codification™, sometimes referred to as the Codification or ASC.  In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses for the reporting period.  Actual results could differ from those estimates.  Material estimates that are particularly susceptible to significant change in the near term are the fair value and other than temporary impairment (OTTI) of financial instruments, and the allowance for loan losses.

The accompanying unaudited consolidated financial statements include the accounts of the Company, West Bank and West Bank's wholly-owned subsidiary WB Funding Corporation (which owns an interest in a limited liability company). West Bank's 99.99 percent owned subsidiary ICD IV, LLC (a community development entity) was liquidated during the third quarter of 2014 because the underlying loan matured.  All significant intercompany transactions and balances have been eliminated in consolidation.  In accordance with GAAP, West Bancorporation Capital Trust I is recorded on the books of the Company using the equity method of accounting and is not consolidated.

Current accounting developments: In January 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-04, Receivables—Troubled Debt Restructuring by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure. The update clarifies when an in substance foreclosure occurs, that is, when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan. This is the point when the consumer mortgage loan should be derecognized and the real property recognized. For public companies, this update was effective for interim and annual periods beginning after December 31, 2014. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 660): Summary and Amendments that Create Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs—Contracts with Customers (Subtopic 340-40). The guidance in this update supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition, and most industry-specific guidance throughout the industry topics of the codification. For public companies, this update will be effective for interim and annual periods beginning after December 15, 2016. The Company is currently assessing the impact that this guidance will have on its consolidated financial statements, but does not expect the guidance to have a material impact on the Company's consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The update simplifies the presentation of debt issuance costs by requiring that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update. For public companies, this update will be effective for interim and annual periods beginning after December 15, 2015, and is to be applied retrospectively. Early adoption is permitted. The Company is currently assessing the impact that this guidance will have on its consolidated financial statements, but does not expect the guidance to have a material impact on the Company's consolidated financial statements.


8


West Bancorporation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except per share data)


2.  Earnings per Common Share

Basic earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding for the period.  Diluted earnings per common share reflect the potential dilution that could occur if the Company's outstanding restricted stock units were vested. The dilutive effect was computed using the treasury stock method, which assumes all stock-based awards were exercised and the hypothetical proceeds from exercise were used by the Company to purchase common stock at the average market price during the period.  The incremental shares, to the extent they would have been dilutive, were included in the denominator of the diluted earnings per common share calculation.  The calculations of earnings per common share and diluted earnings per common share for the three months ended March 31, 2015 and 2014 are presented in the following table. 
 
 
Three Months Ended March 31,
 
 
2015
 
2014
Net income
 
$
5,103

 
$
4,400

 
 
 
 
 
Weighted average common shares outstanding
 
16,020

 
15,977

Weighted average effect of restricted stock units outstanding
 
65

 
53

Diluted weighted average common shares outstanding
 
16,085

 
16,030

 
 
 

 
 

Basic earnings per common share
 
$
0.32

 
$
0.28

Diluted earnings per common share
 
$
0.32

 
$
0.27




9


West Bancorporation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except per share data)


3.  Investment Securities

The following tables show the amortized cost, gross unrealized gains and losses and fair value of investment securities, by investment security type as of March 31, 2015 and December 31, 2014.  
 
March 31, 2015
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
(Losses)
 
Fair
Value
Securities available for sale:
 
 
 
 
 
 
 
U.S. government agencies and corporations
$
2,571

 
$
208

 
$

 
$
2,779

State and political subdivisions
51,195

 
1,423

 
(72
)
 
52,546

Collateralized mortgage obligations (1)
128,894

 
1,104

 
(551
)
 
129,447

Mortgage-backed securities (1)
62,865

 
897

 
(43
)
 
63,719

Trust preferred security
1,765

 

 
(840
)
 
925

Corporate notes and equity securities
14,710

 
93

 
(6
)
 
14,797

 
$
262,000

 
$
3,725

 
$
(1,512
)
 
