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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A (Amendment No. 1)

(Mark One)

☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended June 30, 2020
or
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from __________ to __________

Commission File Number:  0-49677

WEST BANCORPORATION, INC.

(Exact Name of Registrant as Specified in its Charter)

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

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

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

Securities registered or to be registered pursuant to Section 12(b) of the Act:

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

Yes  ☒                      No  ☐

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

Yes  ☒                      No  o

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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

Yes  ☐                      No  ☒

As of August 10, 2020, there were 16,469,272 shares of common stock, no par value, outstanding.

EXPLANATORY NOTE

This amendment is being filed to furnish Exhibit 101, Interactive Data File (Quarterly Report on Form 10-Q, for the quarterly period ended June 30, 2020, furnished in iXBRL (Inline eXtensible Business Reporting Language)), which had been inadvertently omitted from the original filing. For the convenience of the reader, this report on Form 10-Q/A refiles in its entirety our Form 10-Q. Additionally, this filing includes updated CEO and CFO certifications filed as Exhibits 31.1, 31.2, 32.1, 32.2. No other changes have been made to the original filing.

						Page
PART I.			FINANCIAL INFORMATION
Item 1.			Financial Statements			4
			Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019			4
			Consolidated Statements of Income for the three and six months ended June 30, 2020 and 2019			5
			Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2020 and 2019			6
			Consolidated Statements of Stockholders' Equity for the three and six months ended June 30, 2020 and 2019			7
			Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019			9
			Notes to Consolidated Financial Statements			9
Item 2.			Management's Discussion and Analysis of Financial Condition and Results of Operations			30
			"Safe Harbor" Concerning Forward-Looking Statements			30
			Critical Accounting Policies			30
			Non-GAAP Financial Measures			31
			Overview			32
			Significant Developments			32
			Summary			34
			Results of Operations			37
			Financial Condition			45
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			49
Item 4.			Controls and Procedures			49
PART II.			OTHER INFORMATION
Item 1.			Legal Proceedings			49
Item 1A.			Risk Factors			49
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			50
Item 3.			Defaults Upon Senior Securities			50
Item 4.			Mine Safety Disclosures			50
Item 5.			Other Information			50
Item 6.			Exhibits			51
			Signatures			52

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

West Bancorporation, Inc. and Subsidiary

Consolidated Balance Sheet

(unaudited)

(in thousands, except share and per share data)						June 30, 2020						December 31, 2019
ASSETS
Cash and due from banks						$	54,175					$	37,808
Federal funds sold						62,494						15,482
Cash and cash equivalents						116,669						53,290
Investment securities available for sale, at fair value						342,017						398,578
Federal Home Loan Bank stock, at cost						12,307						12,491
Loans						2,199,688						1,941,663
Allowance for loan losses						(21,363)						(17,235)
Loans, net						2,178,325						1,924,428
Premises and equipment, net						28,655						29,680
Accrued interest receivable						8,467						7,134
Bank-owned life insurance						35,187						34,893
Deferred tax assets, net						10,122						5,361
Other assets						8,574						7,836
Total assets						$	2,740,323					$	2,473,691
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing demand						$	590,487					$	380,079
Interest-bearing demand						378,931						346,307
Savings						1,081,743						996,836
Time of $250 or more						61,456						81,871
Other time						143,092						209,663
Total deposits						2,255,709						2,014,756
Federal funds purchased						5,755						2,660
Subordinated notes, net						20,445						20,438
Federal Home Loan Bank advances, net						179,869						179,365
Long-term debt						22,867						22,925
Accrued expenses and other liabilities						46,991						21,727
Total liabilities						2,531,636						2,261,871
COMMITMENTS AND CONTINGENCIES (NOTE 8)
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value; authorized 50,000,000 shares; no shares issued and outstanding at June 30, 2020 and December 31, 2019						—						—
Common stock, no par value; authorized 50,000,000 shares; 16,469,272     and 16,379,752 shares issued and outstanding at June 30, 2020     and December 31, 2019, respectively						3,000						3,000
Additional paid-in capital						27,632						27,260
Retained earnings						193,981						184,821
Accumulated other comprehensive loss						(15,926)						(3,261)
Total stockholders' equity						208,687						211,820
Total liabilities and stockholders' equity						$	2,740,323					$	2,473,691

See Notes to Consolidated Financial Statements.

