West Bancorporation 2026 Q3 Earnings Call

Good afternoon, everybody. I am Jane Funk, the CFO at West Bancorporation Inc, and I would like to welcome the participants on our call today and thank you for joining us. With me today are Dave Nelson, CEO, Harlee Olafson, Chief Risk Officer, Brad Winterbottom, our Bank President, and Brad Peters, our Minnesota Group President. I will start by reading our fair disclosure statement. During today's conference call, we may make projections or other forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding future events or the future financial performance of the company. We caution that such statements are predictions and that actual results may differ materially. Please see the forward-looking statement disclosure in our 2026 third quarter earnings release for more information about risks and uncertainties which may affect us.

The information we provide today is accurate as of September 30, 2026, and we undertake no duty to update the information. With that, I will turn it over to Dave Nelson.

Thank you, Jane, and good afternoon, everyone. Thank you for joining us. We appreciate your interest in West Bank. I have a few general comments, and then we will turn the call over to others who will provide more details. West Bank had another strong quarter, and our earnings per share continues to increase as expected. Our board of directors approved a $0.26 per share quarterly dividend payable Wednesday, November 25, to shareholders of record as of Wednesday, November 11. About the only thing that hasn't been enviable about West Bank this year has been our flat loan growth. We had good loan production, but our net loan growth was hampered by customers selling assets. There are likely a couple more coming sometime next year, but it is likely to subside during 2027.

We did have some loan growth this past quarter, and we have a solid loan pipeline that is favorable. West Bank does not have credit problems and has not had any for a very long time. Our calling efforts, market disruption, and asset repricing will all continue to favorably impact our margin. All of our performance metrics are good and continue to strengthen. Those are my prepared comments. I would now like to turn the call over to Mr. Harlee Olafson, our Chief Risk Officer.

Thank you, Dave. Credit quality is very strong at West Bank. We have zero past dues over 30 days, no other real estate, and no non-accruals. Our watch list is only 0.6% of total loans. The majority of our watch list credits are in the transportation business. All are well-secured and properly structured. After going through a time when opportunities for new business seemed quite limited, we have now seen an acceleration in new closed business and have a very robust pipeline. We continue to maintain our underwriting standards, and they include strong balance sheets, strong global cash flow, and liquidity from our customers and prospects. Our diversified commercial real estate portfolio continues to perform as expected. After all our prepared remarks, I am available for questions, and I now turn it over to Brad Winterbottom, our Bank President.

Thanks, Harlee. For the quarter ended 9/30/2026, our loan portfolio increased 1.5% when compared to the second quarter. We are right at $3 billion in outstandings. This is the first quarter in the past five quarters that we have experienced an increase in outstandings from quarter to quarter. We continue to experience notable payoffs as a result of secondary market refinancing and asset sales. We are not losing customers, but they are selling assets to gain liquidity. We were able to add to our loan portfolio during the quarter due to existing customers adding to their asset base with new and/or improved assets. We still believe new activity is mild due to the economic and political issues we are facing. However, our pipeline going into the fourth quarter is very positive. As always, deposit gathering sales efforts continue to be an emphasis in the markets we serve, and they are extremely competitive.

Those are my remarks. I will turn it over to Brad Peters.

Thanks, Brad. Good afternoon, everyone. I am going to provide you a brief update on our Minnesota banks. Our expansion into Minnesota began with our first full-service bank in Rochester opening 10 years ago. We grew our presence in Minnesota early in 2019 by expanding into St. Cloud, Mankato, and Owatonna. Each regional center has strong, vibrant markets with diverse businesses driving their respective economies. Although it has been nearly 8 years since our recent expansion, we are still relatively new to the marketplace and continue to introduce West Bank to our communities. Our relationship-based model with a business banking focus has allowed us to grow while maintaining a small number of employees. Our clients like the fact that they can count on West Bank to be responsive with quick decisions and a predictable, common-sense approach to banking. Our disciplined calling approach has driven results.

Our business banking focus and our seasoned team of bankers set us apart from the competition. We have also strategically invested in unique facilities, offering our teams the opportunity to entertain and engage in quality conversations with our clients and prospects. This relationship-building strategy has been a key in growing our commercial banking business. We are also winning the personal banking of our business owners, key executives, and high-value retail prospects in our communities. We continue to see our clients challenged with the uncertainty in the economy and interest rate volatility. Our bankers have been diligent in staying close with our clients and have increased calling activities to better manage relationships. Despite those challenges, we continue to see slight growth in both deposits and loans. Those are the end of my comments. I will now turn the call back over to Jane.

Thanks, Brad. Net income was $11.6 million for the third quarter, and that compares to $9.3 million in the third quarter of 2025 and represents a 25% increase in net income. Year to date, our net income is $33.3 million, which is 32% higher than the first 9 months of 2025. Net interest income continues to improve for improvement in our net interest margin. Net interest income increased $3.9 million, or 17%, compared to the third quarter of last year, and our margin increased 8 basis points compared to the previous quarter and 41 basis points compared to the third quarter of last year. Our cost of deposits increased 3 basis points compared to the previous quarter, but has declined 41 basis points compared to third quarter of last year. As described earlier, credit quality remains pristine and no provision for credit losses was recorded this quarter.

Non-interest expenses remain well-controlled with a 3% increase from the third quarter of last year. Year to date, non-interest expenses are up just 2.7% compared to the first 9 months of 2025. Those are the end of our prepared remarks, so we would open it up for questions.