$
264,213

 
 
 
 
 
 
 
 
Securities held to maturity:
 
 
 
 
 
 
 
State and political subdivisions
$
51,322

 
$
602

 
$
(140
)
 
$
51,784

 
 

 
 

 
 

 
 

 
December 31, 2014
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
(Losses)
 
Fair
Value
Securities available for sale:
 
 
 
 
 
 
 
U.S. government agencies and corporations
$
12,626

 
$
204

 
$
(10
)
 
$
12,820

State and political subdivisions
51,234

 
1,286

 
(161
)
 
52,359

Collateralized mortgage obligations (1)
126,430

 
856

 
(1,416
)
 
125,870

Mortgage-backed securities (1)
65,813

 
624

 
(284
)
 
66,153

Trust preferred security
1,763

 

 
(845
)
 
918

Corporate notes and equity securities
14,729

 
66

 
(125
)
 
14,670

 
$
272,595

 
$
3,036

 
$
(2,841
)
 
$
272,790

 
 
 
 
 
 
 
 
Securities held to maturity:
 
 
 
 
 
 
 
State and political subdivisions
$
51,343

 
$
344

 
$
(186
)
 
$
51,501

(1)
All collateralized mortgage obligations and mortgage-backed securities consist of residential mortgage pass-through securities guaranteed by GNMA or issued by FNMA and real estate mortgage investment conduits guaranteed by FHLMC or GNMA.

Investment securities with an amortized cost of approximately $66,934 and $4,805 as of March 31, 2015 and December 31, 2014, respectively, were pledged to secure access to the Federal Reserve discount window, for public fund deposits, and for other purposes as required or permitted by law or regulation. 


10


West Bancorporation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except per share data)


The amortized cost and fair value of investment securities available for sale as of March 31, 2015, by contractual maturity, are shown below.  Certain securities have call features that allow the issuer to call the securities prior to maturity.  Expected maturities may differ from contractual maturities for collateralized mortgage obligations and mortgage-backed securities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.  Therefore, collateralized mortgage obligations and mortgage-backed securities are not included in the maturity categories within the following maturity summary. Equity securities have no maturity date.
 
March 31, 2015
 
Amortized Cost
 
Fair Value
Due in one year or less
$
775

 
$
776

Due after one year through five years
21,379

 
21,871

Due after five years through ten years
19,311

 
19,876

Due after ten years
27,292

 
27,043

 
68,757

 
69,566

Collateralized mortgage obligations and mortgage-backed securities
191,759

 
193,166

Equity securities
1,484

 
1,481

 
$
262,000

 
$
264,213

The amortized cost and fair value of investment securities held to maturity as of March 31, 2015, by contractual maturity, are shown below.  Certain securities have call features that allow the issuer to call the securities prior to maturity.  
 
March 31, 2015
 
Amortized Cost
 
Fair Value
Due after five years through ten years
$
9,282

 
$
9,353

Due after ten years
42,040

 
42,431

 
$
51,322

 
$
51,784

The details of the sales of investment securities for the three months ended March 31, 2015 and 2014 are summarized in the following table.
 
 
Three Months Ended March 31,
 
 
2015
 
2014
Proceeds from sales
 
$
10,057

 
$
29,238

Gross gains on sales
 
11

 
716

Gross losses on sales
 

 
210


11


West Bancorporation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except per share data)


The following tables show the fair value and gross unrealized losses, aggregated by investment type and length of time that individual securities have been in a continuous loss position, as of March 31, 2015 and December 31, 2014.
 