West Bancorporation, Inc. and Subsidiary

Consolidated Statements of Income

(unaudited)

						Three Months Ended June 30,																		Six Months Ended June 30,
(in thousands, except per share data)						2020						2019						2020						2019
Interest income:
Loans, including fees						$	22,332					$	21,108					$	44,643					$	41,496
Investment securities:
Taxable						1,994						2,632						4,377						4,960
Tax-exempt						319						485						616						1,322
Federal funds sold						12						110						241						208
Total interest income						24,657						24,335						49,877						47,986
Interest expense:
Deposits						2,351						6,670						7,397						12,634
Federal funds purchased						3						115						19						202
Subordinated notes						253						256						508						508
Federal Home Loan Bank advances						1,204						1,093						2,513						2,366
Long-term debt						99						163						229						349
Total interest expense						3,910						8,297						10,666						16,059
Net interest income						20,747						16,038						39,211						31,927
Provision for loan losses						3,000						—						4,000						—
Net interest income after provision for loan losses						17,747						16,038						35,211						31,927
Noninterest income:
Service charges on deposit accounts						531						600						1,134						1,211
Debit card usage fees						391						434						773						809
Trust services						461						481						924						964
Increase in cash value of bank-owned life insurance						136						162						294						314
Loan swap fees						3						—						589						—
Realized investment securities gains (losses), net						(69)						23						(75)						(65)
Other income						322						299						656						885
Total noninterest income						1,775						1,999						4,295						4,118
Noninterest expense:
Salaries and employee benefits						5,318						5,424						10,602						10,884
Occupancy						1,349						1,344						2,709						2,577
Data processing						596						716						1,268						1,396
FDIC insurance						292						185						529						404
Professional fees						200						209						439						443
Director fees						194						258						428						509
Other expenses						1,468						1,614						3,105						3,081
Total noninterest expense						9,417						9,750						19,080						19,294
Income before income taxes						10,105						8,287						20,426						16,751
Income taxes						2,136						1,629						4,368						3,194
Net income						$	7,969					$	6,658					$	16,058					$	13,557
Basic earnings per common share						$	0.48					$	0.41					$	0.98					$	0.83
Diluted earnings per common share						$	0.48					$	0.41					$	0.97					$	0.83

See Notes to Consolidated Financial Statements.

West Bancorporation, Inc. and Subsidiary

Consolidated Statements of Comprehensive Income

(unaudited)

						Three Months Ended June 30,																		Six Months Ended June 30,
(in thousands)						2020						2019						2020						2019
Net income						$	7,969					$	6,658					$	16,058					$	13,557
Other comprehensive income (loss):
Unrealized gains on investment securities:
Unrealized holding gains arising during the period						5,622						7,050						5,814						11,967
Plus: reclassification adjustment for net (gains) losses realized in net income						69						(23)						75						65
Income tax expense						(1,423)						(1,757)						(1,472)						(3,008)
Other comprehensive income on investment securities						4,268						5,270						4,417						9,024
Unrealized gains (losses) on derivatives:
Unrealized holding losses arising during the period						(2,910)						(4,729)						(24,168)						(7,170)
Plus: reclassification adjustment for net (gains) losses on derivatives realized in net income						1,038						(114)						1,363						(251)
Plus: reclassification adjustment for amortization of derivative termination costs						15						24						31						47
Income tax benefit						463						1,203						5,692						1,841
Other comprehensive loss on derivatives						(1,394)						(3,616)						(17,082)						(5,533)
Total other comprehensive income (loss)						2,874						1,654						(12,665)						3,491
Comprehensive income						$	10,843					$	8,312					$	3,393					$	17,048

See Notes to Consolidated Financial Statements.

 

West Bancorporation, Inc. and Subsidiary

Consolidated Statements of Stockholders' Equity

(unaudited)

(in thousands, except share and per share data)
						Three Months Ended June 30, 2020
																																				Accumulated
																								Additional												Other
						Preferred						Common Stock																		Paid-In						Retained						Comprehensive
						Stock						Shares						Amount						Capital						Earnings						Income (Loss)						Total
Balance, March 31, 2020						$	—					16,447,272						$	3,000					$	27,023					$	189,470					$	(18,800)					$	200,693
Net income						—						—						—						—						7,969						—						7,969
Other comprehensive income, net of tax						—						—						—						—						—						2,874						2,874
Cash dividends declared, $0.21 per common share						—						—						—						—						(3,458)						—						(3,458)
Stock-based compensation costs						—						—						—						609						—						—						609
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes						—						22,000						—						—						—						—						—
Balance, June 30, 2020						$	—					16,469,272						$	3,000					$	27,632					$	193,981					$	(15,926)					$	208,687
						Three Months Ended June 30, 2019
																																				Accumulated
																								Additional												Other
						Preferred						Common Stock																		Paid-In						Retained						Comprehensive
						Stock						Shares						Amount						Capital						Earnings						Income (Loss)						Total
Balance, March 31, 2019						$	—					16,357,752						$	3,000					$	24,898					$	173,349					$	(4,977)					$	196,270
Net income						—						—						—						—						6,658						—						6,658
Other comprehensive income, net of tax						—						—						—						—						—						1,654						1,654
Cash dividends declared, $0.21 per common share						—						—						—						—						(3,440)						—						(3,440)
Stock-based compensation costs						—						—						—						793						—						—						793
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes						—						22,000						—						—						—						—						—
Balance, June 30, 2019						$	—					16,379,752						$	3,000					$	25,691					$	176,567					$	(3,323)					$	201,935
See Notes to Consolidated Financial Statements.

West Bancorporation, Inc. and Subsidiary

Consolidated Statements of Stockholders' Equity

(unaudited)

(in thousands, except share and per share data)
						Six Months Ended June 30, 2020
																																				Accumulated
																								Additional												Other
						Preferred						Common Stock																		Paid-In						Retained						Comprehensive
						Stock						Shares						Amount						Capital						Earnings						Loss						Total
Balance, December 31, 2019						$	—					16,379,752						$	3,000					$	27,260					$	184,821					$	(3,261)					$	211,820
Net income						—						—						—						—						16,058						—						16,058
Other comprehensive loss,    net of tax						—						—						—						—						—						(12,665)						(12,665)
Cash dividends declared, $0.42 per common share						—						—						—						—						(6,898)												(6,898)
Stock-based compensation costs						—						—						—						1,121						—						—						1,121
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes						—						89,520						—						(749)						—						—						(749)
Balance, June 30, 2020						$	—					16,469,272						$	3,000					$	27,632					$	193,981					$	(15,926)					$	208,687
						Six Months Ended June 30, 2019
																																				Accumulated
																								Additional												Other
						Preferred						Common Stock																		Paid-In						Retained						Comprehensive
						Stock						Shares						Amount						Capital						Earnings						Income (Loss)						Total
Balance, December 31, 2018						$	—					16,295,494						$	3,000					$	25,128					$	169,709					$	(6,814)					$	191,023
Net income						—						—						—						—						13,557						—						13,557
Other comprehensive income, net of tax						—						—						—						—						—						3,491						3,491
Cash dividends declared, $0.41 per common share						—						—						—						—						(6,699)						—						(6,699)
Stock-based compensation costs						—						—						—						1,424						—						—						1,424
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes						—						84,258						—						(861)						—						—						(861)
Balance, June 30, 2019						$	—					16,379,752						$	3,000					$	25,691					$	176,567					$	(3,323)					$	201,935

See Notes to Consolidated Financial Statements.

West Bancorporation, Inc. and Subsidiary

Consolidated Statements of Cash Flows

(unaudited)

						Six Months Ended June 30,
(in thousands)						2020						2019
Cash Flows from Operating Activities:
Net income						$	16,058					$	13,557
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses						4,000						—
Net amortization and accretion						1,269						2,026
Investment securities losses, net						75						65
Stock-based compensation						1,121						1,424
Increase in cash value of bank-owned life insurance						(294)						(314)
Gain on sale of premises						—						(307)
Depreciation						753						698
(Benefit) provision for deferred income taxes						(540)						450
Change in assets and liabilities:
Increase in accrued interest receivable						(1,333)						(306)
Increase in other assets						(119)						(689)
Increase in accrued expenses and other liabilities						2,540						9
Net cash provided by operating activities						23,530						16,613
Cash Flows from Investing Activities:
Proceeds from sales of securities available for sale						78,581						145,342
Proceeds from maturities and calls of securities available for sale						32,814						19,403
Purchases of securities available for sale						(49,748)						(98,784)
Purchases of Federal Home Loan Bank stock						(6,853)						(22,378)
Proceeds from redemption of Federal Home Loan Bank stock						7,037						23,589
Net increase in loans						(257,897)						(70,840)
Proceeds from sale of premises						—						604
Purchases of premises and equipment						(428)						(394)
Net cash used in investing activities						(196,494)						(3,458)
Cash Flows from Financing Activities:
Net increase in deposits						240,953						71,258
Net increase (decrease) in federal funds purchased						3,095						(17,705)
Net decrease in Federal Home Loan Bank advances						—						(10,000)
Principal payments on long-term debt						(58)						(4,058)
Common stock dividends paid						(6,898)						(6,699)
Restricted stock units withheld for payroll taxes						(749)						(861)
Net cash provided by financing activities						236,343						31,935
Net increase in cash and cash equivalents						63,379						45,090
Cash and Cash Equivalents:
Beginning						53,290						47,474
Ending						$	116,669					$	92,564
Supplemental Disclosures of Cash Flow Information:
Cash payments for:
Interest						$	11,377					$	15,647
Income taxes						1,020						1,560
Supplemental Disclosure of Noncash Investing Activities:
Establishment of lease liability and right-of-use asset						$	—					$	10,435