March 31, 2015
 
Less than 12 months
 
12 months or longer
 
Total
 
Fair
Value
 
Gross
Unrealized
(Losses)
 
Fair
Value
 
Gross
Unrealized
(Losses)
 
Fair
Value
 
Gross
Unrealized
(Losses)
Securities available for sale:
 
 
 
 
 
 
 
 
 
 
 
U.S. government agencies and corporations
$

 
$

 
$

 
$

 
$

 
$

State and political subdivisions
5,112

 
(72
)
 

 

 
5,112

 
(72
)
Collateralized mortgage obligations
4,796

 
(22
)
 
48,276

 
(529
)
 
53,072

 
(551
)
Mortgage-backed securities
8,811

 
(1
)
 
8,287

 
(42
)
 
17,098

 
(43
)
Trust preferred security

 

 
925

 
(840
)
 
925

 
(840
)
Corporate notes and equity securities
1,582

 
(1
)
 
1,986

 
(5
)
 
3,568

 
(6
)
 
$
20,301

 
$
(96
)
 
$
59,474

 
$
(1,416
)
 
$
79,775

 
$
(1,512
)
 
 

 
 

 
 

 
 

 
 

 
 

Securities held to maturity:
 
 
 
 
 
 
 
 
 
 
 
State and political subdivisions
$
10,215

 
$
(140
)
 
$

 
$

 
$
10,215

 
$
(140
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2014
 
Less than 12 months
 
12 months or longer
 
Total
 
Fair
Value
 
Gross
Unrealized
(Losses)
 
Fair
Value
 
Gross
Unrealized
(Losses)
 
Fair
Value
 
Gross
Unrealized
(Losses)
Securities available for sale:
 
 
 
 
 
 
 
 
 
 
 
U.S. government agencies and corporations
$
10,039

 
$
(10
)
 
$

 
$

 
$
10,039

 
$
(10
)
State and political subdivisions
6,614

 
(90
)
 
5,887

 
(71
)
 
12,501

 
(161
)
Collateralized mortgage obligations
17,283

 
(87
)
 
53,318

 
(1,329
)
 
70,601

 
(1,416
)
Mortgage-backed securities
15,184

 
(101
)
 
17,126

 
(183
)
 
32,310

 
(284
)
Trust preferred security

 

 
918

 
(845
)
 
918

 
(845
)
Corporate notes and equity securities
4,581

 
(23
)
 
2,881

 
(102
)
 
7,462

 
(125
)
 
$
53,701

 
$
(311
)
 
$
80,130

 
$
(2,530
)
 
$
133,831

 
$
(2,841
)
 
 
 
 
 
 
 
 
 
 
 
 
Securities held to maturity:
 
 
 
 
 
 
 
 
 
 
 
State and political subdivisions
$
13,048

 
$
(186
)
 
$

 
$

 
$
13,048

 
$
(186
)
As of March 31, 2015, the available for sale securities with unrealized losses that have existed for longer than one year included 12 collateralized mortgage obligation securities, two mortgage-backed securities, one trust preferred security, two corporate notes and two equity securities.

The Company believes the unrealized losses on investments available for sale and held to maturity as of March 31, 2015, were due to market conditions, rather than reduced estimated cash flows. The Company does not intend to sell these securities, does not anticipate that these securities will be required to be sold before anticipated recovery, and expects full principal and interest to be collected. Therefore, the Company does not consider these investments to have OTTI as of March 31, 2015.

    

12


West Bancorporation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except per share data)


4. Loans and Allowance for Loan Losses

Loans consisted of the following segments as of March 31, 2015 and December 31, 2014.
 
March 31, 2015
 
December 31, 2014
Commercial
$
314,110

 
$
316,908

Real estate:
 
 
 
Construction, land and land development
146,069

 
154,490

1-4 family residential first mortgages
50,877

 
53,497

Home equity
23,620

 
24,500

Commercial
640,109

 
625,938

Consumer and other loans
10,452

 
9,318

 
1,185,237

 
1,184,651

Net unamortized fees and costs
(790
)
 
(606
)
 
$
1,184,447

 
$
1,184,045

Real estate loans of approximately $600,000 and $590,000 were pledged as security for Federal Home Loan Bank (FHLB) advances as of March 31, 2015 and December 31, 2014, respectively.