See Notes to Consolidated Financial Statements.

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

1.  Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared by West Bancorporation, Inc. (the Company) pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to such rules and regulations. Although management believes that the disclosures are adequate to make the information presented understandable, it is suggested that these interim consolidated financial statements be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on February 27, 2020. In the opinion of management, the accompanying consolidated financial statements of the Company contain all adjustments necessary to fairly present its financial position as of June 30, 2020 and December 31, 2019, net income, comprehensive income and changes in stockholders' equity for the three and six months ended June 30, 2020 and 2019, and cash flows for the six months ended June 30, 2020 and 2019. The results for these interim periods may not be indicative of results for the entire year or for any other period.

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

The accompanying unaudited consolidated financial statements include the accounts of the Company, West Bank and West Bank's special purpose subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. In accordance with GAAP, West Bancorporation Capital Trust I is recorded on the books of the Company using the equity method of accounting and is not consolidated.

Current accounting developments:  In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326). The amendments in this update require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net carrying value at the amount expected to be collected on the financial assets. Under the update, the income statement will reflect the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount of financial assets. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. The allowance for credit losses for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination that are measured at amortized cost basis is determined in a similar manner to other financial assets measured at amortized cost basis; however, the initial allowance for credit losses is added to the purchase price rather than being reported as a credit loss expense. Only subsequent changes in the allowance for credit losses are recorded as a credit loss expense for these assets. Off-balance-sheet arrangements such as commitments to extend credit, guarantees, and standby letters of credit that are not considered derivatives under ASC 815 and are not unconditionally cancellable are also within the scope of this update. Credit losses relating to available for sale debt securities should be recorded through an allowance for credit losses.

In December 2019, the FASB issued ASU No. 2019-10, Financial Instruments-Credit Losses (Topic 326). This update amends the effective date of ASU No. 2016-13 for certain entities, including smaller reporting companies until fiscal years beginning after December 15, 2022, including interim periods within those fiscal periods. Early adoption is permitted. The one-time determination date for identifying as a smaller reporting company was November 15, 2019. The Company met the definition of a smaller reporting company as of this date and plans to adopt the standard with the amended effective date. The Company does not plan to early adopt this standard, but continues to work through implementation. The Company continues collecting and retaining loan and credit data and evaluating various loss estimation models. While we currently cannot reasonably estimate the impact of adopting this standard, we expect the impact will be influenced by the composition, characteristics and quality of our loan and securities portfolios, as well as the general economic conditions and forecasts as of the adoption date.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this update modify the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. The update is effective for interim and annual periods in fiscal years beginning after December 15, 2019, with early adoption permitted for the removed disclosures and delayed adoption until the fiscal year 2020 permitted for the new disclosures. The removed and modified disclosures will be adopted on a retrospective basis, and the new disclosures will be adopted on a prospective basis. The adoption did not have a material effect on the Company’s consolidated financial statements.

In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Financial Instruments - Credit Losses (ASC 326), Derivatives and Hedging (ASC 815), and Financial Instruments (ASC 825). The amendments in the ASU improve the Codification by eliminating inconsistencies and providing clarifications. The amended guidance in this ASU related to the credit losses will be effective for the Company for fiscal years and interim periods beginning after December 15, 2022. The Company is currently evaluating the impact of the ASU on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this update provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. It provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact of the reference rate reform on the Company’s consolidated financial statements.

2.  Earnings per Common Share

Basic earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per common share reflect the potential dilution that could occur if the Company's outstanding restricted stock units were vested. The dilutive effect was computed using the treasury stock method, which assumes all stock-based awards were exercised and the hypothetical proceeds from exercise were used by the Company to purchase common stock at the average market price during the period. The incremental shares, to the extent they would have been dilutive, were included in the denominator of the diluted earnings per common share calculation. The calculations of earnings per common share and diluted earnings per common share for the three and six months ended June 30, 2020 and 2019 are presented in the following table.

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars 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 June 30, 2020 and December 31, 2019.

			June 30, 2020
			Amortized Cost						Gross Unrealized Gains						Gross Unrealized (Losses)						Fair Value
Securities available for sale:
State and political subdivisions			$	53,284					$	2,264					$	—					$	55,548
Collateralized mortgage obligations (1)			160,855						6,433						(149)						167,139
Mortgage-backed securities (1)			52,185						1,125						(41)						53,269
Asset-backed securities (2)			15,247						62						(12)						15,297
Collateralized loan obligations			52,848						81						(2,465)						50,464
Corporate notes and other investments			300						—						—						300
			$	334,719					$	9,965					$	(2,667)					$	342,017
			December 31, 2019
			Amortized Cost						Gross Unrealized Gains						Gross Unrealized (Losses)						Fair Value
Securities available for sale:
State and political subdivisions			$	45,442					$	1,736					$	—					$	47,178
Collateralized mortgage obligations (1)			180,899						1,651						(629)						181,921
Mortgage-backed securities (1)			73,038						225						(233)						73,030
Asset-backed securities (2)			17,551						66						(17)						17,600
Collateralized loan obligations			64,939						21						(128)						64,832
Corporate notes and other investments			15,300						—						(1,283)						14,017
			$	397,169					$	3,699					$	(2,290)					$	398,578

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

(2)Pass-through asset-backed securities guaranteed by the SBA, representing participating interests in pools of commercial working capital and equipment loans.

Investment securities with an amortized cost of approximately $220,704 and $148,257 as of June 30, 2020 and December 31, 2019, respectively, were pledged to secure access to the Federal Reserve discount window, for public fund deposits, and for other purposes as required or permitted by law or regulation.

The amortized cost and fair value of investment securities available for sale as of June 30, 2020, 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, mortgage-backed securities and asset-backed securities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Therefore, collateralized mortgage obligations, mortgage-backed securities and asset-backed securities are not included in the maturity categories within the following maturity summary.

The details of the sales of investment securities available for sale for the three and six months ended June 30, 2020 and 2019 are summarized in the following table.

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars 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 June 30, 2020 and December 31, 2019.

			June 30, 2020
			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:
Collateralized mortgage obligations			$	—					$	—					$	17,670					$	(149)					$	17,670					$	(149)
Mortgage-backed securities			—						—						4,356						(41)						4,356						(41)
Asset-backed securities			6,831						(12)						—						—						6,831						(12)
Collateralized loan obligations			26,164						(1,695)						14,225						(770)						40,389						(2,465)
			$	32,995					$	(1,707)					$	36,251					$	(960)					$	69,246					$	(2,667)
			December 31, 2019
			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:
Collateralized mortgage obligations			$	54,521					$	(335)					$	35,546					$	(294)					$	90,067					$	(629)
Mortgage-backed securities			45,132						(174)						4,687						(59)						49,819						(233)
Asset-backed securities			3,641						(4)						7,075						(13)						10,716						(17)
Collateralized loan obligations			42,823						(128)						—						—						42,823						(128)
Corporate notes and other investments			4,499						(501)						9,518						(782)						14,017						(1,283)
			$	150,616					$	(1,142)					$	56,826					$	(1,148)					$	207,442					$	(2,290)

As of June 30, 2020, securities available for sale with unrealized losses included three collateralized mortgage obligation securities, one mortgage-backed security, two asset-backed securities and seven collateralized loan obligation securities. Collateralized loan obligations are debt securities backed by pools of senior secured commercial loans to a diverse group of companies across a broad spectrum of industries. At June 30, 2020, the Company only owned collateralized loan obligations that were AAA or AA rated. The Company believed the unrealized losses on securities available for sale as of June 30, 2020 were due to market conditions rather than reduced estimated cash flows. At June 30, 2020, the Company did not intend to sell these securities, did not anticipate that these securities will be required to be sold before anticipated recovery, and expected full principal and interest to be collected. Therefore, the Company did not consider these securities to have other than temporary impairment as of June 30, 2020.