Loans are stated at the principal amounts outstanding, net of unamortized loan fees and costs, with interest income recognized on the interest method based upon those outstanding loan balances.  Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method. Loans are reported by the portfolio segments identified above and are analyzed by management on this basis. All loan policies identified below apply to all segments of the loan portfolio.

Delinquencies are determined based on the payment terms of the individual loan agreements. The accrual of interest on past due and other impaired loans is generally discontinued at 90 days past due or when, in the opinion of management, the borrower may be unable to make all payments pursuant to contractual terms.  Unless considered collectible, all interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income, if accrued in the current year, or charged to the allowance for loan losses, if accrued in the prior year.  Generally, all payments received while a loan is on nonaccrual status are applied to the principal balance of the loan. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured. 

Based upon its ongoing assessment of credit quality within the loan portfolio, the Company maintains a Watch List, which includes loans classified as Doubtful, Substandard and Watch according to the Company's classification criteria. These loans involve the potential for payment defaults or collateral inadequacies. A loan on the Watch List is considered impaired when management believes it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement.  Impaired loans are measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent.  The amount of impairment, if any, and any subsequent changes are included in the allowance for loan losses.

A loan is classified as a troubled debt restructured (TDR) loan when the Company concludes that a borrower is experiencing financial difficulties and a concession was granted that would not otherwise be considered. Concessions may include a restructuring of the loan terms to alleviate the burden on the borrower's cash requirements, such as an extension of the payment terms beyond the original maturity date or a change in the interest rate charged.  TDR loans with extended payment terms are accounted for as impaired until performance is established. A change to the interest rate would change the classification of a loan to a TDR loan if the restructured loan yields a rate that is below a market rate for that of a new loan with comparable risk. TDR loans with below-market rates are considered impaired until fully collected. TDR loans may be reported as nonaccrual or past due 90 days, rather than TDR, if they are not performing per the restructured terms.


13


West Bancorporation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except per share data)


The table below presents the TDR loans by segment as of March 31, 2015 and December 31, 2014.
 
March 31, 2015
 
December 31, 2014
Troubled debt restructured loans(1):
 
 
 
Commercial
$
110

 
$

Real estate:
 
 
 
Construction, land and land development
364

 
376

1-4 family residential first mortgages
81

 
86

Home equity

 

Commercial
529

 
557

Consumer and other loans

 

Total troubled debt restructured loans
$
1,084

 
$
1,019


(1)
There were two TDR loans as of March 31, 2015 and December 31, 2014, with balances of $610 and $643, respectively, categorized as nonaccrual.

There was one loan modification considered to be TDR that occurred during the three months ended March 31, 2015 with a pre- and post-modification recorded investment of $110. There were no loan modifications considered to be TDR during the three months ended March 31, 2014.

No TDR loans that were modified within the twelve months preceding March 31, 2015 and 2014 have subsequently had a payment default. A TDR loan is considered to have a payment default when it is past due 30 days or more.


14


West Bancorporation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except per share data)


The following table summarizes the recorded investment in impaired loans by segment, broken down by loans with no related allowance and loans with a related allowance and the amount of that allowance as of March 31, 2015 and December 31, 2014.
 
March 31, 2015
 
December 31, 2014
 
Recorded Investment
 
Unpaid Principal Balance
 
Related Allowance
 
Recorded Investment
 
Unpaid Principal Balance
 
Related Allowance
With no related allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
Commercial
$
164

 
$
310

 
$

 
$
164

 
$
310

 
$

Real Estate:
 
 
 
 
 
 
 
 
 
 
 
Construction, land and land development
364

 
966

 

 
376

 
978

 

1-4 family residential first mortgages
324

 
324

 

 
257

 
257

 

Home equity

 

 

 

 

 

Commercial
529

 
529

 

 
557

 
557

 