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars in thousands, except per share data)

4. Loans and Allowance for Loan Losses

Loans consisted of the following segments as of June 30, 2020 and December 31, 2019.

			June 30, 2020						December 31, 2019
Commercial			$	619,726					$	431,044
Real estate:
Construction, land and land development			302,911						264,193
1-4 family residential first mortgages			56,551						54,475
Home equity			10,288						12,380
Commercial			1,212,145						1,175,024
Consumer and other			6,060						6,787
			2,207,681						1,943,903
Net unamortized fees and costs			(7,993)						(2,240)
			$	2,199,688					$	1,941,663

Included in commercial loans at June 30, 2020, were $223,435 of loans originated in the Paycheck Protection Program (PPP), which was established by the Coronavirus Aid, Relief and Economic Security Act (CARES Act), enacted on March 27, 2020, in response to the Coronavirus Disease 2019 (COVID-19) pandemic. The PPP is administered by the Small Business Administration (SBA). PPP loans may be forgiven by the SBA and are 100 percent guaranteed by the SBA. Therefore, no allowance for loan losses is allocated to PPP loans.

Real estate loans of approximately $980,000 and $910,000 were pledged as security for Federal Home Loan Bank (FHLB) advances as of June 30, 2020 and December 31, 2019, 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 the terms of the loan. 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. 

A loan is classified as a troubled debt restructured (TDR) loan when the Company separately concludes that a borrower is experiencing financial difficulties and a concession is granted that would not otherwise be considered. Concessions may include a restructuring of the loan terms to alleviate the burden of 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 also be reported as nonaccrual or 90 days past due if they are not performing per the restructured terms.

On March 22, 2020, federal banking regulators issued an interagency statement that included guidance on their approach for the accounting of loan modifications in light of the economic impact of COVID-19. The guidance interprets current accounting standards and indicates that a lender can conclude that a borrower is not experiencing financial difficulty if short-term modifications are made in response to COVID-19, such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant related to the loans in which the borrower is less than 30 days past due on its contractual payments at the time a modification program is implemented. The agencies confirmed in working with the staff of the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs. At June 30, 2020, COVID-19 related loan modifications totaled approximately $553,000. The modifications primarily included a delay of principal and/or interest payments for two to six months. These loans continue to accrue interest and are evaluated for past due status based on the revised payment terms.

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 anticipated 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.

TDR loans totaled $0 and $4 as of June 30, 2020 and December 31, 2019, respectively, and were included in the nonaccrual category. There were no loan modifications considered to be TDR that occurred during the three and six months ended June 30, 2020 and 2019. No TDR loans that were modified within the twelve months preceding June 30, 2020 and 2019 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. COVID-19 related loan modifications are not reported as TDRs.

West Bancorporation, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

(dollars 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 for loan losses and loans with a related allowance and the amount of that allowance as of June 30, 2020 and December 31, 2019.

			June 30, 2020																														December 31, 2019
			Recorded Investment						Unpaid Principal Balance						Related Allowance						Recorded Investment						Unpaid Principal Balance						Related Allowance
With no related allowance recorded:
Commercial			$	—					$	—					$	—					$	91					$	91					$	—
Real estate:
Construction, land and land development			—						—						—						—						—						—
1-4 family residential first mortgages			390						390						—						411						411						—
Home equity			—						—						—						31						31						—
Commercial			—						—						—						5						5						—
Consumer and other			—						—						—						—						—						—
			390						390						—						538						538						—
With an allowance recorded:
Commercial			—						—						—						—						—						—
Real estate:
Construction, land and land development			—						—						—						—						—						—
1-4 family residential first mortgages			—						—						—						—						—						—
Home equity			—						—						—						—						—						—
Commercial			—						—						—						—						—						—
Consumer and other			—						—						—						—						—						—
			—						—						—						—						—						—
Total:
Commercial			—						—						—						91						91						—
Real estate:
Construction, land and land development			—						—						—						—						—						—
1-4 family residential first mortgages			390						390						—						411						411						—
Home equity			—						—						—						31						31						—
Commercial			—						—						—						5						5						—
Consumer and other			—						—						—						—						—						—
			$	390					$	390					$	—					$	538					$	538					$	—