Consumer and other loans
4

 
4

 

 

 

 

 
1,385

 
2,133

 

 
1,354

 
2,102

 

With an allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
Commercial
290

 
290

 
160

 
292

 
292

 
150

Real Estate:
 
 
 
 
 
 
 
 
 
 
 
Construction, land and land development

 

 

 
825

 
825

 
200

1-4 family residential first mortgages

 

 

 

 

 

Home equity
223

 
223

 
223

 
229

 
229

 
229

Commercial
168

 
168

 
168

 
172

 
172

 
172

Consumer and other loans

 

 

 

 

 

 
681

 
681

 
551

 
1,518

 
1,518

 
751

Total:
 
 
 
 
 
 
 
 
 
 
 
Commercial
454

 
600

 
160

 
456

 
602

 
150

Real Estate:
 
 
 
 
 
 
 
 
 
 
 
Construction, land and land development
364

 
966

 

 
1,201

 
1,803

 
200

1-4 family residential first mortgages
324

 
324

 

 
257

 
257

 

Home equity
223

 
223

 
223

 
229

 
229

 
229

Commercial
697

 
697

 
168

 
729

 
729

 
172

Consumer and other loans
4

 
4

 

 

 

 

 
$
2,066

 
$
2,814

 
$
551

 
$
2,872

 
$
3,620

 
$
751

   
The balance of impaired loans at March 31, 2015 and December 31, 2014 was composed of 12 and 11 different borrowers, respectively. The Company has no commitments to advance additional funds on any of the impaired loans.



15


West Bancorporation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except per share data)


The following table summarizes the average recorded investment and interest income recognized on impaired loans by segment for the three months ended March 31, 2015 and 2014.
 
 
Three Months Ended March 31,
 
 
2015
 
2014
 
 
Average Recorded Investment
 
Interest Income Recognized
 
Average Recorded Investment
 
Interest Income Recognized
With no related allowance
 
 
 
 
 
 
 
 
recorded:
 
 
 
 
 
 
 
 
Commercial
 
$
165

 
$

 
$
305

 
$

Real estate:
 
 
 
 
 
 
 
 
Construction, land and land development
 
367

 
3

 
414

 
4

1-4 family residential first mortgages
 
271

 

 
454

 

Home equity
 

 

 

 

Commercial
 
543

 

 
773

 
2

Consumer and other loans
 
1

 

 

 

 
 
1,347

 
3

 
1,946

 
6

With an allowance recorded:
 
 
 
 
 
 
 
 
Commercial
 
290

 
2

 
684

 
2

Real estate:
 
 
 
 
 
 
 
 
Construction, land and land development
 
618

 
6

 
1,987

 
22

1-4 family residential first mortgages
 

 

 
313

 

Home equity
 
226

 

 

 

Commercial
 
171

 

 

 

Consumer and other loans
 

 

 

 

 
 
1,305

 
8

 
2,984

 
24

Total:
 
 
 
 
 
 
 
 
Commercial
 
455

 
2

 
989

 
2

Real estate:
 
 
 
 
 
 
 
 
Construction, land and land development
 
985

 
9

 
2,401

 
26

1-4 family residential first mortgages
 
271

 

 
767

 

Home equity
 
226

 

 

 

Commercial
 
714

 

 
773

 
2

Consumer and other loans
 
1

 

 

 

 
 
$
2,652

 
$
11

 
$
4,930

 
$
30




16


West Bancorporation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except per share data)


The following tables provide an analysis of the payment status of the recorded investment in loans as of March 31, 2015 and December 31, 2014.
 
March 31, 2015
 
30-59
Days Past
Due
 
60-89
Days Past
Due
 
90 Days
or More
Past Due
 
Total
Past Due
 
Current
 
Nonaccrual Loans
 
Total Loans
Commercial
$

 
$

 
$

 
$

 
$
313,766

 
$
344

 
$
314,110

Real estate: